You are on page 1of 47

ADR in Business

ADR in Business

Practice and Issues across Countries and Cultures

by

J. C. Goldsmith Arnold Ingen-Housz and Gerald H. Pointon

ISBN 90-411-25841

Published by: Kluwer Law International, P.O. Box 316, 2400 AH Alphen aan den Rijn, The Netherlands, sales@kluwerlaw.com http://www.kluwerlaw.com Sold and distributed in North, Central and South America by Aspen Publishers, Inc., 7201 McKinney Circle, Frederick, MD 21704, USA Sold and distributed in all other countries by Turpin Distribution Services Ltd., Stratton Business Park, Pegasus Drive, Biggleswade, Bedfordshire SG18 8TQ, United Kingdom

2006 Kluwer Law International BV, The Netherlands

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, mechanical, photocopying, recording or otherwise, without prior written permission of the publishers. Permission to use this content must be obtained from the copyright owner. Please apply to permission Department, Wolters Kluwer Legal, 76 Ninth Avenue, 7th Floor, New York, NY 10011, United States of America. E-mail: permissions@kluwerlaw.com.

Chapter 8

ADR in East Asia


Michael Hwang S.C.,* Loong Seng Onn** and Yeo Chuan Tat***

1.

INTRODUCTION

Numerous forms of dispute resolution exist in todays commercial world. Besides litigation and arbitration, types of dispute resolution that allow parties voluntarily to reach their own negotiated settlement agreement are increasing in popularity throughout the world. Examples of such forms of dispute resolution include mediation, neutral evaluation etc,1 and will be collectively termed ADR in this Chapter. The ICC refers to ADR as Amicable Dispute Resolution, thus emphasizing the voluntary and non-binding nature of ADR.2 The ICCs definition of ADR as amicable dispute resolution will be adopted in this Chapter. There has long been the perception that it is part of Asian culture to engage in ADR, as Asians possess a reluctance to litigate and a preference for reaching consensus through prolonged discussion.3 While one should not totally ignore the influence certain societal values have on peoples attitudes towards ADR in East Asia,4 it is noteworthy that the use of ADR is not an immutable and inherent

* ** *** 1. 2.

3. 4.

Barrister and Arbitrator, Singapore. Executive Director, Singapore Mediation Centre. Associate, Michael Hwang S.C., Singapore. See chapter 3 of this collection, A. Ingen-Housz, Ambit and Potential of Green Services in the ICC Dispute Resolution System for a discussion of the various forms of ADR. The term ADR is also used to mean Alternative Dispute Resolution, and some have included arbitration as a form of alternative dispute resolution. On the other hand, the ICCs definition, Amicable Dispute Resolution, makes it clear that ADR does not extend to arbitration. As noted in the main text, the ICCs definition will be used in this paper. V. Taylor and M. Pryles, The Cultures of Dispute Resolution in Asia, in M. Pryles (ed.), Dispute Resolution in Asia, 2nd ed. (The Hague: Kluwer Law International, 2002) 1, at 2. See chapter 11 of this collection, N.A. Antaki, Cultural Diversity and ADR Practices in the World.

J.C. Goldsmith, G.H. Pointon and A. Ingen-Housz (eds), ADR in East Asia, pp. 147-190. 2006 Kluwer Law International. Printed in the Netherlands.

148

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

characteristic of Asian culture. This so-called Asian preference for the use of less formalistic means of resolving disputes has since been explained largely by economic and institutional factors.5 There is recognition by many Asian countries of the vital role economic and institutional factors play in determining the use of ADR. This is manifested in the enactment of various pieces of legislation by countries across the region promoting the use of ADR. Besides involving the courts in the ADR process, there are also provisions in the legislation of several East Asian countries which provide for the use of ADR in conjunction with arbitration, such as Arb-Med.6 These provisions recognize the complementary nature of arbitration and ADR. The use of both processes in a dispute allows parties to a dispute to obtain the benefits both processes can offer, and enables each dispute to be resolved in the most appropriate manner.7 There are also many mediation institutions being established to enhance the infrastructure for mediation and other ADR processes. This chapter aims to provide a practical overview of ADR in East Asia, through discussion of the legislation governing ADR noted above, and the major ADR institutions in various East Asian countries.8 An indication of the status of ADR in the various countries will also be given by analyzing the attitudes of the government, the courts and the public to ADR in the various countries. This analysis of ADR in East Asia will be divided into two main sections. The first section will focus on ADR in Singapore. The second section will then provide insight on ADR in some other selected East Asian nations that are important trading countries, and therefore of interest to the international business community. Singapore has been selected for discussion in greater depth than the rest of the countries, owing to its highly developed ADR infrastructure, for both court-annexed and private mediations. It is also perhaps the East Asian country whose ADR practices have evolved the most from an informal, traditional practice of ADR, to a rationalized and more institutionalized practice of ADR.9 Although there is much diversity across the region with regard to ADR in terms of legislation, institutional frameworks, and the status of ADR in each country, there are some observations generally applicable to the region. For example, it appears that the East Asian countries, with the exception of India, Japan, and the Philippines, have not seen the need to enact legislation addressing private mediations. Indeed, as will be seen from the discussion of the individual countries below, most statutes on ADR concern court-annexed mediation. Private mediations are also, in
5. 6. 7. 8. 9. See, e.g., V. Taylor and M. Pryles, The Cultures of Dispute Resolution in Asia, op. cit. in footnote 3, at 13; J.M. Ramsayer, Reluctant Litigant Revisited: Rationality and Disputes in Japan (1988) 14 Journal of Japanese Studies 111. The relevant provisions are discussed in greater detail in the main text below. For a fuller discussion of the complementary nature of ADR and arbitration, see chapter 1 of this collection, C. Wallgren, ADR and Business, and also N.A. Antaki, Cultural Diversity and ADR Practices in the World, op. cit. in footnote 4. We shall discuss the following countries in this chapter: China, Hong Kong, India, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, and Thailand. For a more detailed discussion of these concepts and their application, N.A. Antaki, Cultural Diversity and ADR Practices in the World, op. cit. in footnote 4.

ADR in East Asia

149

general, much less popular than court-annexed mediations in the region. The lack of legislation facilitating the use of ADR could be one of the reasons underlying this phenomenon in East Asia. Other reasons that may be applicable to the respective countries discussed will be suggested in the main discussion below. 2. 2.1. ADR IN SINGAPORE INTRODUCTION

Traditionally, the Chinese, the Malays and the Indians (the three main ethnic groups in Singapore) have used mediation to resolve disputes.10 Subsequently, the British colonized Singapore, and introduced English laws and litigation as a means of dispute resolution. With time, mediation lost ground to litigation. Litigation was increasingly used as a means of formal dispute resolution as Singaporeans became more rights conscious.11 It was only in the 1990s that mediation enjoyed a renaissance in Singapore. Today, mediation forms an integral part of the Singapore legal system. It has also been introduced as a dispute resolution mechanism in government departments and various professional bodies. Coming full circle, mediation has been re-established for community disputes. This section will focus on the three principal forms of institutionalized mediation in Singapore: (i) private commercial mediation; (ii) court-based mediation; and (iii) community mediation. For, private commercial mediation, this section will focus on the Singapore Mediation Centre (SMC). Court-based mediation refers to mediation that takes place after the commencement of litigation proceedings in the Subordinate Courts,12 where it is coordinated by the e@dr centre, also known as the Primary Dispute Resolution Centre. The third category of institutionalized mediation practice refers to mediation at the Community Mediation Centres (CMCs) under the Ministry of Law. The rebirth of mediation in Singapore can be largely attributed to the initiatives of Singapores judiciary, in particular former Chief Justice Yong Pung How. The judiciary initiated Pre-Trial Conferences (PTCs) for civil cases in the Supreme Court and the Subordinate Courts as early as January 1992. These PTCs, led by a registrar, served to evaluate cases for optimal and efficient case-management and
10. 11. 12. See L. Boulle and H.H. Teh, Mediation: Principles, Process, Practice (Singapore: Butterworths, 2000). See the speech of the former Chief Justice Yong Pung How, delivered on 16 August 1997 at the launch of the Singapore Mediation Centre. The Subordinate Courts comprise the District Courts, the Magistrates Courts, the Coroners Court, the Juvenile Court and the Small Claims Tribunals. The civil jurisdiction of the Subordinate Courts involves claims for which the amount in dispute does not exceed SGD 250,000. Generally, the criminal jurisdiction covers all offences for which the maximum term of imprisonment does not exceed ten years or which are punishable with a fine only. The Subordinate Courts handle more than 95 per cent of the Singapore Judiciarys caseload.

150

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

encouraged parties to settle their disputes. The use of PTCs was formalized in 1996 in the High Court through Order 34A of the Rules of Court of Singapore. This order empowers the Court to order the parties to attend confidential PTCs or to make other orders or directions as it regards appropriate for the just, expeditious and economical disposal of the dispute at any time after the beginning of proceedings. In the Subordinate Courts, the mediation movement was given a significant boost with the launch of Court Dispute Resolution (CDR). The main objective of CDR was to reintroduce mediation into Singapore culture, to preserve family and societal harmony and cohesion. Other reasons included increasing productivity by reducing the costs of conflict, and making more efficient use of public resources for conflict resolution. Today CDR has become firmly entrenched in the Subordinate Courts. Moreover, the efforts of the judiciary have ingrained in Singapores legal community a culture to strive for early dispute resolution. The Singapore Government has also adopted an active role in promoting mediation and in encouraging parties to attempt mediation before resorting to litigation. In May 1996 a cross-professional committee on ADR was formed to study how mediation could be further promoted in Singapore and to implement mediation beyond the courts. Dividing the non court-based mediation movement into commercial and community mediation, the Committee made two main recommendations. First, the committee recommended the creation of a commercial mediation centre under the Singapore Academy of Law. This resulted in the incorporation of SMC, which was launched on 16 August 1997. Second, it recommended the establishment of a network of easily accessible CMCs to foster social cohesion. This recommendation was implemented by the Ministry of Law and Singapores first CMC was officially opened in November 1998. The Ministry of Law supervises the CMCs and remains an active promoter of mediation. Other initiatives to promote mediation as the primary tool of dispute resolution include the recommendation by the Attorney-Generals Chambers that government departments should use mediation as their first option for dispute resolution and to include a mediation clause for referrals of disputes to SMC in government contracts. 2.1.1. Legal Framework

Singapore has not seen the need to enact legislation for private mediation. Instead, common law principles (such as the law of contract) govern private mediations in terms of issues such as the enforceability of settlement agreements, confidentiality, validity of mediation clauses and damages for the breach of mediation clauses. Neither are there statutory provisions or a national system to regulate the accreditation and the quality or standards of mediators. Various bodies have thus developed their own rules, regulations, and standards with respect to mediation and mediators. There are, however, statutory provisions which established CMCs, and which govern their operations. The Community Mediation Centres Act (Cap. 49A) (CMC

ADR in East Asia

151

Act) became law in 1998. It provided for the establishment of CMCs under the Ministry of Law. Mediation is also dealt with in the arbitration statutes. Section 16(1) of the International Arbitration Act (IAA) provides that the Chairman of the Singapore International Arbitration Centre (SIAC) may appoint a conciliator13 if the appointing authority chosen by the Parties refuses or does not make the appointment. Section 16(3) of the IAA allows a conciliator appointed under an arbitration agreement to act as the arbitrator in the event the conciliation proceedings fail to produce a settlement acceptable to the Parties. Section 17 of the IAA also provides for Arb-Med, and states that, [i]f all parties to any arbitral proceedings consent in writing and for so long as no party has withdrawn his consent in writing, an arbitrator or umpire may act as a conciliator. There are similar provisions in the Arbitration Act (Cap. 10) (AA). Under Section 62(1) of the AA, there is provision for the Chairman of SMC to appoint a mediator where the appointing authority refuses to make the appointment. The AA also deals with the issue in mediation-arbitration of whether a mediator can subsequently act as an arbitrator, similar to Section 16(3) of the IAA. The AA provides that a person who acts as a mediator can thereafter act as an arbitrator if so provided for in the arbitration agreement. There can be no objection solely on the ground that he had previously acted as a mediator.14 However, it has been noted that the position of a conciliator-turned-arbitrator is a delicate one, especially with regard to the handling of confidential information.15 Sections 17(3) of the IAA and Section 63(3) of the AA aim to minimize any possible prejudice to any of the parties, resulting from any confidential information that has been disclosed in a failed conciliation, by requiring the conciliator-turned-arbitrator to disclose to the parties as much of that information [which he has received in the conciliation proceedings] as he considers material to the arbitral proceedings. There are also miscellaneous provisions under different Singapore legislation and subsidiary legislation which provide for mediation. A few of these instances will be highlighted. For example, under the Architects (Professional Conduct and Ethics) Rules, there is provision for mediation in the case of disputes between registered architects if parties so agree.16 Under the Womens Charter (Cap. 353),17 a statute that addresses matrimonial matters, the Court may refer such matters to mediation with the consent of the parties. Rule 4 of the Legal Profession (Inadequate Professional Services Complaint Inquiry) Rules (dealing with complaints to the
13. 14. 15. 16. 17. Section 16(5) of the IAA states that, for the purposes of this section and Section 17 (which is discussed below in the main text), any reference to conciliator shall include a reference to any person who acts as a mediator. See Section 62(3) of the Arbitration Act (Cap. 10). M. Hwang S.C., L. Boo and A. Lai, Singapore in J. Paulsson (ed.), The International Handbook on Commercial Arbitration (Supplement 38 April 2003). See Rule 3(1)(b)(ii) Architects (Professional Conduct and Ethics) Rules. Rule 4(1) provides for referral to mediation with the consent of parties where there is a dispute between a registered architect, licensed corporation or licensed partnership and another person. See Section 50 of Womens Charter (Cap. 353).

