Mixed-mode dispute resolution: China’s Belt and Road is driving change

A trend toward combining alternative dispute resolution processes (typically mediation and arbitration) is gaining traction internationally and is being particularly driven in Asia by the Belt and Road Initiative.

With China at the heart of the Belt and Road, a more consensus-driven approach to dispute resolution, reflecting Asian values and promoting mediation, looks set to thrive. Traditionally, international commercial disputes play out to Western values and norms and have been adversarial in nature.

For some time, mediation has been discussed as a dispute resolution process suitable for Belt and Road disputes. As an adjunct to adjudicative processes like litigation and arbitration, academicsend-users and China’s own court reforms have highlighted the integral role mediation is likely to play as part of a multi-tier process.

2019 developments

Singapore and China started 2019 with a pro-mediation statement of intent. A memorandum of understanding was signed between the Singapore International Mediation Centre (SIMC) and the China Council for the Promotion of International Trade (CCPIT) in Beijing on 24 January. This announced the establishment of an international panel of mediators to handle disputes that may arise from BRI projects. Mediators will be drawn from a pool of dispute resolution specialists in China, Singapore and other countries and regions along the Belt and Road. Both parties plan to develop rules for case management and enforcement for BRI disputes submitted to mediation. As with other institutions and proposed online platforms, negotiation, mediation and – as a last resort – arbitration will be the combination of processes championed by SIMC and CCPIT.

The ICC too has just published mediation guidance for Belt and Road disputes, alongside appropriate clauses from its existing suite. These promote the use of mediation as either a standalone or mixed-mode process with arbitration.

“Belt and Road presents a rare opportunity to rethink how complex multi-party, international disputes are resolved,” said Herbert Smith Freehills’ Justin D’Agostino, chair of the ICC Court’s Belt and Road Commission.

“For centuries, dispute resolution has been anchored to adversarial processes. With the Belt and Road’s Asian nexus, a more consensual, efficient approach may evolve to resolve disputes. ICC has long offered mediation and arbitration services and is well placed to offer mixed-mode dispute resolution along the Belt and Road.”

 

Justin D'Agostino
Justin D'Agostino
Global Head of Dispute Resolution, Hong Kong
+852 21014010
Anita Phillips
Anita Phillips
Professional Support Consultant, Hong Kong
+852 21014184
Briana Young
Briana Young
Professional Support Consultant, Hong Kong
+852 21014214

Belt and Road: Supporting the resolution of disputes

We have previously commented on how the sheer complexity and scale of China’s ambitious Belt and Road Initiative is prompting a welcome review of dispute resolution processes including efforts, led and supported by the Chinese government, to encourage mediation clauses in Belt and Road agreements.

In the following article, first published on http://arbitrationblog.kluwerarbitration.com on 16 April 2018, Mingchao Fan (ICC) and Briana Young and Anita Phillips (Herbert Smith Freehills) review the latest development in the efforts to support the resolution of Belt and Road disputes.


 

On 5 March 2018, the ICC Court announced the establishment of a commission to address dispute resolution in relation to China’s Belt and Road Initiative. The commission will drive the development of ICC’s existing dispute resolution procedures and infrastructure to support Belt and Road disputes.

The Belt and Road

The Belt and Road is China’s ambitious infrastructure project spanning more than 70 countries, with an increasing number of non-Chinese investors, contractors and developers – including sovereign states – involved. The project aims to build connectivity and cooperation between China across the land-based Silk Road Economic Belt and the 21st Century Maritime Silk Road. It spans large parts of Asia, the Middle East, Africa and Europe.

A construction and infrastructure initiative on this scale will inevitably generate disputes. With an estimated US$900bn in projects planned or already underway, the project gives rise to a multitude of actual and potential commercial disputes to consider. In response to this, Alexis Mourre, President of the ICC Court, announced the establishment of the commission during the ICC Court’s working session last fall.

It is a competitive field, with numerous existing institutions vying for a share of the Belt and Road disputes market, and new courts and institutions being established specifically for the purpose. It seems clear that parties who adopt the right dispute resolution model in their contracts today will be in a better position to resolve disputes as and when they may arise.

Make-up of the Commission

Justin D’Agostino, Global Head of Disputes at Herbert Smith Freehills and Hong Kong’s alternate member of the ICC Court, has been appointed commission chair. Dr Mingchao Fan, ICC Director for North Asia, will act as secretary. Other commission members are drawn from a range of sectors, representing jurisdictions including the PRC, Hong Kong and Singapore. A broader advisory board, representing other countries along the Belt and Road, is being considered.

