Why you should care
China’s global infrastructure initiative is sparking a growing demand for mediation services to resolve disputes.
When in June a Kenyan court blocked construction of the country’s first coal-fired power station, it was not only a blow for the project’s Chinese backers, say lawyers, but also a sign that China’s Belt and Road Initiative (BRI) might benefit from better dispute resolution.
Local judges blocked the plant’s construction on environmental grounds after finding that the project owner had failed to consult local communities. Through mediation, the Chinese investors and Kenyan government might have been able to come up with a mutually beneficial arrangement, experts contend.
The scope of the BRI, a $1 trillion infrastructural program, extends from the southern Pacific to Europe, Africa and Latin America. Through it, China aims to finance roads, ports and other infrastructure such as power stations in some of the world’s poorest areas. According to the World Bank, the potential network of BRI infrastructure would touch about 70 countries. While it may make for large-scale economic opportunity, it also raises the possibility of myriad international commercial disputes. In response, the Chinese government is looking for ways to settle BRI disputes efficiently. This month, China was one of the first countries to sign the Singapore Convention, the new United Nations protocol on the enforcement of mediated settlement agreements.
Meanwhile, the nonprofit Singapore International Mediation Centre and the China Council for the Promotion of International Trade — a Chinese state body charged with developing business cooperation with other countries — recently established an international panel of mediators to handle disagreements arising from BRI projects.
The most actively developing market outside of the U.S. right now is Asia.
Chris Poole, CEO, Jams
Other dispute resolution bodies around the world have also recognized the importance of offering mediation to counterparties of BRI projects. The Paris-based International Chamber of Commerce (ICC), whose international court of arbitration has resolved about 23,000 commercial disputes since its creation in 1923, released guidance on the mediation of BRI quarrels last year.
The ICC has also set up a court commission to develop its approach to BRI disputes, headed by Hong Kong-based Justin D’Agostino, global head of disputes for law firm Herbert Smith Freehills. “Belt and Road presents a rare opportunity to rethink how complex multiparty, international disputes are resolved,” D’Agostino wrote recently in a note to potential BRI counterparties.
“For centuries, dispute resolution has been anchored to adversarial processes,” D’Agostino added. “But there is a concerted effort to encourage mediation clauses in Belt and Road agreements, with provision for arbitration if mediation fails.”
Styles and preferences for commercial dispute resolution often differ from culture to culture, says Jack Coe, faculty director of the international commercial arbitration master’s program at Pepperdine Law School. Many business cultures prefer arbitration, he says, whereby an arbiter decides on the virtue, or otherwise, of quarreling parties’ arguments. Some societies, meanwhile, may favor the use of potentially less combative methods of dispute resolution, such as mediation, in which parties involved reach a voluntary agreement.
Mediation has “been around for decades” in the United States and the United Kingdom as an alternative to arbitration or litigating disputes in the courts, says Coe. The U.K. in particular, with its strong legal reputation and deep international ties with Commonwealth countries around the globe, has been a traditional hub for international commercial dispute resolution, including mediation.
Coe notes that in some legal cultures, “infrequent use of commercial mediation may reflect a preference for compulsory processes such as arbitration, that do not depend on voluntary participation to run their course,” However, he adds, it is “tough to speak in generalities because cultures aren’t monoliths and attitudes can vary from industry to industry.”
Arbitration is still the norm in Asia, even though some Asian cultures have a reputation for consensus-building, say lawyers in the region. “The reality is most people want to settle disputes amicably if they want an ongoing business relationship,” says Jones Day Singapore partner Matthew Skinner. “So there is always a place for settlement.”
In Europe, apart from London and Paris, Geneva is also popular. The dozens of international organizations hosted by the Swiss city include the World Intellectual Property Organization’s arbitration and mediation center, which is widely used for entertainment, technology and other intellectual property disputes.
Dubai is looking to establish itself as a center for mediating disputes in the Middle East, says Skinner. Disputes in the Gulf region are particularly common in large-scale construction projects involving multiple contractors.
In the U.S., New York and Washington are traditional mediation centers, while Miami, with its long-established Hispanic connections, is becoming an increasingly popular destination for Latin American counterparties to mediate disputes. Los Angeles–based Jams, which boasts of being the world’s largest private alternative dispute resolution provider, also offers cross-border services with Latin America, which it runs out of Miami.
Asia, however, is viewed as the growth area. “The most actively developing market outside of the U.S. right now is Asia,” says Chris Poole, CEO of Jams. “That is why we have a representative in Beijing and a partner organization in Shanghai.”
China’s BRI and Singapore are key driving forces. Its eye on the future, the Singapore government has just finished the expansion of a dedicated alternative dispute resolution center, the Maxwell Chambers Suites, in the city’s old traffic police headquarters. The center is officially scheduled to have “the highest concentration of case management offices anywhere in the world,” a spokesperson says, in the full expectation of seeing “more high-value cross-border disputes managed in and out of Singapore.”
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