152

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

Law Society concerning the quality of legal services provided by lawyers), empowers the Director of the Law Society to write to the client to inquire if the client would like to consider mediation. There is also interesting subsidiary legislation where parties are to consider mediation. Under the Housing Developers Rules, Vendors and Purchasers, before resorting to arbitration or court proceedings, are required to consider mediation. Rule 21A.2 goes on to provide expressly that this does not create a legal obligation to attempt mediation. In some provisions parties can be referred to mediation without the consent of the parties. Under the Building Maintenance and Strata Management Act 2004, there shall be an attempt to first mediate all matters that are in dispute before the Board makes a decision.18 Under the Companies (Identical Names) Rules, Business Registration (Identical Names) Rules and Limited Liability Partnerships (Identical Names) Rules 2005, parties may be referred to mediation by the Registrar before he issues any direction under those Rules to direct a company, business or partnership to change its name. Parties can also be referred to mediation before the Tribunal makes a decision under the Maintenance of Parents Act (Cap. 167B).19 Mandatory mediation is also found in the CMC Act. Under Section 128 of the Criminal Procedure Code (Cap.68) a Magistrate can be informed of a criminal offence through a complaint. These complaints generally concern minor criminal offences. Under Section 15 of the CMC Act, the Magistrate may refer the complaint to a mediator of the CMC with or without the consent of the parties. Any party who fails to comply with the order of the Magistrate is guilty of contempt of court.20 The Magistrate may make such a referral if he is of the opinion that the matter may be more appropriately resolved by mediation because of the nature of the case, the attitude of the parties, or both.21 The Magistrate will be kept informed of the outcome of the mediation so that he can take appropriate action later, for instance, issuing a summons against the alleged offender if the complainant wants to proceed to trial.22 2.1.2. 2.1.2.1. ADR Institutions Singapore Mediation Centre (SMC)23

SMC was incorporated on 8 August 1997, and officially launched by former Chief Justice Yong Pung How on 16 August 1997. SMC is a not-for-profit organization guaranteed by the Singapore Academy of Law (a body created by the Singapore Academy of Law Act (Cap. 294A)). SMC is linked institutionally with many professional and trade associations and enjoys the support of the judiciary. SMC
18. 19. 20. 21. 22. 23. See Section 92(1) of the Building Maintenance and Strata Management Act 2004. See Section 5(6) of the Maintenance of Parents Act (Cap. 167B). See Section 15(3) of the Community Mediation Centre Act (Cap. 49A). See Section 15(1)(b) of the Community Mediation Centre Act (Cap. 49A). See Section 15(4) of the Community Mediation Centre Act (Cap. 49A). See Singapore Mediation Centre webpage: www.mediation.sg.

ADR in East Asia

153

was tasked to spearhead the non-court based mediation movement in Singapore and is dedicated to the promotion of amicable and efficient settlement of disputes. It aims to contribute to the building of a harmonious society and a thriving business community by broadening awareness of, and providing access to, constructive means of dispute resolution and conflict management. There is no jurisdictional limit (in terms of geography or quantum) on the kinds of cases that SMC will mediate. As long as parties consent to mediation, SMC will handle any civil matter, and has handled a wide range of cases, from probate to construction to international contracts. Generally, SMC mediators practise interest-based, facilitative mediation.24 This is entrenched in SMCs Mediation Procedure (the Procedure).25 Clause 4.4 of the Procedure provides that the mediator is to facilitate negotiations between the parties and steer the direction of the discussion with the aim of finding a mutually acceptable solution. It further provides that the mediator will not make any ruling or finding unless expressly requested to do so by all parties. Clause 7.4 of the Procedure provides that the parties can request that the mediator produce a non-binding written recommendation of the terms of settlement if requested to do so by all the parties. Another feature of mediation at SMC is that parties are strongly encouraged to have legal representation. SMC feels that legal representation is useful for inputs as to the law and also to help parties appreciate the implications of not settling the matter. Furthermore, lawyers play a key role in drafting settlement agreements, if any. As at 31 December 2005, more than 1,300 disputes were referred to SMC. About 75 per cent of the cases that are mediated at SMC are successfully settled. Of those successfully resolved, more than 90 per cent were settled within one working day. Almost all types of civil cases are mediated at SMC. However most of the cases are commercial in nature. About 40 per cent of SMC cases are referred to it by the courts. Most of the cases involve quantum in dispute in excess of SGD 250,000. To date, the total quantum of disputes handled at SMC is in excess of SGD 1.19 billion.
24. Interest-based, and facilitative mediation refers to the substance focused on in the mediation, and the process of the mediation respectively. There is a strong correlation between the two, as an interest-based mediator will most likely conduct the mediation in a facilitative manner. For a more thorough analysis of these terms, see R. Fisher, W. Ury, B. Patton, Getting to Yes: Negotiating Agreement Without Giving In, 2nd ed. (New York: Penguin Books, 1991), and L.L. Riskin, Understanding Mediators Orientations, Strategies, and Techniques: A Grid for the Perplexed, 1:7 Harvard Negotiation Law Review (1996) 7. SMC and SIAC also provide Med-Arb jointly. A set of Rules known as the SMC-SIAC Med-Arb Procedure governs these joint Med-Arb proceedings. The Procedure allows for a mediation to be commenced at the same time as an arbitration at the Singapore International Arbitration Centre. The same person is appointed mediator and arbitrator, but the arbitration is stayed while mediation proceeds. If the mediation is successful, the mediator puts on his hat as arbitrator and makes a consent award recording the terms of settlement. This is to enable the settlement to have instant effect as an award, so as to be enforceable as such. If the mediation is unsuccessful, the mediator/arbitrator steps down as arbitrator, and another arbitrator is appointed to carry on the arbitration. Cf. the practice in Hong Kong, Japan, and the Philippines (footnotes 51, 91, and 113, and the accompanying main text).

25.

154

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

The Procedure provides that the mediation is on a without prejudice basis, and that the mediation process will be kept confidential. Clause 4 of the Procedure states that a mediator has to subscribe to SMCs Code of Conduct. These provisions are binding upon all mediators appointed by SMC to mediate. The Code of Conduct provides that the mediators should be impartial, should declare any conflict of interest, and should keep information or documents disclosed in the course of mediation confidential. Currently, SMC has 106 Principal Mediators. They comprise members of different professions and fields including Members of Parliament, former High Court Judges, Senior Counsel, architects, doctors, engineers, IT specialists, project managers, psychologists, and university professors. SMC Principal Mediators are required to undergo formal mediation training and an evaluation before being appointed to the panel. There is also an International panel consisting of internationally renowned neutrals. If disputes require technical expert knowledge, SMC usually appoints two mediators to co-mediate the dispute. One of these mediators will be a professional from the industry concerned who is familiar with the subject matter of the dispute. The other mediator is usually a lawyer who will be familiar with the legal issues. SMC will also try to match the language abilities of the mediators to the disputants to facilitate communication and to avoid the mediation of cases through translators who may hinder the building of rapport between the mediator and parties. So far, besides English, cases have been successfully mediated in Mandarin and other Chinese dialects as well as Tamil and Malay. 2.1.2.2. Court-Based Mediation in the Subordinate Courts26

Court Dispute Resolution (CDR) at the Primary Dispute Resolution Centre (PDRC) in the Subordinate Courts was introduced in a pilot project on 7 June 1994. The Court Mediation Centre was established in 1995. It was renamed the PDRC in May 1998 as CDR expanded to include processes other than mediation such as early neutral evaluation and binding and non-binding evaluation and special forms of mediation like CDR-International, Co-Mediation with Experts, Mini-Trial and Mediation-Arbitration. Furthermore, the multi-door courthouse was established within the Primary Dispute Resolution Centre in 1999. Its purpose is to assist and direct disputants in finding the appropriate dispute resolution mechanism within or outside the court system. Also, it seeks to increase public awareness of dispute resolution processes.

26.

See generally, L.Y. Lim and T.L. Liew, Court Mediation in Singapore (Singapore: FT Law and Tax Asia Pacific, 1997). See also Judge Liew Thiam Leng, Alternative Dispute Resolution in Singapore, at: www.eadr.gov.sg/archives/PAPER%20FOR%20SPIDR.pdf and M. Bay, S. Nair and A. Mendis, The Integration of Alternative Dispute Resolution Within the Adjudication Process : A Comparative Study of the Singapore Experience, 16 SacLJ (2004) 501.

ADR in East Asia

155

Most of the cases at the Subordinate Courts undergo mediation. Mediation is used in matters such as the assessment of damages, disputes over costs of civil proceedings, maintenance applications, applications by spouses for personal protection orders, complaints to magistrates of offences involving neighbourhood and relational disputes, and small claims. CDR Settlement Conferences are by far the most significant and widespread mode of PDRCs settlement activities in the Subordinate Courts. CDR sessions are conducted in court as an integral part of the civil justice case process. CDR sessions can be held at almost any juncture during the process leading to trial. By the use of CDR sessions, the PDRC handles the entire range of tort and contract cases filed in the Subordinate Courts. CDR sessions are presided over by experienced District Judges who assume the role of settlement judges. In appropriate cases, the settlement judge may conduct the CDR session with another person (either a foreign judge or an expert). Settlement Judges will adopt a pro-active stance and guide the parties, and intervene in the process by suggesting and actively engaging in the finding of possible solutions to the dispute. CDR is a highly evaluative or rights-based form of mediation. Evaluative mediation seeks to maintain an objective perspective where the merits of the case are candidly and openly discussed. CDR has had an enormous impact on Singapores judicial system. Since 1994 to 2004, 48,300 matters have undergone CDR. Of these, 94.6 per cent were successfully settled. Surveys conducted by the Subordinate Courts in 1997 revealed significant cost and time savings for both the judiciary and for 96 per cent of the disputing parties. Settlement Judges are guided by the Model Standards of Practice for Court Mediators of the Subordinate Courts. Clause 4 of the Model Standards provides that mediators have to comply with the Code of Ethics for Court Mediators of the Subordinate Courts of Singapore. This Code of Ethics deals with areas concerning impartiality, neutrality, confidentiality, informed consent, conflict of interests, promptness, training, and qualification. The code of ethics enables practitioners to develop a sense of their professional responsibilities. 2.1.2.3. Other Courts Within the Subordinate Courts in Singapore Have Also Developed a Mediation Culture

Established within the system of the Subordinate Courts in 1995, mediation in the Family Courts was intended to be a process by which most family related disputes can be resolved. The Court provides in-house mediation and counselling services free of charge. Mediations are conducted by District Judges, the Deputy Registrar at the Family Court, court interpreters or volunteer mediators from the Court Support Group (which includes people with a legal, social work, psychology or family therapy background). Mediations take place on a without prejudice basis and no matters disclosed during the sessions are admissible in court. Paragraph 47 of the Subordinate Courts Practice Directions provides that lawyers and parties are to be prepared to discuss their cases during the mediation and have all necessary

156

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

documents ready. A similar provision exists for Muslim parties or parties married under Muslim Law who seek mediation or counselling for their family dispute. The Small Claims Tribunal was established in 1985 with the passing of the Small Claims Tribunals Act (Cap. 308). It handles claims from disputes relating to contracts for the sale of goods or services, or damage caused to property by torts not exceeding SGD 10,000 in value. Upon request, the Tribunal also deals with disputes not exceeding SGD 20,000 if the parties submit a written request. Proceedings before the tribunal are conducted in a private setting and in an informal manner, with several attempts to settle the dispute amicably before a referee hears the evidence and submissions of the parties and decides the case based on its merits. 2.1.2.4. Community Mediation Centres27

The Community Mediation Centres Act (Cap. 49A) (CMC Act) became law in 1998, providing for the establishment of CMCs under the Ministry of Law. CMCs were established to help develop a more harmonious, civil and gracious community, a society where social conflicts could be resolved amicably, and provide mediation services connected with any social, community or family disputes that do not involve seizable offences under any written law. A complete procedure for mediation, documented in the form of a handout, governs the conduct of mediation sessions. The CMC Act expressly states that mediations are to be conducted with as little formality and technicality as possible.28 This would be in keeping with the spirit of CMCs in handling social, community, and family disputes. To promote mediation, the CMC Act provides that mediation can proceed regardless of whether the dispute is the subject matter of any legal proceedings.29 The voluntariness of the mediation process is enshrined under Section 12 (1). Further, parties can withdraw from mediation at any time.30 To encourage mediation, the rights or remedies which a party might otherwise have are not affected by mediation at CMC.31 It is provided that no settlement is binding unless it has been reduced to writing and signed by the parties.32 Since the first CMC was set up, more than 1,850 mediations have been conducted with a success rate of 75 per cent. More than 90 per cent of the caseload is referred to the CMC by its referral partners, the main four being the Police, the Subordinate Courts, the Legal Aid Bureau and the Housing and Development Board. CMC mediators are appointed by the Minister of Law.33 Although there is no mention in the CMC Act of any standards or qualities expected of the mediators, currently CMCs 139 volunteer mediators are respected members of society. They
27. 28. 29. 30. 31. 32. 33. See http://notesapp.internet.gov.sg/__48256E09003B1AF3.nsf/. See Section 10 of the Community Mediation Centre Act (Cap. 49A). See Section 11(2) of the Community Mediation Centre Act (Cap. 49A). See Section 12(2) of the Community Mediation Centre Act (Cap. 49A). See Section 12(3) of the Community Mediation Centre Act (Cap. 49A). See Section 13(2) of the Community Mediation Centre Act (Cap. 49A). See Section 8 of the Community Mediation Centre Act (Cap. 49A).