ICC recognises the importance of engaging key stakeholders within both corporates and governments all along the Belt and Road, to ensure that it is offering the best possible service to parties on all sides.

Although the ICC Belt and Road Commission’s main objective is to raise awareness of the ICC as a “go-to” institution for disputes arising out of China’s Belt and Road Initiative, the commission has additional relevant aims:

 leveraging ICC’s unparalleled international coverage with secretariats and/or national committees in over 100 jurisdictions to attract Belt and Road disputes;
•  engaging with corporates, state-owned enterprises and governments across all Belt and Road territories; and
 highlighting Belt and Road dispute resolution at a series of events throughout the region, with the aim of promoting ICC’s capabilities widely. Events are planned in locations as diverse as China, Paris, Kazakhstan, Kyrgyzstan, Nigeria, Southeast Asia, Japan and Hong Kong, with more to come.

In the Commission’s view, the combination of the ICC’s tried-and-tested, multi-process services, its unrivalled geographical footprint, and its established credibility and independence, place it in a strong position to resolve Belt and Road disputes.

Sector expertise

On average, construction and engineering disputes account for close to a quarter of all ICC arbitration cases, while the finance and insurance sector accounts for approximately 20%. As the world’s leading arbitral institution, ICC is adept at handling complex multiparty cases as well as high-value, complex multi-party and multi-contract disputes (approximately half of all cases filed involve three or more parties). The introduction in 2017 of an expedited procedure also enables lower-value cases to be handled with greater time- and cost-efficiency.

Mediation matters too

There is no ‘one-size-fits-all’ method of resolving Belt and Road disputes. But there is a concerted effort, led and supported by the Chinese government, to encourage mediation clauses in Belt and Road agreements, with provision for arbitration if mediation fails. ICC is a world-leading arbitration and mediation provider, with tried and tested mechanisms and a strong pool of arbitrators and mediators. It is therefore well placed to provide appropriate, effective dispute resolution services to parties all along the New Silk Road. ICC’s stated objective is to ensure that where disputes arise, they are resolved efficiently and with minimal damage to the parties’ commercial relationships.

The role of mediation in the resolution of Belt and Road Initiative disputes

China’s Belt and Road Initiative (BRI) has gained huge momentum of late, with governments, companies and lawyers keen to maximise the many opportunities it presents. The resolution of disputes arising from the BRI is no exception. The sheer complexity and scale of BRI projects is prompting a welcome review of dispute resolution processes, with a view to resolving BRI disputes more quickly and amicably, ideally in a confidential and enforcement-friendly environment.
Recent developments suggest that the BRI presents an opportunity for less formal procedures, like mediation, to flourish and enter the mainstream. Indeed, three key BRI jurisdictions – China, Singapore and Hong Kong – have recently promoted mediation in the context of BRI disputes.

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Herbert Smith Freehills launches latest Guide to Dispute Resolution in Asia Pacific

Dispute Resolution in AP

Please click here to preview this publication.  To request a copy of the guide, please email asia.publications@hsf.com.


Our updated Guide to Dispute Resolution in Asia Pacific aims to provide answers to some of the basic questions a party unfamiliar with a particular jurisdiction will wish to ask when facing the prospect of having to engage in a dispute resolution process in that jurisdiction (including at the stage of negotiating contracts, when deciding on the choice of law and whether to include jurisdiction or arbitration clauses in favour of a particular jurisdiction).

Amongst the range of topics addressed in the Guide, we asked local counsel whether parties to litigation or arbitration are required to consider or submit to ADR procedures before or during proceedings. We will feature the responses of the various jurisdictions in upcoming posts and cover our first five jurisdictions (Australia, Bangladesh, China, Hong Kong and India) below. 

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Launch of landmark global conference series on the future of dispute resolution

Herbert Smith Freehills is pleased to announce the launch of The Global Pound Conference (GPC) Series 2016-17.

The aim of this ambitious worldwide conference series is to build a global conversation about the current landscape of civil and commercial dispute resolution and how dispute resolution tools and institutions should respond to the needs of 21st century business.  In particular, it aims to gather standardised and actionable data on what users of dispute resolution mechanisms need and want and whether those needs are being met.

Over 25 countries worldwide have already committed to holding a GPC event, with more being added. The launch will take place at a two-day conference in Singapore on 17-18 March 2016 and the last event is scheduled to be held in London in July 2017.  Other cities will include Hong Kong, Paris, Dubai, Madrid, Sydney, New York and Frankfurt/Berlin.

