I recently delivered the above seminar, held at the offices of Norton Rose Fulbright, aimed at promoting the Hong Kong International Arbitration Centre.
Specifically the topic was on the subject of “Step Clauses” and the use of mediation with arbitration in the resolution of cross-border disputes.
If negotiations between the parties fail the choices they face are broadly threefold: litigation, arbitration and mediation. Litigation is probably to be avoided at all costs. My experience of cases in which I have acted for Chinese and Hong Kong companies in the English Courts and in the Supreme Court of the Turks and Caicos Islands suggest that litigation is not the quickest and most cost-effective method of dispute resolution Does a Chinese Company want to litigate in – say- the English Courts? In a foreign land, in a foreign language and probably under a foreign system of law? Likewise, would a UK company wish to litigate in the Chinese Courts? Additionally, there may be problems in enforcing in State B a judgment made in the Courts of State A.
Arbitration may be different. This is the process by which the parties to a dispute submit their differences to the decision of an impartial tribunal appointed by mutual consent, the parties agreeing in advance to abide by the “award” of the arbitral tribunal. This “private” dispute resolution process operates outside the judicial processes of the State courts, and in most countries the award of the arbitral tribunal is enforceable in the State courts. In the case of international arbitration- for example where the parties are from different States- the arbitral award may be enforceable internationally under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Unlike litigation, the parties have a measure of control over a flexible process: they can choose the governing law, the place of arbitration, the language – and probably some of the arbitrators.
A concept that may be of considerable practical significance in mediation – particularly with cross-border commercial disputes - is the use of mediation in a ‘Step Clause,’ or multitiered
dispute resolution clauses. Mediation is used as part of a “filter” process: try mediation first and only if it fails do you move on to arbitration. The great benefit of mediation as part of such a multi- tiered dispute resolution process is that it can take mediation into the cross-border field of dispute resolution, giving the parties to even the most complex and high – value disputes the chance to settle their dispute amicably without being pitched headlong into the expense of a lengthy and costly arbitral process. This will be of particular benefit if the parties wish to continue in business together.
/ 1st Oct 2013
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