ADR in East Asia

157

are usually grassroots and other community leaders. All mediators have undergone basic mediation training before they are appointed for two-year terms. 2.1.3. 2.1.3.1. Reaction to ADR Study on Mediation34

The SMC has been consolidating feedback from disputants and their lawyers by administering survey forms at the end of each mediation process regardless of the outcome of the mediation. The object is to contribute to the development of theoretical models that are based on practice and reflect the needs of modern Singaporeans. There are different survey forms for lawyers and parties. The study is based on 1,177 completed forms of lawyers and 1,343 completed forms of parties from January 1998 to August 2004. Efficiency in mediation was measured in terms of savings in time, as well as tangible and intangible costs. The survey showed that overall (parties who settled and parties who did not settle), 83 per cent reported cost savings and 87 per cent reported time savings; 82 per cent of the lawyers reported cost savings and 81 per cent reported time savings. The number of parties who believed that they saved time is greater than the number of parties who believed that they saved costs. The converse is true for lawyers. It is to be noted that even parties and lawyers who did not reach a settlement reported time and cost savings. Effectiveness of the mediation process was measured with reference to the nature of the outcome in terms of the impact on relationships: 71 per cent of all parties reported improvements in party relationships whereas 81 per cent of all lawyers perceived that the relationships improved through the mediation; 87 per cent of all lawyers found that their own relationship with the opposing counsel improved. Effectiveness was also measured through other factors including fairness, opportunity for meaningful participation and control over the outcome. The findings show that the mediation process provided the parties with meaningful participation, and control over the outcome of their disputes: 97 per cent of the parties indicated that they had a chance to communicate their views about the disputes, 90 per cent felt that they had a better understanding of the strengths and weaknesses of their own case as a result of mediation, 98 per cent felt that they had their views understood by the mediators, and 92 per cent believed that their inputs had determined the mediated outcome. It is further noteworthy that for cases which did not reach settlement, 84 per cent of parties and 95 per cent of lawyers would be willing to recommend mediation to others. It would thus appear that mediation was still considered effective even if the case was not settled.

34.

See L. Boulle and H.H. Teh, Mediation: Principles, Process, Practice, op. cit. in footnote 10.

158 2.2.

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat CONCLUSION

The birth of institutionalized mediation has made a significant impact on dispute resolution in Singapore. The speed at which mediation has taken off is largely due to the institutional involvement in and support for mediation. In the relatively short history of the mediation movement, there has been a proliferation of mediation set-ups. Apart from the institutions outlined above, there has also been a growth of specialized mediation for different industries and professional bodies. Examples of such mediation service providers include the Financial Industry Disputes Resolution Centre (which handles disputes between consumers and financial institutions) and the Institute of Estate Agents Mediation Board. Other bodies that provide mediation services include the Singapore Institute of Architects, Singapore Institute of Surveyors and Valuers, Real Estate Developers Association of Singapore, and the Law Society of Singapore. It would therefore appear from the popularity and success of mediation that it has firmly taken root in Singapore. However, there is still some way to go, especially for the more significant disputes, before mediation is resorted to as the default mode for dispute resolution rather than resorting to litigation. 3. 3.1. 3.1.1. ADR IN OTHER EAST ASIAN NATIONS CHINA35 Legal Framework

Conciliation and mediation are the main forms of ADR for commercial disputes in China. They may be used as independent methods for dispute settlement, or used together with arbitration and litigation. While there is no legislation that comprehensively addresses these forms of ADR in China, or mandates the use of ADR in commercial cases, the Civil Procedure Law of China (the Civil Procedure Law) and CIETAC Arbitration Rules contain provisions for the parties to a dispute to resort to conciliation and mediation, in litigation and arbitration respectively. The CIETAC Arbitration Rules contain provisions for the parties to an arbitration to voluntarily resort to conciliation before the matter proceeds to arbitration.36 Indeed, one of the key features of arbitration in China is that conciliation is often involved. Besides pre-arbitration conciliation, the arbitrator may also, at any time before an award is given, resort to conciliation if the parties so agree. The arbitrator can perform the conciliators function, if necessary, in the

35. 36.

This section is largely based on contributions from Mr. Ang Yong Tong, Consultant, Robert Wang & Woo, Singapore. Article 40 of the CIETAC Arbitration Rules.

ADR in East Asia

159

same proceedings.37 If an agreement is reached between the parties, the parties may choose either to apply to the arbitration tribunal for an award in accordance with the agreement, or withdraw from the arbitration. However, if the mediation turns out to be unsuccessful, the arbitration would proceed as normal. The Civil Procedure Law also carves out a role for ADR with regard to litigation proceedings. Under Articles 85 and 87 of the Civil Procedure Law, the courts have the discretion to attempt mediation during the court proceedings, and may also invoke the assistance of other relevant parties where appropriate. The mediation will be conducted in the same place where the court is located, and foreign parties to the matter must have Chinese legal representation for the mediation. In keeping with the nature of mediation, any mediation agreement, even in this form of mediation that is court-based, must be reached voluntarily between the parties.38 Court-mediated agreements in general have the same binding effect as a court judgment, and will not be subject to any appeal. Similar to arbitration proceedings, if no agreement is reached during court-based mediation, the Court shall proceed on with the case in the usual manner. Besides using ADR processes in conjunction with arbitration and litigation, mediation may be used (as noted above) as an independent form of dispute resolution. Such mediation may take the form of an ad hoc mediation, or institutional mediation,39 and may be provided for in the contracts between the parties. It is interesting to note that the invocation of the conciliation process is regarded as a sufficient reason for the suspension of the statute of limitation in China. Under Chinese law, any settlement reached by the parties pursuant to mediations independent of arbitration and litigation proceedings has legal force only as a new contract between the parties. If there is non-performance of the settlement agreement, the performing party can only sue the defaulting party for breaching the settlement agreement. 3.1.2. ADR Institutions in China

The China Council for the Promotion of International Trade/China Chamber of International Commerce Conciliation Centre in Beijing (Beijing Conciliation Centre), set up in 1987, is the permanent conciliation institution in China, which independently and impartially resolves disputes arising from international commercial and maritime transactions by means of conciliation.40 The Beijing Conciliation Centre possesses its own set of rules, The Conciliation Rules of the Beijing Conciliation Centre of the China Council for the Promotion of International Trade (China International Commerce) (Beijing Conciliation Centre Rules), which have been effective since 1 January 1992.
37. 38. 39. 40. Article 40(2) of the CIETAC Arbitration Rules. Article 88 of the Civil Procedure Law. For a discussion of the major mediation centres in China, please refer to Section 3.1.2 below. See the website of CCPIT: www.ccpit.org/static_ccpit/en/settlement_5.jsp.

160

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

In addition to the Beijing Conciliation Centre, The China Council for the Promotion of International Trade (CCPIT) has also established over 30 conciliation centres at the provincial level. All these provincial-level conciliation centres are guided by the Beijing Conciliation Centre, and also apply the Beijing Conciliation Centre Rules. It has been noted that the conciliation centres of CCPIT cover the main areas in China.41 The Beijing Conciliation Centre maintains its own panel of conciliators, who adhere to The Rules for Conciliators of the Beijing Conciliation Centre of the China Council for the Promotion of International Trade (China Chamber of Commerce) Concerning the Handling of Cases. The panel of conciliators of the Beijing Conciliation Centre is selected and appointed by CCPIT, and the vast majority of them are Chinese. In 2002, the number of conciliators in the Beijing Conciliation Centre Panel was 281.42 Another form of institutional mediation available in China is joint conciliation,43 and this form of institutional mediation involves the Beijing Conciliation Centre co-operating with foreign dispute resolution bodies to provide conciliation. Beijing Conciliation Centre has signed a co-operation agreement with the Beijing-Hamburg Conciliation Centre in Hamburg, Germany. The Beijing-Hamburg Conciliation Centre also has its own set of rules, which will apply to conciliations of disputes administered by Beijing Conciliation Centre that involve parties of the two countries. Beijing Conciliation Centre has to date entered into such conciliation co-operation agreements with more than ten foreign dispute resolution bodies, including the London Court of International Arbitration (in 1997), the Argentina-China Conciliation Centre, and the American Arbitration Association. In addition, the US-China Business Mediation Centre was also recently established in 2004. This was set up with the United States Institute for Dispute Resolution of the International Institute for Conflict Prevention and Resolution. The new mediation centre has offices in both Beijing and New York, and has formulated unified mediation rules44 for use by the two offices. 3.1.3. Reaction to ADR

Conciliation, and processes similar to it, has long been a vital component of the Chinese way of dispute resolution. It has played a prominent role in both traditional and contemporary China.45 There is also substantial support for conciliation from the Chinese Government, as evidenced by the setting up of The Beijing Conciliation Centre and the provincial-level conciliation centres. With a strong institutional framework and facilitative laws, coupled with political support and a tradition of
41. 42. 43. 44. 45. Ibid. See http://softic.or.jp/symposium/open_materials/11th/en/RzhengQ.pdf. M.J. Moser, Peoples Republic of China, in M. Pryles (ed.), Dispute Resolution in Asia, 2nd ed. (The Hague: Kluwer Law International, 2002) 79, at 86. See http://english.people.com.cn/200507/16/eng20050716_196485.html. M.J. Moser, Peoples Republic of China, op. cit. in footnote 43, at 85.

ADR in East Asia

161

utilizing ADR processes, ADR is playing an ever-increasing role in dispute resolution in China. Reliance on conciliation by commercial parties seems to be increasing. The Beijing Conciliation Centre has also seen an increasing number of cases being referred to it for conciliation. The CCPIT website also notes that the Beijing Conciliation Centre enjoys a high success rate of conciliation.46 3.2. 3.2.1. HONG KONG47 Legal Framework

There is no legislation in Hong Kong that mandates the use of ADR to resolve commercial disputes. Parties who wish to do so must either insert an ADR clause in the contract, or agree to resolve the dispute by ADR after the dispute had arisen. There is also the Construction List Practice Direction issued by the Court of First Instance in Hong Kong, which requires parties to consider mediation before a hearing is listed. There is also no ordinance that specifically governs mediation or other forms of ADR in Hong Kong. Besides certain provisions in the Arbitration Ordinance,48 which will be discussed below, the legislation of Hong Kong does not prescribe detailed rules or procedures for mediation, and the parties are usually free to agree on the rules and procedures governing the conduct of mediation. As noted, there are brief references to certain aspects of mediation in the Arbitration Ordinance. These provisions are primarily aimed at facilitating mediation proceedings carried out in conjunction with arbitration, including Arb-Med. Section 2A of the Arbitration Ordinance contains rules on the appointment of a conciliator, where the arbitration agreement provides for a conciliator. Where such an agreement provides for the appointment of a conciliator by a person who is not one of the parties and that person fails to make the appointment, the Court may, on the application of one of the parties to the agreement make the appointment.49 Section 2A(3) states that, unless the parties agree otherwise, an arbitration agreement that provides for the appointment of a conciliator is deemed to contain a provision that, if the conciliation proceedings fail to produce a settlement within three months of the date of the conciliator being appointed, the proceedings will be terminated. Section 2B grants the arbitrator the right to perform the role of a conciliator if there is written consent from the parties. In addition, under the Arbitration Ordinance, if the parties to an arbitration agreement reach a settlement agreement in writing, whether pursuant to a mediation
46. 47. 48. 49. See the website of CCPIT: www.ccpit.org/static_ccpit/en/settlement_5.jsp. This section is largely based on contributions from Mr. Christopher To, Secretary General of the Hong Kong International Arbitration Centre. The Arbitration Ordinance (Cap. 341), Laws of Hong Kong. The relevant provisions in the Arbitration Ordinance will be noted in the following discussion in the main text. The Arbitration Ordinance, Section 2A(1).

