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Arbitration-mediation, or arb-med, signifies mediation within arbitration, or the integration of arbitration with mediation. Arb-med was, in practice, started in China by the China International Economic and Trade Arbitration Commission (CIETAC) in the 1950s. It is now expressly provided for in articles 51 and 52 of the PRC Arbitration Law and further supplemented in the CIETAC Arbitration Rules.

Arb-med stresses fairness, efficiency and harmony, and offers several advantages in the resolution of complex civil and commercial economic disputes:

1. Arb-med takes place during the course of an arbitration procedure, and is therefore subsidiary to it; and
2. Arb-med is a standalone procedure. The scope of mediation may be different from that of the related arbitration, and failure of the mediation effort does not preclude continuation of the arbitration procedure. Once an arbitration procedure enters arb-med, the arbitrators take on a different capacity, i.e. that of mediators. If the mediation proves successful, the arbitration tribunal may issue a written mediation statement or an award based on the mediation agreement, and the party that applied for arbitration can apply for the case to be withdrawn. If the mediation proves unsuccessful, the arbitration tribunal can continue the arbitration hearings, in which case the arbitrators who had taken on the capacity of mediators revert to their original capacity as arbitrators and may lawfully issue an arbitration award based on the circumstances of the case.

A written mediation statement prepared when arb-med is successful has the same legal force and effect as an arbitration award. Either a written arb-med statement or an arbitration award can serve as the basis for petitioning a people¡¯s court for enforcement. However, when a court accepts a party¡¯s application for enforcement, it may, pursuant to an application from the other party, carry out a judicial review of the written arb-med statement or award and has the right to issue a decision refusing enforcement.

Arb-med and litigation-mediation

Arbitration-mediation and litigation-mediation in China are both based on the principles of free will, lawfulness, ascertainment of the facts and distinguishing the true from the false, but in nature and operation they are not identical. The major differences can be summarized as follows.

First, the method of initiating the mediation procedure is different. Litigation-mediation can start either pursuant to an application by the parties or after a people¡¯s court has otherwise secured the consent of the parties. Pursuant to the Arbitration Law and the Arbitration Rules, an arb-med procedure may be initiated in any one of the following four ways:

1. The parties reach a settlement through consultation or mediation before commencing arbitration, and with the consent of both parties, either party may petition the arbitration commission on the strength of the arbitration agreement and the settlement the parties have reached to issue an arbitration award based on the settlement;
2. If, during arbitration, the arbitrators believe that the case could be mediated, they conduct mediation after having secured the consent of the parties;
3. During arbitration, the parties agree through consultation to ask the arbitrators to mediate; or
4. If, in the course of the mediation procedure hosted by the arbitration tribunal, the parties reach a settlement outside the arbitration tribunal, the parties are nonetheless deemed to have reached a settlement under mediation of the arbitration tribunal.

Second, mediation is used in different circumstances. With respect to litigation-mediation, under normal circumstances, mediation can apply to any civil or commercial case, with the exception of cases of certain types, including marital relationships and affirmation cases. On the other hand, the scope of arbitration-mediation cases is specific, mainly being confined to contractual disputes that arise in the course of commercial activities and labour disputes. Marriage, adoption, guardianship, fostering and inheritance disputes as well as administrative disputes that are required by law to be dealt with by administrative authorities may not be arbitrated, and so also cannot be the subject of arbitration-mediation.

Lastly, the legal documents prepared in the event that mediation is successful, the times those documents enter into effect and their legal validity are different. When litigation-mediation is successful, the court is required to prepare a written mediation statement; whereas when arb-med is successful, the arbitration tribunal will prepare a written arbitration-mediation statement or arbitration award based on the mediation agreement or settlement agreement. Both a written litigation-mediation statement and a written arbitration-mediation statement become legally effective once signed upon receipt by the parties, whereas an award issued after arbitration-mediation enters into effect immediately upon being issued.

The legal effect of a written mediation statement prepared by a court and of a court judgment are equivalent, whereas a written arbitration-mediation statement or award is not as enforceable as a written court settlement agreement. This is because if there is an error in a written mediation statement prepared by a court, the other party, when applying for enforcement, can have it quashed or amended only through an adjudication supervision procedure, failing which the original written mediation statement will continue to be enforced.

On the other hand, when a party applies to a court for enforcement of a written arbitration-mediation statement, as mentioned above, if the other party is able to show that there are grounds that make the written arbitration-mediation statement or award unenforceable, the court may, after confirming through examination that there is no error in those grounds, rule not to enforce the statement or award.

Freedom

Broadly speaking, China¡¯s arbitration-mediation system, as compared to litigation-mediation, is more flexible and convenient. In an arbitration hearing, the parties have a great deal of freedom, allowing them to initiate various types of mediation activities under or beyond the auspices of the tribunal at any time. The arbitrators accord the greatest possible respect to the parties¡¯ efforts to mediate.

Jim Qiu is a partner and Lilla Guo is an associate in the Shanghai office of Yao Liang Law Offices

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jim.qiu@yaolianglaw.com

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