The Series, which is being led by the International Mediation Institute (IMI), is being sponsored by Herbert Smith Freehills as well as other global partners: Shell,  AkzoNobel, the Beijing Arbitration Commission (BAC),  JAMS, and the International Centre for Dispute Resolution (ICDR). 

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ADR in Asia – overview of key ADR processes

We previously reported the publication of our ADR in Asia Guide.  As well as distilling the results of our client survey on the use of mediation in Hong Kong, the Guide contains a summary of the main ADR processes used across Asia and includes our Dispute Resolution Wheel, explaining at a glance the characteristics of the various dispute resolution processes you may encounter in Asia.

That summary and Dispute Resolution Wheel can now be downloaded separately, here. If you would like a copy of our full Guide, please email asia.publications@hsf.com.

 

Herbert Smith Freehills publishes ADR in Asia Guide

Herbert Smith Freehills’ Hong Kong dispute resolution team has launched its first ADR in Asia Guide, featuring a spotlight on mediation in Hong Kong. In particular, the Guide includes the results of our recent client research on how international corporates use mediation in Hong Kong.

ADR in Asia

If you would like an electronic copy of our Guide, please email asia.publications@hsf.com.

The Guide:

  • summarises seven ADR processes and their use in Asia
  • contains a practical guide to help you get the most out of mediation (with an emphasis on the procedures in Hong Kong)
  • summarises the outputs of our recent client research to enable organisations to benchmark themselves against their peers when assessing their dispute resolution options

Our research involved around 100 clients and contacts being surveyed through direct interviews and through voting via a bespoke iPad app at an interactive event convened on 29 January 2015.  The research comes 5 years exactly since mediation was put at the heart of Hong Kong’s litigation landscape by Practice Direction 31 (PD 31), which effectively introduces a ‘mediation step’ into civil litigation proceedings in Hong Kong.

The research indicates that mediation remains under-utilised in practice, despite being widely supported and recognised as having the potential to resolve disputes in a quick, cheap and confidential way. Many clients see mediation undertaken without any real intention to settle, simply to comply with PD 31 and move on with the litigation. This is a missed opportunity to front-end the settlement of disputes. Whether you litigate, arbitrate, or have never yet been embroiled in a formal dispute, our commercially-focused Guide will assist you to deploy mediation more effectively in the resolution of your disputes.

Read more about our client research in our Hong Kong Dispute Resolution e-bulletin.

 

Herbert Smith Freehills to publish survey on the use of ADR in Asia

To mark the fifth anniversary of the introduction of the Mediation Practice Direction in Hong Kong, Herbert Smith Freehills has recently conducted a client survey on the use of ADR in Asia generally, and specifically on mediation in Hong Kong. The results will be presented in a publication to be launched at an interactive client seminar on 29 January 2015 in Hong Kong.

The initiative follows our previous leading research on how blue-chips are using ADR and our lead role in a recent landmark convention in London on “Shaping the Future of International Dispute Resolution“, looking at what corporate users need from ADR.

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Selling Mediation in the East

It is generally accepted that, while the use of mediation is on the rise globally, this trend is significantly more pronounced in the West than in Asia.   While the modern concept of formal mediation has of course been around for longer in the West, and has had more time to take hold, can this alone explain the disparity?  Or does the explanation lie at least partly in how mediation is ‘sold’ ?

Sean Izor, an associate in our Beijing and Hong Kong offices, examines this issue in an article recently published in the Asian Journal on Mediation.   In particular, he seeks to identify a number of broad cultural differences in the way individuals approach disputes generally and suggests that practitioners and proponents of mediation would do well to bear these in mind when seeking to communicate the benefits of mediation to Asian parties.

Read the article ‘Selling Mediation in the East – Is there an Asian Way?’ (© Singapore Mediation Centre. Originally published in [2013]  Asian Journal on Mediation, 1.  Reprinted with permission.)

Our new Asia disputes blog

We have today launched Herbert Smith Freehills’ new Asia disputes blog, Asia Disputes Notes, where you will find the latest updates on disputes related topics from across the Asian jurisdictions in which we operate (Hong Kong and Greater China, Southeast Asia, Japan and Korea). The posts will cover developments relating to litigation, ADR, international arbitration, and investigations and compliance.  We will of course continue to cover ADR developments in Asian jurisdictions in our ADR Notes.

As with our other blogs, content on the site can be accessed in various ways, including by jurisdiction, by category, by ‘tag’ for specific developments and sub-topics, or by key-word searching.  You can subscribe to the blog to receive notifications by e-mail when items are posted or you can visit the site whenever you choose at http://hsf-asiadisputesnotes.com/ or via the link under “Our blogs” in the top menu.