162

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

before the arbitration, or during the course of the arbitration proceedings, the agreement is to have the same legal effect as an arbitral award.50 Such a settlement agreement may, with the leave of the court, be enforced in the same manner as a judgment or order to the same effect. However, if the mediation process fails, the arbitrator may resume the arbitration proceedings. It is also noted that, unlike China, there is no legislation in Hong Kong that allows the judge to conduct mediation between parties in litigation. It is however possible for the judge, by adjourning the proceedings, to allow settlement negotiations to take place if so requested by the parties. For mediation proceedings independent from arbitration proceedings, the settlement agreement will only be binding as a contract between the parties. Accordingly, it would be useful, before any other form of ADR is undertaken by the parties, for them to first enter into an arbitration agreement so that any subsequent settlement agreement may enjoy the same status of an arbitral award as provided for in the Arbitration Ordinance.51 3.2.2. ADR Institutions in Hong Kong

There are two prominent institutions providing mediation services in Hong Kong. They are the Hong Kong International Arbitration Centre (HKIAC), and Hong Kong Mediation Centre (HKMC). Both organizations are non-profit making companies limited by guarantee. The HKIAC administers both mediation and arbitration. A division of HKIAC, the Hong Kong Mediation Council (the Mediation Council), is specifically concerned with mediation. The Mediation Council is in turn sub-divided into four sub-committees dealing with different types of disputes. The four sub-committees are the Commercial, Community, Construction, and Family sub-committees, and the Mediation Council is looking into the possibility of establishing sub-committees involved in personal injury disputes, and disputes involving governmental agencies. The HKIAC has its own set of rules, the HKIAC Mediation Rules, and also administers mediations pursuant to the Government of the Hong Kong Special Administrative Regions Mediation Rules. The two sets of rules are largely similar. The HKIAC Mediation Rules states that a sole mediator will conduct the mediation,52 and that the mediator shall use his best endeavours to conclude the mediation within 42 days of his appointment.53 In any case, the mediators appointment shall not extend beyond a period of 3 months without the written consent of the parties.

50. 51.

52. 53.

The Arbitration Ordinance, Section 2C. See APEC Website: A Guide to Arbitration and ADR in APEC Member Economies: Hong Kong at www.arbitration.co.nz/content.asp?section=ADR&country=HKG. Cf. the practice in Singapore, Japan, and the Philippines (see footnotes 25, 91, and 113, and the accompanying main text). HKIAC Mediation Rules, Rule 5. HKIAC Mediation Rules, Rule 7.

ADR in East Asia

163

There is also provision for the confidentiality of the mediation proceedings.54 However, in line with the principle of party autonomy, Rule 2 of the HKIAC Mediation Rules allows the parties to agree to vary the rules at any time. It is also of note that, both the HKIAC Mediation Rules and the Government of Hong Kong Special Administrative Regions Mediation Rules have been revised to remove the requirement for a mediator to provide an opinion in a report upon request by one of the parties, as this was viewed as being inconsistent with the fundamentals of mediation. The HKMC was established in 1999 by a group of local active mediation advocates in Hong Kong. The HKMC does not appear to have its own set of mediation rules, unlike the HKIAC. The HKMC currently has a mediator member list of around 150 mediators, and has entered into corporate agreements with 17 other ADR organizations, including numerous Chinese arbitration and conciliation institutions, Arbitrators and Mediators Institute of New Zealand, and Singapore Mediation Centre. In addition to the Mediation Council (HKIAC) and HKMC, there are also various professional bodies (for example, the Hong Kong Institution of Engineers, Hong Kong Bar Association and the Hong Kong Law Society), and governmental bodies which practise mediation. 3.2.3. Reaction to ADR

As a matter of policy, the Government of Hong Kong actively encourages the settlement of commercial disputes by amicable means of dispute resolution. This is manifested in the utilization of mediation by governmental bodies, such as the Environment, Transport and Works Bureau, Labour Department and the Equal Opportunities Commission. Similarly, the Courts are very supportive of ADR. However, it appears that the commercial sector is not as keen as the Government and the Courts on ADR. A major reason cited by practitioners in Hong Kong for this relative lack of support is that, generally, the commercial community does not fully understand the nature of mediation and what it entails, and is therefore unaware of its various advantages over litigation and arbitration. However, the mediation institutions have been actively promoting mediation in Hong Kong. With increased understanding of mediation and its various advantages, it is hoped that mediation will grow in popularity within the business community.

54.

HKIAC Mediation Rules, Rule 12.

164 3.3. 3.3.1. INDIA55

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

Legal Framework

India, along with Japan and the Philippines (which will be discussed below), is one of the few countries in the world which possesses legislation directly addressing ADR. This important legislation is the Arbitration and Conciliation Act 1996 (the Arbitration and Conciliation Act). Specifically, Part III of the Arbitration and Conciliation Act, which consists of 22 sections, is the main legal framework governing ADR in India, and is based on the UNCITRAL Conciliation Rules. The Arbitration and Conciliation Act covers conciliation in disputes arising out of a legal relationship, whether contractual or not.56 One of the main objectives of the Arbitration and Conciliation Act is to provide statutory foundation for conciliation proceedings, and for the enforcement of any resulting settlement agreement,57 thus encouraging settlement of disputes by conciliation. The Arbitration and Conciliation Act covers many issues, such as the process of commencing conciliation,58 the confidentiality of the proceedings,59 and the procedure for appointing conciliators.60 It also provides that a single conciliator should conduct the conciliation, unless otherwise agreed by the parties.61 The conciliator is entitled to conduct the conciliation proceedings in such a manner as he considers appropriate,62 but he is to be guided by the principles of objectivity, fairness and justice.63 Either party to the dispute, or the conciliator, is free to make proposals for a settlement of the dispute.64 It is also stated in the act that parties cannot initiate litigation or arbitration proceedings in respect of the matter which is the subject-matter of the conciliation, unless the court or arbitration proceedings are necessary for the preservation of the requesting partys rights.65 It is noted that, in Section 74 of the Arbitration and Conciliation Act, any settlement agreement shall have the force of an arbitral award on agreed terms. An award on settled terms will have the force and status of an arbitral award pursuant to Section 30(3) of the Arbitration and Conciliation Act. Besides Part III of the Arbitration and Conciliation Act, which lays down the general law governing conciliation proceedings, Section 30(1) of the Arbitration
55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. This section is largely based on the contributions from Mr. Shishir Dholakia, Senior Advocate, Lawyers Chambers, Supreme Court of India, New Delhi. Section 61(1) of the Arbitration and Conciliation Act. See the Statements of Objects and Reasons when introducing the legislation in the Indian Parliament. Section 62 of the Arbitration and Conciliation Act. Section 75 of the Arbitration and Conciliation Act. Section 64 of the Arbitration and Conciliation Act. Section 63 of the Arbitration and Conciliation Act. Section 67(3) of the Arbitration and Conciliation Act. Section 67(2) of the Arbitration and Conciliation Act. Section 67(4) and Section 72 of the Arbitration and Conciliation Act. Section 77 of the Arbitration and Conciliation Act.

ADR in East Asia

165

and Conciliation Act also seeks to promote the use of ADR procedures during arbitral proceedings, and provides for Arb-Med. Section 30 of the Arbitration and Conciliation Act reads as follows. It is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute and, with the agreement of the parties, the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement. If the parties settle their dispute in the course of the arbitral proceedings through ADR processes, the arbitral tribunal should terminate the proceedings and may record the settlement in the form of an arbitral award on agreed terms.66 This award on agreed terms, as noted above, will have the same status and effect as any arbitral award. Another legislative provision that provides for ADR in India is Section 4 of the Legal Services Authorities Act. Section 4(f) provides that the Central Authority (which consists of, among others, the Chief Justice of India, and one present or retired judge) should encourage the settlement of disputes by way of ADR processes. One way of doing so is provided for in the Legal Services Authorities Act, through the setting up of Lok Adalats (Peoples Courts). Lok Adalats mainly carry out ADR proceedings in three situations: First, if the parties so agree.67 Second, if one of the parties makes an application to the Court to refer the case to a Lok Adalat for settlement, and the Court is prima facie satisfied that there are chances of settlement, the Court will refer the case to a Lok Adalat.68 Third, if the Court is satisfied that the matter is an appropriate one to be taken cognizance of by a Lok Adalat, it will refer the matter to a Lok Adalat.69 Lok Adalats often consist of retired judges, and they are to be guided by the principles of justice, equity, fair play, and other legal principles when seeking to reach a settlement between the parties. An award by a Lok Adalat is deemed to be a decree of a civil court.70 However, in a Lok Adalat case which was referred from the Court, and where no settlement is reached, the record of the case shall be returned to the Court from which the reference was received. The Indian Parliament has also, in 2002, amended the Code of Civil Procedure 1908, providing the courts with another avenue by which they could refer disputes to ADR processes. The relevant provision is Section 89 of the Code of Civil Procedure, and states that, where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of settlement and give the draft settlement to the parties for observations. After receiving the observations of the parties, the Court may reformulate the terms
66. 67. 68. 69. 70. Section 30(2) of the Arbitration and Conciliation Act. Section 20(1)(i)(a) of the Legal Services Authorities Act. Section 20(1)(i)(b) of the Legal Services Authorities Act. Section 20(1)(ii) of the Legal Services Authorities Act. Section 21 of the Legal Services Authorities Act.

166

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

of a possible settlement, and direct the Parties to opt for one of the following modes of dispute resolution, i.e. arbitration, conciliation, settlement through a Lok Adalat, or mediation.71 However, Rule 2(b) of the Alternative Dispute Resolution Rules also states that the Court, in the exercise of such power, shall not refer any dispute to arbitration or judicial settlement by a person or institution without the written consent of all the Parties. The Alternative Dispute Resolution Rules also state that, where the dispute is referred for conciliation, the conciliator is to conciliate the disputes between the parties to the suit by the application of the provisions of the Arbitration and Conciliation Act, insofar as they relate to conciliation. With regard to disputes referred for mediation, the Civil Procedure Alternative Dispute Resolution and Mediation Rules (2003) Part II, Civil Procedure Mediation Rules will apply. While there are many provisions addressing ADR in India, there is still no legislation comprehensively mandating the use of ADR processes in commercial disputes. However, there is some legislation, for e.g. the Industrial Disputes Act 1947, which provides for compulsory mediation/conciliation before adjudication for industrial disputes. In addition, in November 2004, the Indian Law Commission had recommended that ADR be made mandatory for all civil cases in India, which will include commercial cases. 3.3.2. ADR Institutions in India

Despite the various pieces of legislation regulating ADR in India, there does not seem to be a main mediation centre in India which is analogous to the Beijing Conciliation Centre in China. The mediation bodies most often relied upon in India for mediation proceedings would be the Lok Adalats discussed in the preceding sub-section. Numerous cases have been settled by the Lok Adalats. However, the majority of the cases referred to the Lok Adalats by the parties are accident claim cases, divorce matters, insurance claims etc. There appear to be much less reliance on this form of ADR with regard to the settlement of commercial matters. 3.3.3. Reaction to ADR

As can be gleaned from the various statutes in place regarding ADR, the Government of India strongly supports the use of ADR. Certain trade organizations have also provided in their membership rules for mandatory mediation before a dispute is referred to arbitration. However, despite the success of mediation in accident matters etc by the Lok Adalats, there does not appear to be a corresponding interest and acceptance of mediation in commercial matters. This is so despite the extensive legal framework governing ADR in India, and the fact that there is a strong tradition
71. Civil Procedure Alternative Dispute Resolution and Mediation Rules (2003) Part I, Alternative Dispute Resolution Rules, Rule 2(b). This set of rules is discussed in great detail in the case of Salem Advocate Bar Association, Tamil Nadu v. Union of India, Writ Petition (Civil) 196 of 2002, judgment dated 02/08/2005.

ADR in East Asia

167

of domestic mediation and conciliation in India. The lack of a well-recognized mediation centre is perhaps one reason why this is so. One may surmise that another reason for the relative lack of enthusiasm for mediation of commercial disputes in India is that, as the courts in India do not impose heavy costs for frivolous litigation, the costs of conducting litigation is often small compared to the advantages to be gained by delaying the performance of the commercial obligations. Therefore, commercial parties are more likely to conduct litigation to gain such advantages, and will be less interested in undergoing ADR to seek a mutually agreeable settlement. 3.4. 3.4.1. INDONESIA72 Legal Framework

In Indonesia, there is no formal legal regime governing ADR in general. There are therefore no fixed legal rules governing the procedure for voluntary mediation or other forms of ADR, nor rules defining the roles of mediators, conciliators etc. However, the principle of musyawarah untuk mufakat found in the state ideology, Pancasila, as well as that of ishlah from the Koran, call for deliberation to reach consensus and discourage confrontation of any kind. In keeping with this ideology most disputes have always settled through party-driven resolution means, either with or without third party facilitators. Today, for those disputes that do go to the courts, there is a recent regulation (PerMA 02/0373) from the Supreme Court of Indonesia instructing the courts of first instance (District Courts) to order litigating parties to attempt mediation for 30 days before any case can be heard. PerMA 02/03 sets out time limits and some skeletal procedural guidelines. However, no implementing regulations have as yet been issued and a number of questions remain unanswered and ambiguities unclarified regarding the implementation.74 These include: first, the Parties to a dispute are given only one business day to agree upon a mediator, with the result that such facility is not often able to be utilized. A single day is simply too short a time for the Parties to consult clients as to their choices of the mediator, to consider the qualifications required against those of the proposed mediators, and to find out whether there is any conflict of interest. As a result, in practice, the courts usually appoint one of their own judges as the mediator as few parties can agree upon their own choice in this time frame,

72. 73. 74.

