Southern Perspective Shenzhen

When I tell people that I studied Chinese Business Law, I usually get the same response just about every time, “They have laws here?”

Ha ha ha, we chuckle each and every time but that is the pervasive perception of many people who do business in China.

And these comments come mostly from people who have been on the ground in China trading punches with suppliers for years.

This reaction is common when coming from the US, where people have sued the golden arches for making them fat or that their hot beverage was too hot.

The simple fact of reality is that China does not enjoy the direct confrontation that we do in the West when problems arise and must be dealt with.

While the courts in China are changing, it will take time for the structure of the legal system to develop, just as it did everywhere else.

In the meantime, you do have several options for dealing with disputes IF you PREPARE correctly.

Mediation is a great choice and is quickly becoming a preferred method of settling disputes in Hong Kong, if fact as of January 10^th, 2010 solicitors are required by law to inform and explain the availability and differences between mediation and litigation.

This is the direction that dispute resolution will take in Asia, and those that do business in Asia will need to understand the manner in which to handle disputes with a minimum of disruption to business.

Mediation is not a one-size-fits all solution to disputes in China, there are situations when it is a good idea and situations when it is a bad idea.

Mediation is a good idea when;

• You have a solid history of cooperation with the other party
• There are many different parties involved or individual parties where there is a clear distinction about who is responsible for your relationship
  • Mediation works best between two parties that will attempt to be fairly open about their relationship
• There are no hugely overwhelming issues between the parties
  • Mediation works well for smoothing over small bumps in the relationship road, not for overly complex and involved issues
• You have an ongoing relationship with the other party
  • Mediation is not a good option for resolving disputes with a wham-bam-thank you ma’am relationship with a supplier that you are using for a single project.
• The parties BOTH want to reach an agreement
  • If one side is going to be a stick in the mud, they will have a pretty easy time stopping the mediation process

There are also times when mediation will probably be ineffective;

• If the parties have a history of adversarial relations or there is hostility between the two parties.
  • If both parties come to the table looking for a fight, they’re going to find one and nothing will be resolved.
• If the issues in dispute are overly complex or involve many different parties
  • Remember the goal of mediation is for the parties to resolve the disputes themselves, the mediator can only facilitate the parties and act as an independent third party
• If the issues are purely legal issues or one party is forced by requirement to mediate.
  • This is the inherent issue I have with judges requiring parties to mediate, when someone is forced into a situation where they must amicably reach an agreement they will often fail to do so if forced.
• If continuing the dispute is beneficial to one of the parties
  • In a situation where one party would benefit from a long a drawn out mediation, it is possible to entice the opposing party by acting as if you are serious about resolving the problem when in fact they are simply wasting time.
• If there is a significant power imbalance between the two parties.

A well trained mediator should be able to help you work through some small problems.

Their job is the help parties look forward and not dwell on the past.

They should also be able to separate the people involved in the dispute from the problem that is the core of the dispute.

Most importantly they need to be able to help the parties find common points of interest and remember why they are doing business in the first place.

Keep your eyes open and your head on a swivel, its good advice in sports and its good advice for China.