Recent Interpretations and Guidance Concerning Court-Connected Mediation as a Form of Alternative Dispute Resolution in China

By Adria Warren, Foley & Lardner LLP

This article is part of our Winter 2009 edition of Legal News: China Quarterly Newsletter, Eye on China.

With China’s vast legal system often overwhelmed and under-funded, Chinese courts have increasingly indicated their commitment to normalizing alternative dispute mechanisms, in particular by expanding access to, and institutionalization of, court-connected mediation as a form of alternative dispute resolution in China. “Judicial mediation” as practiced in China differs from U.S. mediation models because of its court focus, and may be procedurally compared to U.S. settlement conferences.

The application of voluntary and enforceable mediation (conciliation) through the courts was first officially recognized in the 1991 Civil Procedure Law, and certain provincial and local level courts, including the Langfang City Intermediate Court and the lower-level courts within its jurisdiction, are beginning to experiment with introducing formal pre-trial mediation systems. Nevertheless, judicial mediation in practice continues to pose many challenges, including uncertain enforcement procedures and lack of impartiality as the judge assigned to a case is often the mediator.

Recent pronouncements by China’s Supreme People’s Court (SPC) have recognized these challenges, and indicate a greater willingness on the part of the court to address them. The Third Five-Year Reform Outline for the People’s Courts (2009 – 2013) issued by the SPC in March 2009 (Five-Year Plan) includes among the court’s mandates: assisting the relevant departments in their efforts to develop alternative dispute resolution mechanisms; expanding the scope of parties to be mediated; improving mediation mechanisms; and improving conflict-handling mechanisms, which link litigation and alternative dispute resolution.

The SPC has recently expounded on the specific topic of judicial mediation. On August 4, 2009, the SPC issued a guidance document titled “Several Opinions Concerning the Establishment and Improvement of Dispute Resolution Mechanism that Connect Litigation and Non-Litigation Proceedings” (Opinions). Notably, the Opinions confirm the enforceability of mediation agreements, and also state that the judge who was involved in conducting a mediation prior to trial should not be involved in the further adjudication of that dispute at trial unless the parties agree.

Enforceability of Mediation Agreements

The Opinions specifically give mediated agreements, if made in accordance with law and signed or stamped by both parties, the status of civil contracts for purposes of enforcement. This applies to administrative settlements, civil settlements, and settlements reached through business, trade, or labor organizations, and in connection with rural land contracts.

To give a mediated agreement enforceable effect through the courts, parties are encouraged to apply to the relevant court to confirm a mediated settlement. The court will review the application under simplified procedures. Specific instances when a mediated settlement will not be confirmed include if doing so would 1) violate the laws and mandatory provisions of administrative regulations; 2) infringe national interests or social public interest; or 3) infringe the outside parties’ legitimate rights and interests, or if the agreement is unclear, the mediator had a stake in the case that was not disclosed to the parties, or the mediation organization or mediator compelled mediation or a mediated settlement, his or her impartiality was compromised, or there occurred another serious violation of ethical norms of conduct.

Mediator Impartiality

The Opinions specifically state that, in principle, a judge who mediates a dispute before trial shall not be personally involved in litigating the same case unless agreed to by the parties. In addition, unless the parties agree, the people’s court is directed to not allow a mediator who has been involved in mediating a dispute to subsequently act as a party agent on a same or related dispute. This is notable as it is the first formal and public position statement addressing the role of the judge in pre-trial judicial mediation proceedings.

Under the Opinions, courts retain the discretion to direct a mediation, but if not agreed to by the parties, or if a mediated decision is not reached, the court shall promptly adjudicate the case. In addition, the Opinions direct that staff or personnel engaged in mediation for the court shall not disclose relevant information about the mediation process, testify, or enter into evidence at trial the negotiations, discussions, or transcripts during the course of the trial proceedings. The court can make an exception where admissibility of such evidence is otherwise clearly defined by the laws, if the court deems it necessary for the protection of national interests, social public interests, and outside parties’ legitimate rights and interests, or if the parties otherwise agree.

Practical Steps

To implement the SPC’s guidance in this area, the Opinions encourage lower people’s courts to establish mediation rosters, develop regulations covering management and fees, and adopt a mediator code of ethics. The regulations and professional ethics provisions developed by lower-level and intermediate people’s courts are to be reported to the higher people’s courts for the record, and those developed by the higher people’s courts shall be reported to the SPC.

In conclusion, although the Opinions are not binding on the lower Chinese courts, they provide important legal guidance and indicate new trends in the Chinese judicial system. The Opinions elaborate on the SPC’s Five-Year Plan in the important area of enforcement and clarify the duties and powers of judges with a particular focus on judicial mediation. Perhaps most important for those companies working in China, the Opinions can provide a valuable tool when facing court-led mediation or seeking to enforce mediated settlements, and some important guidance when evaluating whether to use alternative dispute settlement mechanisms.