This section is largely based on the contributions from Ms. Karen Mills, KarimSyah Law Firm, Jakarta. Regulation of the Supreme Court of The Republic of Indonesia, No. 02 of the Year 2003, Regarding the Mediation Procedure in the Court, referred to in the main text as PerMA 02/03. For a detailed discussion, See K. Mills and L. Amanda, Indonesias Supreme Court issues Regulation on Court-Ordered Mediation, unpublished (authors file).

168

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

unless they have already agreed prior to the first hearing. If the mediation is held in the court using a judge as mediator, there is no charge for the service or the venue. Second, PerMA 02/03 does not specify any right of the Parties to object to, or request the recusal of a mediator if they have reasonable grounds to believe that the mediator is not independent and impartial. Third, there are no sanctions provided if PerMA 02/03 is not followed. The Regulation does not, for example, state that a court decision may be invalidated if mediation has not been ordered first. However, if a mediated settlement is reached, the Court should render the same as its judgment in the case and it should be final and binding, and not subject to appeal as a normal court judgment would be. Currently, a privately mediated settlement agreement not held in conjunction with a court action is not directly enforceable as though equivalent to an arbitration award, and has no more legal force than an ordinary private contract, which would require pursuing through a court case, or arbitration if it so provides, to prove the obligation and obtain judgment. ADR is also mentioned in the Arbitration Law (Law No. 30 of 1999) (the Arbitration Law). However, this is basically only an acknowledgement of the parties right to avail themselves of ADR, and there is no attempt here comprehensively to regulate ADR. Chapter II of the Arbitration Law provides that parties may resolve civil disputes or divergent views through ADR, based on good faith, by not seeking resolution by litigation in the District Court.75 Parties who have opted to attempt this ADR route are required to have a direct meeting within 14 days of the waiver, and the outcome, if any, will be set out in a written agreement. If the parties fail to resolve the dispute at the direct meeting, then the parties may, by written agreement, appoint advisors or a mediator to assist in reaching a resolution. If this form of mediation fails to achieve reconciliation, the parties may then request an arbitration institution or ADR institution to appoint a mediator who shall commence mediation within 7 days. If this fails to effect an amicable settlement as well, the parties may finally submit the matter to resolution by arbitration.76 Article 6 of the Arbitration Law also states that efforts to resolve disputes or differences of opinion through mediation shall be undertaken in confidentiality.77 PerMa 02/03 provides that court-ordered mediation is not open to public, unless it concerns environmental protection, human rights, consumer protection, land matters or labour disputes involving numerous workers. Echoing standard court practice, based upon Pancasila, as mentioned above, Article 45 of the Arbitration Law also requires an arbitral tribunal to encourage the parties in dispute to settle their dispute amicably, before the arbitration commences. If a settlement can be reached, it will then be drawn up in writing by the tribunal or mediator, and becomes a binding consent award upon the parties. Such a consent award will be enforceable in the same manner as an award of the tribunal.
75. 76. 77. Article 6(1) of the Arbitration Law. Article 6 of the Arbitration Law. Article 6(6) of the Arbitration Law.

ADR in East Asia

169

There is also a new draft law specifically on ADR which is in circulation, although it is probably far from being finalized and promulgated. No official draft has been issued yet, but it appears that a key feature of the draft law is that it will afford settlement agreements reached as a result of mediation, independent of any arbitration or court proceedings, the same legal force as a final and binding arbitration award, as long as the same is merely registered with the court. 3.4.2. ADR Institutions in Indonesia

Jakartas local mediation centre, Pusat Mediasi Nasional (PMN), was set up by a group of former staff who acted as mediators for the Jakarta Initiative Task Force (JITF), in 200378 after the JITF was dissolved. The JITF was set up by the Ministry of Finance, under sponsorship of the International Monetary Fund and the World Bank in order to assist in restructuring of private sector debt in the wake of the Asian financial crisis of late 1997. The PMN offers its own mediation training courses, and only those who have undertaken their course will be eligible to be listed on their panel of mediators. However, despite this training, it is generally admitted that few of the newly trained mediators, as opposed to the ex-JITF staff, are still too inexperienced to be successful in resolving disputes. And note, PMN only accepts Indonesian nationals for its courses and panel. Yet, parties to a dispute may have little choice but to appoint the mediators on the PMN Panel for mediations in certain circumstances. This is because the courts will only accept either a mediator on the PMN Panel, or one of their own judges, as mediators for mediations ordered by such courts. The PMN has its own set of rules governing the mediation procedure (PMN Rules).79 Rule 2.1 emphasizes the freedom of the parties in coming to a settlement in the mediation process. After the receipt of request for mediation, the PMN will conduct a preliminary evaluation of the request for mediation, and if it decides that a case is unsuitable for mediation, it can terminate the mediation proceedings.80 If the mediation continues, the parties are to appoint a mediator from a list provided by PMN, and if they fail to agree, they can request PMN to appoint the mediator.81 Mediation proceedings under the PMN are to be kept confidential, and the parties are taken to waive their right to use any of the following as evidence in court or arbitration proceedings.82 (a) Opinions or suggestions made by any party or the Mediator concerning alternative solutions to the matter in dispute.
78. 79. 80. 81. 82. See N.A. Antaki, Cultural Diversity and ADR Practices in the World, op. cit. in footnote 4, for a brief discussion of this organization. The PMN Rules can be found at www.pmn.or.id/docs1/PMN_Mediation_Proce dure_v29dec04.pdf. Rule 3.2. Rule 4.2. Rule 7.

170

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

(b) Proposals, summaries, and any other notes presented during the mediation process. (c) Any statement by any party to the Mediator that a proposal is accepted or rejected. (d) All documents drafted and prepared in connection with the mediation process. In addition to the PMN, Indonesias national arbitration institution, Badan Arbitrase Nasional (BANI) is also willing to apply systems that combine mediation and arbitration, or employ other processes of ADR, provided both, or all, parties so desire. BANI maintains a panel of arbitrators, both local and international, and include members of the legal profession as well as engineers and other non-lawyer professionals. Some of these have mediation qualifications. 3.4.3. Reactions to ADR

The reaction to ADR from the business community is varied, despite the strong support of ADR from the Supreme Court. There are a few reasons for this. First, PerMA 02/03 is not yet very widely known, even within the legal profession. Second, many judges and litigating lawyers do not wish to encourage such a quick, simple, and inexpensive form of dispute resolution because it reduces the amount of their participation, yielding less income than were a case to run the course of full court litigation. Third, some businessmen and lawyers see compulsory mediation as an impediment to resolving a dispute, while others see it as just a waste of time. Particularly, the compulsory court-ordered mediation is seen by many as a way to buy time in court cases. This view is held mostly by foreign businesspersons. A fourth reason for the lack of enthusiasm in Indonesia is that formal commercial mediation practice is still not widely understood by the Indonesians. Many Indonesian businessmen still do not appreciate that mediation is a non-binding process, that it is party-driven and the mediator will not have authority to decide the issue contrary to any partys approval. Furthermore, there is sometimes the problem that parties are hesitant to propose mediation, lest the perception arise that they believe their case to be weak. As a result, the majority of disputes are still being settled informally, usually through direct negotiation between the parties or their counsel. However, PerMa 02/03, combined with activities of PMN, as well as the continued efforts of a few dedicated dispute resolution advocates to educate and encourage both the legal profession and the public to apply ADR, may be a sign of better things to come.

ADR in East Asia 3.5. 3.5.1. JAPAN83 Legal Framework

171

Although a large number of international commercial disputes are referred to arbitration in Japan, most domestic commercial disputes are not arbitrated. Neither are they litigated. These domestic commercial disputes are usually resolved by conciliation. There are two kinds of conciliation available in Japan, court-annexed conciliation and conciliation independent of the Court. There is no legislation making ADR mandatory for commercial disputes, although there are quite a number of pieces of legislation governing conciliation and other forms of ADR in Japan. Along with India and the Philippines, Japan is the only other country in our overview of ADR in East Asia that possesses a general law on ADR. This general law on ADR is The Law Concerning Promotion of Use of Alternative Dispute Resolution (ADR Promotion Law), promulgated on 1 November 2004, and which will take effect on 1 April 2007. The ADR Promotion Law was enacted based on the recommendations of the Justice System Reform Council to increase efforts to reinforce and vitalize ADR,84 so that it would become an equally attractive option to adjudication. The ADR Promotion Law will apply to both domestic and international disputes. It is crucial to note what is provided for in the ADR Promotion Law. First, Article 1 of the ADR Promotion Law states the purposes of the ADR Promotion law, which are: to state the fundamental philosophy of ADR, and the responsibilities of the Government in relation to ADR; to establish an accreditation system for private ADR bodies; and to ensure that people can easily choose ADR as a means to solve their disputes.85 In accordance with these principles, the ADR Promotion Law elucidates the fundamental principles of ADR, and the duty of the Government in promoting ADR. The ADR Promotion Law also contains provisions relating to a new certification system for ADR service providers (this will be discussed in further detail below). A notable feature of the ADR Promotion Law is that it does not contain detailed provisions governing the procedural aspects of ADR processes,

83. 84. 85.

This section is largely based on contributions from Mr. Hiroyuki Tezuka and Ms. Yoko Maeda, Nishimura & Partners, Tokyo. Especially non-court regulated private mediation. See discussion in main text under section 3.5.3. See www.nichibenren.or.jp/en/activities/meetings/20041201_1.html.

172

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

unlike the Indian Arbitration and Conciliation Act 1996, or the UNCITRAL Model Law on International Commercial Conciliation. As noted, a key characteristic of the ADR Promotion Law is the introduction of an accreditation system for private ADR bodies. The accreditation system shall not apply to arbitration. The ADR Promotion Law provides for the standards of accreditation. For example, the ADR institution must have in place a procedure to select a proper ADR official, and must also have a set of rules for appropriately handling confidential information. In addition, there are various duties imposed on an accredited ADR institution. An accredited ADR institution is required to submit a business report to the Minister of Justice each fiscal year, explain its choice of ADR officials and its ADR procedure to the customers. The ADR institution is also subject to an inspection by the Minister of Justice at any time. In return, the accredited ADR institution will gain the following advantages: (a) suspension of the Statute of Limitations upon initiation of ADR under the auspices of the accredited ADR institution;86 (b) the Court could stay judicial proceedings, if an ADR procedure being administered by the accredited ADR institution, and judicial proceedings are pending at the same time;87 and (c) exceptions to the use of compulsory mediation in courts for certain matters (for e.g. divorce cases and rent adjustment cases). In cases where the parties have conducted ADR under an accredited ADR institution, the parties can resort to litigation without first using court-annexed mediation.88 While the ADR Promotion Law governs ADR in general, the Civil Conciliation Act (the CCA) governs only court-annexed mediations. The CCA was enacted in 1951 to consolidate several similar statutes relating to conciliation of civil and commercial disputes. Article 1 of the CCA states that the purpose of the CCA is to settle amicably a civil or commercial dispute by applying general principles of justice and mutual concessions as is required by the dispute. There are two ways to invoke mediation under the CCA. First, a party to the dispute could make its application to the Court for conciliation. The Court will then organize a conciliation committee, and the dispute will be referred to the committee. When the committee deems that the dispute is unsuitable for conciliation from its nature, or it deems that the party has applied for conciliation unreasonably with a wrong intention, the committee may terminate the case without resorting to conciliation. Applications for conciliation under the CCA can be made either before litigation, or when litigation is pending. If the partys application is made while litigation is pending, the Court in which the litigation is pending may suspend the court action until termination of the conciliation process. Second, the Court can
86. 87. 88. Article 25 of the ADR Promotion Law. Article 26 of the ADR Promotion Law. Article 27 of the ADR Promotion Law.

