Encouraging Mediation as a Form of ADR in Hong Kong
Reporters: Kenix Yuen, Partner & Felda Yeung, Gall Solicitors
Hong Kong has engaged in valiant efforts for over a decade to increase the appetite for mediation as an alternative dispute resolution (ADR) mechanism to resolve commercial disputes. Hong Kong first introduced mediation as a voluntary resolution process under the Civil Justice Reform (CJR) on April 2, 2009 though only time will tell if there is a strong, lasting appetite for mediation as a means of resolving disputes. Under the Judiciary’s Practice Direction on Mediation, parties to litigation proceedings are encouraged to consider using mediation to resolve their dispute. If the court considers that a party has unreasonably refused to engage in mediation, it may make an adverse costs order against that party. In this sense, although mediation is a voluntary process, in practice, it is quasi-compulsory unless there is a good reason not to attempt mediation.
Advantages of Mediation
Mediation is a faster, more efficient and confidential approach to resolving disputes and it is also conducted on a without prejudice basis, allowing companies to explore settlement without litigation or arbitration. Mediation is particularly useful when a commercial dispute could potentially damage a company’s reputation - a client may be keen to settle on reasonable commercial terms at an early stage and maintain the business relationship with the opposing party. This would be seen as a “win-win” result.
The success of any mediation lies in several key factors including the mediator’s skill, the parties’ willingness to settle, the attitude of the parties’ legal representatives, the respective strengths of the parties’ case, and whether there are any other consequences that are not within the control of both parties.
Challenges of Cross-Border Mediation
Cross-border disputes can be even harder to resolve by way of mediation. Difficulties may be brought about not only by the differences between the laws of the jurisdictions, but cultural differences and differences in legal practice too.
The case of Gao Haiyan & Anor v Keeneye Holdings Ltd  1 HKC 335, however, can provide reassurance to parties seeking to carry out cross-border mediation. In Gao Haiyan, the Court of Appeal dismissed the public policy objection to an arbitration award which the first instance judge found to give rise to “apparent bias”. During the arbitration hearing, the parties had agreed that the arbitration tribunal could engage in med-arb whereby the arbitrators take the role as mediators to resolve the matter by way of mediation, before determining the merits of the dispute as arbitrators. Mediation failed, and an arbitration award was granted. Subsequently, the applicants obtained an enforcement order of the arbitration award to which the respondents applied to set aside the order. The Court of Appeal agreed that “one might share the learned Judge's unease about the way in which the mediation was conducted because mediation is normally conducted differently in Hong Kong” but nonetheless determined that, because the procedures employed were common practice in China, there was no apparent bias and no public policy basis for refusal.
Gao Haiyan was later applied in N v W  3 HKC 161 –there, the plaintiff commenced proceedings to challenge an arbitral award on the ground that there was misconduct on the part of the arbitrator, thereby causing substantial injustice to the plaintiff. It was held that the standard of illegality to justify a refusal to enforce an arbitration award on public policy grounds (despite its high threshold) varies according to the customs and procedures in different jurisdictions.
Hong Kong Developments
The Hong Kong government’s initiatives to promote and employ mediation were most evident in the 2007-08 Policy Address, which led to the establishment of a cross-section working group headed by the Secretary for Justice (the “Working Group”), a Mediation Task Force implementing the recommendations by the Working Group and a Steering Committee.
Various legislative bills to establish a legal framework in relation to mediation have been introduced into the Legislative Council. These later transpired into the enactment of the Mediation Ordinance, the Apology Ordinance and the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017. The first two of these Ordinances both came into operation in the end of 2017, while the operation of the legislation on third party funding for mediation has been deferred.
Following the recommendations of the Working Group on public education, Hong Kong launched the Mediate First campaign in May 2009, with more than 100 companies and trade organisations pledging to consider the use of mediation before resorting to other means of dispute resolution. Since then, however, the number has only grown to just over 650, suggesting that the commercial sector has been slow to embrace mediation as an ADR. The Hong Kong Government continues its commitment to encourage mediation.
In addition, Article 13.8 of the Hong Kong International Arbitration Centre Administered Arbitration Rules 2018 introduced the possibility of suspending the arbitration proceedings where parties agree to pursue other means of settling their dispute, even after arbitration commences. This will allow parties effectively to suspend existing arbitration proceedings, explore mediation, and if mediation fails, resume the arbitration proceedings.
The opening of the West Kowloon Mediation Centre in 2018 marked the first public facility dedicated to mediation in Hong Kong and, also in 2018, the eBRAM Centre (Electronic Business-Related Arbitration and Mediation) was set up. This is funded by the Hong Kong Government and is an online platform for deal-making and dispute resolution including mediation within the Greater Bay Area and Belt & Road countries.
Hong Kong’s continued commitment to encourage and facilitate mediation is consistent with the global trend.
The United Nations Convention on International Settlement Agreements Resulting from Mediation, known as the Singapore Mediation Convention is a good example of the global commitment to mediation. The Singapore Mediation Convention recently opened for signature in August 2019. At the time of writing, it has been signed by 52 states, with additional states expected to follow suit. The Singapore Mediation Convention will come into force on 12 September 2020. To date, the Singapore Mediation Convention has only been ratified by Singapore, Qatar, Saudi Arabia and Fiji. For countries which have not yet ratified the Convention, including China, the Singapore Mediation Convention will come into force six months after ratification.
The Singapore Mediation Convention is an initiative to encourage cross-border mediation by providing a process for direct enforcement of settlement agreements between cross-border parties resulting from mediation. Whilst the Singapore Mediation Convention is relatively new and its success has yet to be seen, this is undoubtedly a positive step towards encouraging the commercial sector in Hong Kong to viewing mediation as a strong alternative dispute resolution mechanism.