Why do we need to know more about dispute resolution in China?

By Huaning Gu

In Australia, China often feels far away with a different social system, legal system and culture. So why is there a need for Australians to inform themselves about Chinese dispute resolution?

Mediation in China: an old tradition

Mediation started in China about 4,000 years ago when Emperor Shun, the ancient Chinese leader, settled disputes for fishermen. According to the legends, Emperor Shun lived with groups of fishermen for one entire year, so he could help them find a reasonable and fair way to allocate every fisherman with a fishing spot.

The tradition of settling disputes in China goes back for centuries. Because of this, there is a tendency to settle disputes through mediation rather than litigation in China today. Mediation is seen as a respectable, private and dignified way of solving conflict. Traditionally, mediators have always been very highly regarded in Chinese society.

Arb-med in China

Ever since arbitration has been introduced into Chinese culture, it has been bundled with mediation into the arb-med method. Arb-med is a resolution process combining both aspects of mediation and arbitration. When solving a dispute, a facilitator will act as an arbitrator in the first instance. If the parties consent or request mediation during the arbitration process, the same facilitator will act as a mediator instead. If no solution is found during the mediation phase, the facilitator will act as an arbitrator to come to a final decision.

In the 1950s, all cases in China were settled through the arb-med method. Today, only a third of all cases are settled this way. In the past, China has been very proud of its prominent use of the arb-med method. However, due to more recent concern over the double roles arb-mediators play in this process, China is changing its practices and relevant regulations in the interest of natural justice.

The value for Australians

China and Australia have always had an important economic relationship. Just last year, the value of investments between China and Australia exceeded 60 billion Australian Dollars. This, in itself, is a valid reason for both Australian legal and business professionals to inform themselves about the arb-med method and dispute resolution in China. Australian businesses are increasingly seeking to enter and thrive in the Chinese market. Sadly, an increased number of business transactions often results in more disputes between businesses as well. How do Australian businesses settle disputes in China? Unlike in Australia or the US, litigation may not always be the obvious choice.

Due to the revival of alternative dispute resolution in Australia, mediation and arb-med are not new to the Australian legal system. Mediation is so popular that when you walk into an Australian court to have a dispute settled by a judge, you are very likely to get a mediator assigned to your case instead. However, this does not mean that the same legal terms embody the exact same concepts in both the Australian and Chinese legal system, and this may be confusing for Australian business owners trying to settle a dispute overseas.

As an American mediator with over 20 year experience in China once pointed out: “If you think you understand dispute resolution in China, think again. You may be mistaken.”

Biography

Huaning Gu is a SJD candidate at La Trobe Law School. Her research focusses on arb-med in China and how Chinese arb-mediators gain their authority and settle disputes. Before moving to Australia, Huaning worked for the China International Economic and Trade Arbitration Commission (CIETAC) for ten years. She is now a CIETAC arbitrator.

La Trobe