ADR in East Asia

173

order conciliation on its own accord if it finds that a dispute, which is brought before it, is suitable for conciliation. Similar to conciliation initiated by a partys request, the Court before which the litigation is pending may suspend the litigation proceedings. The CCA also defines the conciliators role, and provides that the proceedings of civil conciliation should not be open to scrutiny by the public. The CCA stipulates certain procedures for the court-annexed mediation.89 A notable feature of an agreement reached under court-annexed mediation in Japan is that once the final agreement is registered at the Court, it will be enforceable like a court judgment. 3.5.2. ADR Institutions in Japan

Besides the conciliation committees set up by the courts, the main mediation institution in Japan is the Japan Mediation Centre set up in 2003.90 It has branches in Kanagawa and Shizuoka in addition to the main centre in Tokyo. In addition to the Japan Mediation Centre, there are also several other institutions offering conciliation services in Japan. These include the Japan Shipping Exchange, Inc., The Japan Commercial Arbitration Association, the ICC, and the Japanese Bar Association. These institutions provide conciliation of international and domestic business disputes under their own respective sets of conciliation rules. These conciliation rules will generally contain provisions regarding the confidentiality of the proceedings. The various institutions also offer assistance to the parties in the appointment of conciliators. It is noted again that, even though those institutions are not obligated to acquire accreditation, once the ADR Promotion Law comes into force, such institutions will be required to acquire accreditation to enjoy the various privileges prescribed under the ADR Promotion Law. Arb-Med is quite common at local bar associations arbitration centres. For example, the arbitration and mediation rules of the arbitration centre of Daini-Tokyo Bar Association stipulates as follows: (a) If any person requests an arbitration without an arbitration agreement, or if any person requests mediation, then, if the arbitration centre accepts such a request, the mediation procedure shall commence. (b) If an arbitration agreement is made between Parties during mediation, and the matter proceeds to arbitration, the mediator shall act as an arbitrator unless any of the Parties disagree. Another arbitration centre, the Daiichi-Tokyo Bar Association, has similar rules. The rules of the Daiichi-Tokyo Bar Association further stipulate that, in cases
89. 90. See K. Iwasaki, Japan, in M. Pryles (ed.), Dispute Resolution in Asia, 2nd ed. (The Hague: Kluwer Law International, 2002) 191, at 207-208, for a detailed description of the process of a mediation pursuant to the CCA. The website is www.npo-jmc.jp, and is in Japanese.

174

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

mentioned in (b) above, the evidence submitted during mediation may be relied upon in the subsequent arbitral proceedings. Furthermore, if the Parties do reach a settlement during mediation, and if the Parties initiate an arbitration and so request, the mediator can be an arbitrator and make an arbitral award on the agreed terms between the Parties. Formally, the arbitration must be initiated before the settlement agreement is concluded, otherwise there will be no outstanding dispute to arbitrate.91 In practice, this is complied with by the parties agreeing to sign an arbitration agreement before the person who had acted as the mediator, when the parties are very close to a settlement during mediation. The mediator may also ask the parties if they want to agree to an arbitration agreement, so as to make the contents of the parties settlement into an arbitral award. This procedure is undertaken in many cases, as an arbitral award has the same effect as a final and conclusive judgment by a Court and can be enforced more easily than an out-of-court settlement agreement. A party can enforce an arbitral award by only obtaining an enforcement order. While a party who wishes to enforce an out-of-court settlement agreement must usually file a law suit to obtain a court judgment, and this will require a full trial in open court, the Arbitration Law provides that enforcement of an arbitration award could be obtained without full trial in an open court. The arbitration/mediation centres of the local bar associations in Tokyo have also recently implemented a new system of enforcement of out-of-court settlement agreements. The new system allows for the enforcement of the settlement agreement made during mediation proceedings under the auspices of the local bar associations using the immediate settlement procedure in the Tokyo Summary Court (Sokketsu-Wakai). This procedure is inexpensive and obligations (whether monetary or non-monetary) can be enforced without obtaining a further judgment or order from the Court. 3.5.3. Response to ADR

The Government of Japan supports the use of ADR very strongly, as manifested by the promulgation of the ADR Promotion Law. The Courts are very supportive of conciliation as well, and have made many recommendations for conciliation by the parties, pursuant to the CCA. In addition, court-annexed conciliation is very popular with the public in Japan. For every year since the latter half of the 1990s till 2003, the number of civil conciliation cases in the courts have been increasing, and reached 600,000 in 2003. In 2004 however, the number of cases have dropped to about 440,000. In contrast to the popularity of court-annexed conciliation, private conciliation is much less popular. For example, it has been noted that there were only 1200 arbitration and conciliation cases referred to the arbitration centres operated by the
91. Cf. the practice in Singapore, Hong Kong, and the Philippines (footnotes 25, 51, and 113, and the accompanying main text).

ADR in East Asia

175

bar associations. It was in an effort to promote ADR through private institutions that the ADR Promotion Law was promulgated. The main objective of the accreditation system of the ADR Promotion Law is to improve the publics perception of ADR by private institutions. The ADR Promotion Law hopes to achieve this through the various sections in the ADR Promotion Law which strengthen the reliability, convenience, and functionality of privately-administered ADR. In addition, the fact that the Government is monitoring the private ADR institutions is expected to add further legitimacy to non court-annexed ADR by private bodies.92 Whether the ADR Promotion Law can achieve its noble objective of promoting private ADR in Japan remains to be seen. In addition, there are criticisms of Arb-Med in Japan. Critics argue that arbitration and mediation are often not strictly separated, and the outcome of the arbitration may be influenced by prejudicial and/or inadmissible evidence disclosed during mediation. This leads to the related problem that Parties may not be candid during the mediation, due to the fear that what they disclose at the mediation proceedings may be prejudicial to their case during arbitration. However, there is also the countervailing view that experienced mediators may adequately address these concerns and conduct Arb-Med in a very effective manner. 3.6. 3.6.1. MALAYSIA93 Legal Framework

Like most countries in East Asia, there is no legislation governing ADR in general, nor any legislation making ADR mandatory in Malaysia, in relation to commercial disputes. The only law relating to commercial dispute resolution outside the Malaysian court system would be the Malaysian Arbitration Act 2005.94 However, mediation is regulated by the Conciliation/Mediation Rules of the Kuala Lumpur Regional Centre for Arbitration (which will be discussed in greater detail below), which can be applied by mutual consent of the parties in dispute. Mediation has also been included as the first-tier of dispute resolution in private construction contracts in Malaysia before arbitration, as stated in the Agreement and Conditions of Building Contract of the Architects Association of Malaysia.95 As a result of the absence of statutory provision regarding ADR, there are no provisions for the

92. 93. 94. 95.

On the other hand, it is noted that there is opposition to the accreditation system, mainly on the grounds that such a system will increase the governments interference and influence over ADR in Japan. The Editors gratefully acknowledge the assistance of Dato Cecil Abraham, Managing Partner of Shearn Delamore & Co., Kuala Lumpur, in preparing this section. Act 646. Condition 35, Agreement and Conditions of Building Contract, Private Edition with Quantities, Architects Association of Malaysia (PAM) Form 1998.

176

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

recognition and enforceability of settlement agreements. The settlement agreements are enforceable only as contracts between the parties. In addition, the Legal Aid (Amendment) Act 2003 came into force on 29 May 2003. The Legal Aid Act 1971 has been amended to include a fresh part on mediation: Part VA. Section 29A provides that the Minister may authorize the Director General of Legal Aid to provide mediation services to legally aided persons. Participation at the mediation is purely voluntary and either party may withdraw from the mediation session at any time. A partys attendance at, participation or withdrawal from the process is expressly stated by the Act not to affect the rights (or remedies) that the party otherwise enjoys. Any settlement reached by mediation is not binding unless it is placed in writing and signed by all parties to the settlement. With regard to non-commercial disputes, the Law Reform (Marriage and Divorce) Act 1976 (the Marriage and Divorce Act) provides for conciliation before the initiation of divorce proceedings. Section 106 of the Marriage and Divorce Act makes it mandatory for the parties to refer the matter to a conciliatory body before submitting a petition for divorce. For trade disputes between employer and employee, the Industrial Relations Act 1967 provides for conciliation proceedings by the Director-General of Trade Unions.96 The Director-General may take steps to promote settlement between the parties, whether or not the trade dispute was reported to him by the parties. There are also several new initiatives. The first to merit mention is the proposed Mediation Bill. The Bill is drafted by the ADR Committee of the Malaysian Bar Council. It seeks to provide for a uniform regulatory framework within which mediation centres that have been or will be set up around Malaysia will work, without compromising on the flexibility or confidentiality of the mediation process. The Mediation Bill is modelled along the same lines as the Uniform Mediation Act of the United States of America. The Rules Committee, which is statutorily responsible for the Rules of Court, is presently considering an amendment to the Courts of Judicature Act 1964 to the Rules of Court, to allow a judge to regulate and prescribe an alternative dispute resolution mechanism in civil, commercial or family proceedings. If this amendment is passed by Parliament, the Rules Committee would have jurisdiction to provide for alternative dispute resolution mechanisms in the Rules of Court and thus bind parties to legal proceedings. Finally, there is a proposed Construction Industry Payment and Adjudication Act. This proposed Act is modelled along similar legislation in the United Kingdom, New Zealand, certain States of Australia, and in Singapore. The proposed Act serves to provide for a statutory right to payment for parties that carry out construction related activities. The proposed Act will provide for a statutory procedure for adjudication and for enforcement of this right. The Act is intended to bind the Government and to include all forms of construction contracts, including building, engineering, infrastructure, telecommunications, and oil and gas. The adjudicatory
96. Sections 18 and 19 of the Industrial Relations Act 1967.

ADR in East Asia

177

procedure would involve a nominating authority, and at this stage, it would appear that other professionals competent in the dispute resolution process may be excluded. There is also some concern arising out of judicial intervention in the adjudicatory process, and how the adjudicatory process would fit in with the (almost universal) adoption of arbitration or expert determination prevalent in most construction contracts. 3.6.2. ADR Institutions in Malaysia

The Kuala Lumpur Regional Centre for Arbitration (KLRCA) and the Malaysian Mediation Centre are the main institutions offering services for dispute resolution out of court, including mediation/conciliation, in Malaysia. The KLRCA was established on 17 October 1978 by the Asia-African Legal Consultative Committee, with the co-operation and assistance of the Government of Malaysia. One of the functions of the KLRCA is to provide other options for the settlement of disputes such as mediation/conciliation under the Conciliation Rules of the Centre.97 The facilities of the KLRCA can be used by parties seeking to settle disputes, whether the parties are individuals, government bodies or corporate entities. As noted above, the KLRCA has its own set of Conciliation/Mediation Rules (the Rules).98 The Rules incorporate many of the provisions of the UNCITRAL Conciliation Rules.99 The terms conciliation and mediation are used interchangeably in the Rules. Rule 1(1) states that, where the parties have agreed to conciliate under the auspices of the KLRCA, the Rules shall apply. However, in accordance with the principle of party autonomy, Rule 1(2) states that the parties may agree to exclude or vary any part of the Rules at any time. Rule 2 of the Rules stipulates how the conciliation proceedings are to be initiated. Parties are free to choose their own conciliators/mediators but they may also request that the KLRCA appoint conciliators/mediators from its international panel. There shall be one conciliator/mediator unless the parties agree that there shall be two or three conciliators/mediators.100 Where there is more than one conciliator/mediator, they ought, as a general rule, to act jointly.101 If the parties fail to reach agreement on the choice of the conciliators/mediators, the Director of the KLRCA shall assist in the appointment of conciliators/mediators.102 The conciliator/mediator is to be guided by principles of objectivity, fairness and justice, giving consideration to, among other things, the rights and obligations of the parties,

97. 98. 99. 100. 101. 102.

See www.rcakl.org.my/about.htm. The Rules can be found at www.rcakl.org.my/pdf/rules_for_conciliation.pdf. See also the above discussion of the Indian Arbitration and Conciliation Act of 1996 in the section 3.3. The Indian Arbitration and Conciliation Act of 1996 is also based substantially on the UNCITRAL Conciliation Rules. Rule 3 of the Rules. Rule 3 of the Rules. Rule 4(2) of the Rules.

178

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

the usages of trade concerned and the circumstances surrounding the dispute, including any previous business practices between the parties.103 The Rules provide that the conciliator/mediator may, at the request or with the consent of all parties, make proposals for a settlement of the dispute.104 It is also provided that the settlement proposal shall not be binding on the parties. Rule 15 ensures the confidentiality of all matters relating to the conciliation proceedings [and] extends also to the settlement agreement, except where its disclosure is necessary for purposes of implementation and enforcement.105 With regard to Med-Arb, Rule 20 of the Rules provides that the conciliator/mediator shall not, without the consent of the parties, act as an arbitrator in any arbitral proceedings in respect of a dispute that is the subject of the conciliation/mediation proceedings. The Malaysian Mediation Centre (MMC) was established on 5 November 1999 under the auspices of the Bar Council of Malaysia, with the objectives of promoting mediation as an alternative dispute resolution process, and providing a proper avenue for successful dispute resolution. The ADR Committee of the Bar Council is responsible for the proper functioning and implementation of the MMCs objectives. The following services are provided by the MMC: providing mediation services; assisting and advising on how to get the other side to agree to mediation if one party has shown interest; providing mediation training for those interested in becoming mediators; and accrediting and maintaining a panel of mediators.106 Currently, the MMC accepts civil, commercial, and matrimonial matters, but it intends to expand the scope of these matters at a later stage. The MMC has its own set of mediation rules which provides for various aspects of mediation, including the process of initiating mediation, appointment of mediators, disqualification of mediators, mode of settlement agreement, and confidentiality. The mediators of the MMC are also subject to a Code of Conduct, which provides for strict observance of impartiality and confidentiality. The MMC has its own rules for the purpose of accreditation of mediators. All mediators of the MMC must be a practising member of the Malaysian Bar of at least seven years standing. He/she must also have completed at least 40 hours of training conducted and organized by the MMC, and pass a practical assessment conducted by the trainers. Other ADR institutions in Malaysia include the Banking Mediation Bureau (BMB), which provides dispute resolution services between a consumer and commercial banks, finance companies, or merchant banks. The BMB is funded by
103. 104. 105. 106. Rule 7(2) of the Rules. Rule 7(4) of the Rules. Rule 15 of the Rules. Khutubul Zaman Bin Bukhari, Arbitration and Mediation in Malaysia, available at www.aseanlawassociation.org/docs/w4_malaysia.pdf, at 5.

