Commercial Mediation – Improvement Or Barriers

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Commercial Mediation – Improvement Or Barriers

A conflict or a dispute not be resolved by negotiation or mediation methods but having to bring each other to the Court or the arbitration will waste time and money of both parties. Normally, the term of resolving a contract dispute in Vietnam by the Court is 400 from the date of filing the lawsuit until enforcing the judgment. As a consequence, the more time the dispute is, the more cost the parties have to spend. 

Starting from the reality above, the trend of choosing dispute resolution methods outside the Court, the arbitration is increasingly preferred by enterprises. Commercial mediation is one of the methods commonly selected by the parties when a dispute occurs and they fail to negotiate with each other However, they do not want to conduct complicated legal proceedings which wastes time and money. On the other side, some people believe that the commercial mediation proceeding is a barrier about the proceeding and waste their time when they must conduct it before bringing the dispute to the Court or the Arbitration if they “miss” adding the mediation contents in the dispute settlement clause of the contract. Whether this is a barrier that causes the parties to spend more time settling the dispute? Below are some of our views to better understand commercial mediation procedures in accordance with current law.

1. What is Commercial Mediation?

Clause 1, Article 3 of Decree 22/2017/ND-CP on Commercial Mediation defines that “Commercial mediation is a method of resolving commercial disputes agreed upon by involved parties with the assistance of a commercial mediator acting as an intermediary in accordance with this Decree.”

From the above definition, it can be seen that commercial mediation has the following characteristics:

(i) Firstly: Commercial mediation is one of the non-procedural dispute resolution methods. Non-procedural nature is represented through commercial mediation to be conducted entirely voluntarily and by the parties. Accordingly, the parties shall have the right to agree on selecting commercial mediation institutions, commercial mediators, and mediation rules, order and procedures for mediation, which is different from the settlement of disputes by the Court – where the parties are obligated to comply with the order and procedures as prescribed by law.

(ii) Secondly: Commercial mediation is joined by third parties helping the parties agree on the content of dispute settlement. However, it should be noted that this third party is only an intermediary assisting the parties to find the best solution to resolve the dispute, and the result of the mediation is completely decided by the parties.

Therefore, commercial mediation has different characteristics from other types of mediation such as court mediation, land mediation or labor mediation.

2. What are the conditions for settling the dispute by commercial mediation?

For a commercial mediation to take place, the parties must enter into a mediation agreement. A mediation agreement may be made in the form of a mediation clause in a contract or a separate agreement and shall be made in writing. 

In addition, according to the provisions of Article 6 of Decree 22/2017/ND-CP, a mediation agreement may be made before or after a dispute or at any time in the process of dispute resolution.

3. What is the commercial mediation process?

A mediation process usually consists of 5 phases as follows:

(i) Preparation phase: Normally, the parties in the dispute will choose a commercial mediator from the invitation, the recommendation provided by a third party or appointed at the preparation phase. After that, the commercial mediator will contact the parties to collect information related to the case, provide information to the parties about the negotiation process, the role of the mediator, the effects and functions of mediation as well as arrange the time, place for the mediation, fees, preliminary mediation plan, etc.

(ii) Opening phase: Before entering into this phase, the mediator must ensure that the mediator has received all information and documents from the parties and has fully introduced his/her information to the parties and creates a comfortable atmosphere to conduct the mediation. In addition, the mediator will state the mediation process, the basic principles of the mediation such as the mediator’s role, the confidentiality of the mediation, etc. Also, the parties will present a summary of the case and raise the disputed issues as well as their requirements at this phase.

(iii) Information extraction phase begins when the opening phase ends and is also the critical phase affecting the success of the mediation. During this phase, the mediator will provide a specific schedule for the parties to conduct the mediation. The mediator can exactly determine the problem and the parties’ concerns, thereby suggesting a solution through joint, private meetings (depending on the situation and needs of each party involved).

(iv) Negotiation phase: Usually, the parties are ready, have fully prepared the terms and conditions for the dispute settlement, and have made offers to the other party. The result of this phase is the basis for the parties to take a minute of mediation. However, this is a challenging period because the discussion and negotiation process between the parties may not be favorable at any time. Such cases require the mediator to have extensive experience handling the situation to coordinate the discussion and keep the parties calm..

(v) Ending phase: When the parties have agreed (successful or unsuccessful mediation). In the event of a successful mediation, the mediator will make the minute of mediation recording the agreements between the parties and will join the parties’ legal representatives to sign to establish the validity of the mediation minutes. On the contrary, in the event of unsuccessful mediation, the parties may request the competent agencies to continue the mediation or request the Arbitration or the Court to settle the dispute in accordance with the law.

Note: After the agreement has been duly signed by the parties, the successful enforcement of the mediation agreement is important. In most cases, when the parties have reached a mediation result, the parties will voluntarily implement it because they decide and make the agreement. However, there are still some cases where one party does not voluntarily perform, the other party is still allowed to request the Court to recognize the successful mediation results as prescribed in Article 16 of Decree 22/2017/ ND-CP and fully satisfy the conditions, comply with the order and procedures prescribed from articles 416 to 419 of the Civil Procedure Code 2015.

4. What are the advantages and disadvantages of commercial mediation?

Advantages: The selection of commercial mediation methods will help the parties with numerous benefits compared to other dispute resolution methods. The parties involved do not spend too much time preparing for the mediation, such as time, location, process, documents, the content of the mediation, closed meeting, etc. The mediator has arranged and created the most appropriate and fastest dispute resolution process. It is different from the negotiation, where it is more difficult for the parties to prepare such a complete and detailed meeting. 

In addition, business secrets and dispute information will be kept confidential. This helps the parties to the mediation can be more secure when their disputes are not public, avoiding affecting their reputation, especially large corporations or companies listed on the stock exchange.

One of the most prominent advantages of commercial mediation is that “justice” is determined by the parties involved. A third party with the knowledge, experience and skills to run the mediation is just an intermediary to help the parties reach a mediation agreement to resolve the dispute more easily. This mediation agreement will be binding on the parties when recognized by the competent court. However, in most cases, the parties will voluntarily implement the agreement because this agreement is made based on the common will of the parties. 

Besides, the cost for mediation is considered reasonable compared to other dispute resolution methods such as the Court, the Arbitration. In addition, the settlement of disputes by commercial mediation is also the basis for the parties to be able to maintain a cooperative relationship in the future.

Disadvantages: Since the nature of the mediation agreement is decided by the parties, whether the mediation can proceed and achieve results or not entirely is subject to the goodwill of cooperation between the parties in the dispute. Moreover, the mediator’s role is significant in arranging, coordinating, fully exploiting information and keeping the mediation going peacefully so that the parties can reach a mediation agreement. Therefore, the success of the mediation depends on the experience, calmness and necessary skills of the mediator.

In summary, as mentioned above, It is clear that commercial mediation is a very convenient and feasible dispute resolution mechanism. Commercial mediation should not be considered a barrier in the dispute settlement process but rather an opportunity for the parties to find a common voice.