The Delicate Art of Med-Arb and Its Future Institutionalisation in China

Abstract

Mediation is a participatory intervention process wherein disputing parties work with a third party, the mediator, to negotiate a resolution of their conflict. Arbitration is the most formal alternative to court adjudication wherein disputing parties present their case to one or more impartial third persons whom are empowered to render a binding decision. Med-arb refers to the hybrid process in which mediation is combined with arbitration. A narrower, more internationally recognized definition of this term refers to situations in which a party decides to employ the processes of both mediation and arbitration in a single case. The mediator(s) and arbitrator(s) are typically independent, and the mediation and arbitration proceedings operate independently. However, a more Chinese oriented definition of med-arb refers to any hybrid process of mediation and arbitration. It does not matter if the arbitral tribunal or an arbitrator takes over the mediation itself, or if an arbitrator plays the dual (and often conflicting) role of mediator. This relatively broad Chinese conception of med-arb concerns many in the Western world, who have reservations about allowing arbitrators to act simultaneously as mediators.

In Asia, med-arb is gaining popularity. Among other jurisdictions, Japan, Hong Kong, and Singapore have recently enacted particular provisions requiring med-arb to employ proper procedural standards. It is in this context that the delicate Chinese art of med-arb is being challenged. One major question that has been raised is whether the Chinese practice of med-arb is compatible with the rule of law. The usual med-arb proceedings in China often do not meet due process standards, prohibiting actual and apparent bias, as well as ensuring confidentiality. This paper reviews the regulatory landscape of med-arb in China in the context of the current Chinese practice (by China’s flagship arbitration institution, China International Economic and Trade Arbitration Commission, CIETAC, and other local arbitration commissions). In light of the dominance of the med-arb process in commercial dispute resolution in China, and drawing on international experience, this paper proposes an improved institutionalisation of the system with proper procedural safeguards. This paper concludes that the institutionalisation of med-arb bears significant relevance to China’s goal to establish rule-of-law because med-arb is a broadly-used system in a jurisdiction with a booming economy and burgeoning commercial disputes, yet, without established due process traditions. Accordingly, effective procedural safeguards for this system will eventually have a broad impact on Chinese dispute resolution as a whole.