ADR in East Asia

179

the above institutions, and its services are provided free of charge to customers of these institutions. Currently, the BMB handles disputes involving monetary losses up to MYR 25,000. There was also the Insurance Mediation Bureau set up in 1991 which has, since 2005, been replaced by the Financial Mediation Bureau. The Financial Mediation Bureau provides an independent and impartial method for resolving disputes between insurers and policyholders. The Consumer Protection Act 1999 established the Tribunal for Consumer Claims. The Tribunal does not provide mediation or conciliation services. However, it provides an alternative venue for consumers to address any grievances they may have or any loss suffered as a consumer in relation to the provision of goods and services. The Tribunal hears parties and their witnesses and the Act provides for the manner in which the Tribunal may receive evidence. The Tribunal is free to act in such manner as it thinks proper where the Act (or the Regulations made under it) makes no provision. The Housing Development (Control and Licensing) Act 1966 provides in Part VI for a Tribunal for Homebuyer Claims. The workings of the Tribunal are similar to that of the Tribunal for Consumer Claims. A homebuyer may lodge a claim with the Tribunal for any loss or matter concerning his or her interests as a homebuyer. The Tribunal is subject to a monetary jurisdiction limit of MYR 25,000.107 In addition, the Tribunal has no jurisdiction in respect of claims for recovery of land (or any interest therein), in wills or intestacy matters or matters involving goodwill, any chose in action or any trade secret or intellectual property rights. However, the Tribunal for Homebuyer Claims is empowered by Section 16T of the Housing Development (Control and Licensing) Act to assist in negotiations for settlement. Section 16T provides that the Tribunal shall, in every claim, assess whether, in the circumstances, it is appropriate for the Tribunal to assist the parties in negotiating an agreed settlement of the claim. Where an assisted settlement is reached, the Tribunal approves and records the settlement. The settlement can then be enforced as an award of the Tribunal. Note that all proceedings before the Tribunal are public. In all other matters, the Tribunal for Homebuyer Claims must have regard to the provisions of the Act which provide for how evidence can be adduced and for parties to be heard. All awards must be reasoned and a reference to a judge of the High Court on a point of law can be made. 3.6.3. Reaction to ADR

Mediation has only recently gained momentum in Malaysia, and is not as popular as arbitration for the resolution of commercial disputes. However, it is being increasingly recognized, and this is evidenced by the setting up of the MMC in
107. Parties may however, in writing, agree that the Tribunal has jurisdiction to hear and determine the claim where the claim exceeds MYR 25,000, and in such instance, the Tribunal may hear the claim.

180

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

1999 and the various proposed legislative initiatives. The courts have also actively encouraged the use of ADR processes between the parties. It is hoped that thereafter, more cases will be referred for mediation. 3.7. 3.7.1. THE PHILIPPINES108 Legal Framework

There are no statutes which make mediation mandatory in the Philippines. However, the Philippine Government does openly encourage potential litigants to settle out of court. With respect to court-annexed mediation, mandatory pre-trial conferences in civil cases are convenient openings to initiate the process. One of the purposes of pre-trial conferencing is for the opposing parties to consider the possibility of an amicable settlement or submitting the dispute for arbitration.109 Mediation, through the Court or a third party acceptable to the parties, may be employed by the parties towards settling the dispute amicably. The Supreme Court has been actively promoting mediation in various courts such as the Regional Trial Courts, Metropolitan Trial Courts, and the Court of Appeals, through court-accredited mediators. Pilot projects in mediation have yielded positive and encouraging results. For example, the pilot-test mediation in the Court of Appeals, which lasted from 16 September 2002 to 22 November 2002, had a success rate of 67 per cent.110 Court-annexed mediation for the lower courts was institutionalized by the Second Revised Guidelines on Mediation on 6 October 2001, after approval by the Supreme Court. Institutionalization of mediation in the Court of Appeals was achieved through the Revised Guidelines for the Implementation of Mediation in the Court of Appeals on 23 March 2004. The Philippine Judicial Academy and the Philippine Mediation Centre have also been tasked by the Supreme Court to select, train, and accredit prospective mediators who will assist the judiciary in these court-initiated and assisted mediations. With respect to private mediation, this is regulated by the Alternative Dispute Resolution Act of 2004 (ADR Act 2004).111 Section 2 of the ADR Act 2004 declares the policy behind the statute, and provides as follows. It is hereby declared the policy of the State to actively promote party autonomy in the resolution of disputes or the freedom of the party to make their own arrangements to resolve their disputes. Towards this end, the State shall encourage and actively promote the use of Alternative Dispute
108. 109. 110. 111. The Editors gratefully acknowledge the assistance of Mr. Victor P. Lazatin, Senior Partner of Angara Abello Concepcion Regala & Cruz, Metro Manila, in preparing this section. 1997 Rules of Civil Procedure, Rule 18, Sec. 2(a). See J. Bondoc, Mediation in the Philippine Judiciary, available at http://pio.supreme court.gov.ph/courtnews/04/11/11080403.php. Republic Act No. 9285.

ADR in East Asia

181

Resolution (ADR) as an important means to achieve speedy and impartial justice and declog court dockets. As such, the State shall provide means for the use of ADR as an efficient tool and an alternative procedure for the resolution of appropriate cases. Likewise, the State shall enlist active private sector participation in the settlement of disputes through ADR. This Act shall be without prejudice to the adoption by the Supreme Court of any ADR system, such as mediation, conciliation, arbitration, or any combination thereof as a means of achieving speedy and efficient means of resolving cases pending before all courts in the Philippines which shall be governed by such rules as the Supreme Court may approve from time to time. Mediation is covered by Chapter 2 of the ADR Act 2004. The statute is only meant to cover private mediations, as provided in Section 7 of the ADR Act 2004, which states that, the provisions shall cover voluntary mediation, whether ad hoc or institutional, other than court annexed [emphasis added]. Section 9 of the ADR Act 2004 ensures confidentiality of information obtained during the mediation proceedings, and states that a party, a mediator, or a non-party participant may refuse to disclose, and may also prevent any other person from disclosing, communication during the mediation.112 Section 13 of the ADR Act 2004 states that a potential mediator should, prior to accepting his appointment, make an inquiry that is reasonable under the circumstances to determine whether there are any known facts that a reasonable individual would consider likely to affect the impartiality of the mediator. These facts include a financial or personal interest in the outcome of the mediation, and any existing or past relationship with a party or participant in the mediation. Disclosure to the mediation parties of such facts known or learned is to be carried out as soon as practicable, before the potential mediator accepts his appointment. In addition, Section 13 of the ADR Act 2004 also states that the ADR Act 2004 does not require the mediator to have special qualifications by background or profession, unless the special qualifications of a mediator are required in the mediation agreement or by the mediation parties. Section 17 of the ADR Act 2004 addresses the issue of the enforcement of the mediated settlement agreement. Section 17(c) states that the parties may enforce an agreement by first depositing such settlement agreement with the appropriate Clerk of a Regional Trial Court of the place where one of the parties resides. Where there is a need to enforce the settlement agreement, a petition may be filed by any of the parties with the same Court, in which case, the court should proceed summarily to hear the petition. Section 17(d) of the ADR Act 2004 provides an alternative method of enforcing the settlement agreement. Section 17(d) of the ADR Act 2004 states that the parties may agree in the settlement agreement that the mediator shall become a sole arbitrator for the dispute, and shall treat the settlement agreement as an arbitral award, which shall accordingly be enforced in the same manner as an arbitral
112. Section 9(b) of the ADR Act 2004.

182

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

award.113 Enforcement of an arbitral award is provided by The Arbitration Law, R.A. No. 876. Under R.A. No. 876, any party to the dispute may, within one month after the award is made, file with the Regional Trial Court having jurisdiction a motion to have the award confirmed with notice to the other party. Unless the award is vacated, modified or corrected, the Court must grant the motion for confirmation of the award.114 Upon granting of an order confirming the award, judgment may be entered immediately by the Court. The judgment so entered shall have the same force and effect and be subject to all the provisions relating to a judgment in an action and may be enforced as it if had been rendered in the Court in which it has been entered.115 Section 18 of the ADR Act 2004 provides that the parties may also agree to refer the dispute to other forms of ADR processes, including Med-Arb. Section 18 of the ADR Act 2004 states that, the parties may agree to refer one or more or all issues arising in a dispute or during its pendency to other forms of ADR such as but not limited to (a) the evaluation of a third person or (b) a mini-trial, (c) mediation-arbitration, or a combination thereof . Section 36 of the ADR Act 2004, which relates specifically to arbitration of construction disputes, states that, by written agreement of the parties to a dispute, an arbitrator may act as mediator and a mediator may act as arbitrator. In addition, Section 36 of the ADR Act 2004 also states that the parties may agree in writing that, following a successful mediation, the mediator shall issue the settlement agreement in the form of an arbitral award. 3.7.2. ADR Institutions in Philippines

The Philippine Mediation Centre (PMC) is the main mediation institution in Philippines, and was established on 16 October 2001. The PMC is directed and managed by the Philippine Judicial Academy, and is the component unit of the Supreme Court for court-referred and court-related mediation cases, and also other forms of ADR related to mediation. The PMC aims to promote the use of court-annexed mediation, provide training and development of new mediators, and ensure quality mediation services. By 2004, there were a total of twenty-four established PMC units nation-wide in the Philippines, and the number of accredited mediators totalled approximately 180. Despite the high number of established PMC units, it is recognized that the PMC is still in its infancy [and] are experiencing shortcomings, procedural defects, and managerial difficulties.116 However, the setting up of a Mediation Fund is expected to alleviate such problems to a certain extent.

113. 114. 115. 116.

Cf. the practice in Singapore, Hong Kong, and Japan (footnotes 25, 51, and 91, and the accompanying main text). The Arbitration Law, R.A. No. 876, Section 24. V.P. Lazatin, The Philippines, in M. Pryles (ed.), Dispute Resolution in Asia, 2nd ed. (The Hague: Kluwer Law International, 2002) 265, at 291. J. Bondoc, Mediation in the Philippine Judiciary, op. cit. in footnote 110.

ADR in East Asia

183

For voluntary mediation other than court-annexed mediation, there are a few institutions which are actively promoting mediation and training their own mediators. These institutions have their own mediation rules in place and rosters of mediators. One is the Conflict Resolution Group Foundation Inc. or CORE Group. Another is the Philippine Dispute Resolution Centre Inc. or PDRCI (principally an arbitration institute), which used to be the Arbitration Committee of the Philippine Chamber of Commerce and Industry. For construction disputes, the Construction industry Arbitration Commission or CIAC has also embarked on a mediation programme. 3.7.3. Reaction to ADR

It has been observed that most disputes are resolved in the Philippines through informal negotiation. This has been attributed to the Filipinos non-litigious nature [and] the costly and slow process of litigation.117 There is also substantial support from the Government and the Courts in promoting formal ADR in the Philippines. The strong support from the Government for ADR processes in Philippines is evidenced by the enactment of the ADR Act 2004. The Philippine Courts have also been actively taking steps to promote the use of ADR processes, as can be seen from the various court initiatives discussed above. Indeed, it has been noted that mediation is one of the most successful judicial reform projects of the Supreme Court.118 3.8. 3.8.1. REPUBLIC OF KOREA119 Legal Framework

Like most countries in East Asia, there is no statute in South Korea that governs ADR in general. Also, while there are a number of Korean laws which provide for conciliation before litigation or arbitration, there is no provision in Korean legislation which enables an arbitrator to act as a mediator. A non-exhaustive list of Korean laws providing for conciliation before litigation or arbitration includes the Civil Conciliation Act (1990), the Domestic Affairs Adjudication Act, the Consumer Protection Act, the Securities Exchange Act, and the Labour Dispute Adjustment Act. The most important of these statutes is the Civil Conciliation Act, which provides for court-annexed conciliation.

117. 118. 119.

V.P. Lazatin, The Philippines, op. cit. in footnote 115, at 265. J. Bondoc, Mediation in the Philippine Judiciary, op. cit. in footnote 110. This section is largely based on contributions from Professor Chang Seung-Wha, Seoul National University.

184

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

Under the Civil Conciliation Act, a party may file a petition for conciliation to the Court,120 or the Court to which the case is before may transfer the case to conciliation if it deems that such action is necessary.121 The judge may handle the case personally, or form a conciliation committee to handle the dispute.122 The judge may transfer the case to conciliation at any stage before, or during the trial, and objections to the judges decision of referral are not allowed. The Judge may also terminate the conciliation proceedings if he finds that the nature of the dispute is not suitable for conciliation, or that the party in dispute has petitioned for conciliation for improper reasons. Similar to a referral to conciliation on the Courts own initiative, parties may not appeal the rulings of termination of conciliation proceedings.123 The settlement agreement between the parties pursuant to a court-annexed conciliation in Korea has the same enforceability as a court settlement.124 It is also provided for in the Civil Conciliation Act that a petition for conciliation by either of the parties will suspend the operation of the statutes of limitation.125 The other major legislation concerning ADR in Korea is the Code of Civil Procedure. The form of ADR under the Code of Civil Procedure is usually known as court settlement, but there is little difference between court settlement and conciliation as a form of ADR. Similar to conciliation under the Civil Conciliation Act, court settlement under the Code of Civil Procedure is supervised by the Courts. Under the Code of Civil Procedure, the party to a civil dispute may file a motion before a lawsuit is actually filed, for a settlement before a district court. The party seeking the settlement will need to state the grounds for the claim, and the circumstances of the dispute.126 If a settlement is achieved, the court clerk shall record the names of the parties, their counsels, the gist and grounds of the claim, the terms of the settlement, the date, and the Court overseeing the settlement proceedings, in the protocol. If the parties fail to reach a settlement, either party may apply for the institution of a suit, and the court clerk shall forward, without delay, the record of the case to the Court that assumes jurisdiction for the litigation proceedings. The other form of court settlement in the Code of Civil Procedure allows the Court to attempt to effect a compromise at any stage of the suit. In both types of court settlement under the Code of Civil Procedure, the settlement has the same effect as a final and conclusive judgment. There is an important difference between a conciliation under the Civil Conciliation Act, and a court settlement under the Code of Civil Procedure. In a court settlement, it is always a judge who mediates the dispute between the parties.
120. 121. 122. 123. 124. 125. 126. Article 2 of the Civil Conciliation Act. Article 6 of the Civil Conciliation Act. Article 7 of the Civil Conciliation Act. Article 26 of the Civil Conciliation Act. Article 29 of the Civil Conciliation Act. Article 35 of the Civil Conciliation Act. Article 35, Code of Civil Procedure.

ADR in East Asia

185

However, in a court ordered conciliation under the Civil Conciliation Act, the conciliation committee may consist of civil conciliation members who are not judges, nor even qualified lawyers. In practice, the conciliation committee often consists of laymen. It is noted that, by having a conciliation committee mediate the dispute in conciliation proceedings, it is possible that a wider range of views and the varied legal approaches of the civil conciliators may result in a more objective mediation settlement.127 3.8.2. ADR Institutions in Korea

The main ADR institution in Korea is the Korean Commercial Arbitration Board (KCAB), which administers a variety of ADR processes, including mediation and conciliation just prior to instituting arbitration proceedings. KCAB does not have its own set of rules covering the mediation process, and the parties are presumably free to agree on the process. A general outline of the mediation process through KCAB is provided on the KCAB website.128 The process begins when one or both parties request in writing to the KCAB for the provision of mediation services. KCAB shall, upon acceptance of the request, give notice to the other party. Once the actual mediation gets underway, KCAB will issue progress reports and try to maintain open communication between the parties, while also helping them reach an amicable solution. The mediation process is generally provided via correspondence or phone. The number of cases at the KCAB has averaged about 520 per year for the past six years. To promote the use of mediation in dispute settlement, KCAB has also made its mediation services free of charge as of the year 2000. 3.8.3. Reaction to ADR

In recent years, the Korean judges have played an active role in court-annexed conciliation pursuant to the Civil Conciliation Act, as well as court settlement proceedings. It has been observed that while court-annexed ADR processes are slowly gaining popularity in Korea when compared to the past, private mediation and other private ADR processes for commercial disputes are comparatively rarely used. This situation mirrors that of Japan.

127. 128.

See Sang-Hyun Song, Alternative Dispute Resolution Procedures in Korea (1994). See www.kcab.or.kr/English/M3/M3_S1.asp.

186 3.9. 3.9.1.

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat THAILAND129 Legal Framework

There is no law or statute in Thailand which comprehensively addresses mediation or other forms of ADR. Also largely in line with most countries in East Asia, while there is little legislation regarding private mediation, there is Thai legislation allowing the Courts to attempt to bring about a settlement through mediation if it decides that it is appropriate to do so. The most important piece of legislation regarding court-annexed mediation is the Thai Civil Procedure Code. Section 20 of the Thai Civil Procedure Code states that the Court has the power to call parties to a dispute, to appear and settle their dispute through mediation, if the Court is of the opinion that the dispute could be settled amicably. It should be noted that this court-ordered mediation can take place at any stage during the trial of the dispute. Furthermore, Section 19 of the Thai Civil Procedure Code empowers the Court, for the purpose of mediation, to order the litigants in the proceedings to be personally present in the Court, even if they have legal representation. If the party disobeys the court order to appear personally, he will be liable for contempt of court.130 If the parties are able to reach an agreement, the judge will put the compromise agreement in writing, and give judgment accordingly. Second, the Courts of Justice of Thailand have also enacted two regulations regarding mediation, which act as a supplement to the provisions on ADR found in the Thai Civil Procedure Code discussed above. These regulations from the Courts of Justice of Thailand are to be followed by all the courts. The first is the Court of Justice Regulations Pertaining to Mediation of Financial Dispute B.E. 2544 (the Financial Dispute Regulations). The Financial Dispute Regulations were issued in order to reduce the backlog of cases relating to cases where financial institutes were claiming against their debtors for monetary payment. The Financial Dispute Regulations were specifically passed to govern the procedure for mediation of financial disputes, and give the Court the choice of referring financial disputes to mediation under the auspices of the Alternative Dispute Resolution Office, the Office of Judiciary (ADRO).131 If the mediation is successful and a settlement is reached, the case will be sent back to the Court for the Court to render its judgment based on the agreed terms of the settlement. This is in contrast to a privately mediated agreement, which has no legal status except as an ordinary contract. However, if the mediation is unsuccessful, the case will be sent back to the Court for the litigation proceedings.
129. 130. 131. This section is largely based on contributions from Mr. Alastair Henderson, Herbert Smith (Thailand) Limited, Bangkok. Section 31(5) of the Thai Civil Procedure Code. The prescribed penalty is expulsion from the Court, imprisonment not exceeding six months, and/or a fine not exceeding THB 500 (Section 33). It will be noted in section 3.9.2 below that the ADRO has set up a mediation centre.

ADR in East Asia

187

The second regulation enacted was issued to cover mediation of disputes in general. The Court of Justice Regulations Pertaining to Mediation B.E. 2544 (the General Mediation Regulations) provides for two types of mediators, one being a judge-mediator, and the other a private mediator who is appointed by the Court. It is noted that the appointment of a judge as mediator, for the purposes of the General Mediation Regulations, have been much more popular than the appointment of private mediators.132 This is so despite the requirement that the private mediators are to be registered with the Court. In addition, the use of judges as mediators has also been reasonably successful.133 The General Mediation Regulations stipulates that the mediation proceedings are to be kept confidential,134 and any fact arising in the mediation are generally not to be used as evidence in litigation and arbitration proceedings.135 In contrast to these extensive provisions on mediation in litigation proceedings, Thai law does not address Arb-Med at all, i.e. it neither permits nor prevents it. The procedural rules of the Thai Arbitration Institute and the Commercial Arbitration Committee of the Board of Trade are also silent on this matter. However, the Thai Arbitration Institute has published a Code of Ethics for Arbitrators which provides that, [i]f requested to do so by all parties, the arbitrator may mediate or settle the dispute or act as a conciliator.136 Despite this lack of legislation relating to arbitration and mediation, it would not be surprising for a Thai arbitrator to try informally to see whether a solution could be reached/promoted between the parties in dispute. While formal Arb-Med is rarely practised in Thailand, the use of informal mediation during arbitration proceedings may indicate an implicit recognition of the complementary nature of different types of dispute resolution processes. 3.9.2. ADR Institutions in Thailand

The main ADR institution responsible for mediation in Thailand is the Mediation Centre, which is part of the ADRO. It has its own set of mediation rules, the Mediation Rules of the Mediation Centre. The Mediation Centre handles both court-annexed mediations, and mediations independent of any court proceedings. Currently, most mediation services that are provided by the ADRO are free. Many of the cases handled by the Mediation Centre are financial disputes referred to it by the Courts pursuant to the Financial Dispute Regulations. The Mediation Centre is also actively trying to expand its mediation services to other types of disputes. However, the number of non court-annexed cases handled by the Mediation Centre is few compared to the cases referred to it by the Courts. For example, from 2002-2005, there were approximately 80 private mediation cases
132. 133. 134. 135. 136. Suchint Chaimungkalanont, Resolving Disputes by Mediation: Policy, Law and Practice in Thailand, in Asian Dispute Review (March 2004), 19. Ibid. Article 21 of the General Mediation Regulations. Article 26 of the General Mediation Regulations. Article 32 of the Code of Ethics for Arbitrators.

188

Michael Hwang S.C., Loong Seng Onn and Yeo Chuan Tat

handled a year by the Mediation Centre, compared to an average of over 600 financial dispute cases referred to it by the Courts. However, it must also be noted that the number of financial dispute cases handled by the Mediation Centre has decreased significantly in 2005 to less than 300 cases. There are also other bodies providing mediation for specialized types of disputes. These include The Securities and Exchange Commission, Thailand for trading disputes, and the Intellectual Property and International Trade Court for intellectual property disputes. 3.9.3. Reaction to ADR

Similar to other countries, dispute resolution by mediation is increasingly a more common practice in Thailand. This is due, in no small part, to the enactment of the Financial Dispute Regulations and the General Mediation Regulations. The support of the Courts for ADR is also a major reason why there is an increasing number of mediations being carried out. Mediation is also supported by a number of fundamental values and beliefs in Thai society.137 However, mediation in Thailand today is not commonly undertaken on its own, but usually resorted to in conjunction with arbitration or litigation. It appears that parties in dispute still prefer to resort to more usual types of dispute resolution, before agreeing to mediate with encouragement from the Court.138 It is quite clear that the business community in Thailand still chooses litigation and arbitration of disputes over mediation, despite the respectable success rate of mediation. The main reason cited for this is that the business community does not fully understand the nature of formal mediation and its benefits, and are therefore not ready to include mediation clauses in their contracts. A further reason may lie in the traditional Thai preference for resolving business disputes informally or with assistance from respected intermediaries, meaning that unofficial mediation-type processes may have occurred already before the parties consider more formal procedures. For these reasons or others, whilst there has been increasing use of court-annexed mediation,139 private mediations are still rarely used. Many government agencies and offices of the judiciary have been actively promoting mediation in Thailand to improve the situation. The ADRO has also organized training courses in mediation throughout the provinces of Thailand. In addition, the Office of the Attorney-General has also arranged legal education programs, to facilitate a better understanding of ADR processes, including mediation. It is hoped that these programs, along with the increasing number of success stories as a result of mediation, will enable private formal mediation to flourish in Thailand.
137. 138. 139. Thawatchai Suvanpanich, Thailand, in M. Pryles (ed.), Dispute Resolution in Asia, 2nd ed. (The Hague: Kluwer Law International, 2002) 350 at 361. Suchint Chaimungkalanont, Resolving Disputes by Mediation: Policy, Law and Practice in Thailand, op. cit. in footnote 132. Approximately 24 per cent of all civil cases go to mediation. Of these cases, approximately 60 per cent are settled.

ADR in East Asia 4. CONCLUSION

189

The survey of ADR in the countries of East Asia reveals diverse legislative and institutional frameworks in these countries, with marked differences between one country and the next. This should come as no surprise, given the economic, legal, institutional, and cultural heterogeneity of the region. Each country would choose to regulate and promote ADR in the way which it feels would be most appropriate in the light of the countrys own unique circumstance. Yet, underpinning these diverse frameworks of ADR is the common and fundamental recognition of the value of ADR processes, resulting in the efforts by the governments to promote the use of ADR. The recognition and promotion of ADR by the various governments is a necessary, but not sufficient, condition for the success and widespread utilization of ADR. Beyond black letter law and the setting up of institutions, there is also a need to enable the business community to appreciate the potential advantages and value in the use of ADR processes compared to, or more accurately, in conjunction with, litigation and arbitration. That this is an important factor in promoting the use of ADR is reflected in the preceding survey of ADR in East Asia, in particular Hong Kong, Indonesia, and Thailand. The availability of different dispute resolution processes, such as ADR, litigation, and arbitration, allows each conflict to be managed in the most appropriate manner, and to achieve the best result from a commercial point of view.140 The countries discussed above are all of commercial significance, and the facilitative legal, institutional, and social frameworks being put in place by the various countries for promoting the use of ADR, are to be welcomed by the business community.

140.

See C. Wallgren, What ADR Means to the International Business Community, op. cit. in footnote 7.