An effective way of resolving disputes in Hong Kong

Civil Justice Reform

Litigation is often lengthy and expensive. It is for this reason that the Civil Justice Reform took effect in Hong Kong on 2 April 2009 with the objective of increasing cost effectiveness and facilitating dispute settlement. Under the Civil Justice Reform lawyers encourage parties to use an Alternative Dispute Resolution (“ADR“) procedure if appropriate in the hope of leading to an amicable settlement. The new Practice Direction 31 on mediation, a common mode of ADR, took effect on 1 January 2010.

Practice Direction 31

Under the new Practice Direction (“PD“), parties have to explore the possibility of mediation before pursuing litigation. Unreasonable refusal of a party to mediate will risk adverse costs orders. The PD creates a framework for mediating. Parties will have to comply with filing certificates stating that they have been advised about mediation. The PD also provides for a party to serve a Mediation Notice setting out its proposals for mediation. If this is done, the other party then must serve a Mediation Response giving its position. If it refuses to mediate, the responding party must set out why.

What is mediation?

Mediation is ultimately a form of assisted negotiation. It is a voluntary process in which a trained and impartial third person, the mediator, helps the parties in dispute to reach an amicable settlement that is responsive to their needs and acceptable to all sides. The settlement agreement concluded by the parties is a legally enforceable contract.

During the process, the experienced mediator will employ a mixture of facilitative and solution-focused techniques in order to help the parties generate settlement options and achieve a “win-win” solution of the dispute. The mediator brings the parties together face to face in a private and confidential setting. Each party will have the opportunity of putting forward his point of view and listening to what the other has to say.

The mediator’s role

The mediator will:

  • Discuss and decide what matters are in dispute;
  • Explore each party’s real needs and interests;
  • Expand settlement options and assess the most suitable solution;
  • Draw up the settlement agreement in detail, setting out how the parties have agreed to resolve each matter in dispute.
  • The mediator does not impose a decision on the parties. His impression of the merits of the case is irrelevant. The key decision makers in mediation are the parties themselves. Because the mediator is not deciding the case, he is not bound by the rules of natural justice as if he were sitting as a judge.

Why mediation?

Experience worldwide has shown that mediation facilitates a high settlement rate and most people are satisfied with the outcome of mediation.

The advantages of mediation are many and include the following:

  • Avoids the tension, conflict and risk in the adversarial court system;
  • Saves time and money by not needing to contest matters in court;
  • Mediation can start before any litigation or at any stage during the process of litigation;
  • Both parties may be more willing and ready to comply with the decision reached;
  • Settlement terms can be kept private and confidential;
  • Settlement terms can be of greater flexibility and more practical than the legal remedies that a court is empowered to grant;
  • Maintains a continuing relationship with the other party involved.

Is mediation suitable for all disputes?

The mediation process is fundamentally different to litigation. Most commercial disputes are suitable for mediation and it should be sensibly tried. However, some individual disputes may not be suitable for mediation because of their particular features. Careful assessment of the suitability of mediation must be made initially.

Mediation in Hong Kong

There is already considerable mediation experience in certain commercial sectors in Hong Kong. A prime example is the construction industry, where the use of mediation has steadily grown over the last 10 years. Family mediation is also common in HK.

Expert adjudication or determination

Adjudication refers to a binding decision of an independent third party (usually an expert in the subject matter in dispute) upon the claims of both sides. Adjudication decisions are usually binding on both parties by prior agreement. Adjudicators are not bound by the rules of litigation or arbitration and adjudication is intended to be quicker and more cost effective than litigation or arbitration.

Based on the HKIAC’s rules on adjudication, the adjudicator is to render a decision within 56 days from the date of the dispute is referred to him, unless extended by consent of the parties.

Tanner De Witt has worked with many experts in diverse fields such as forensics accounting, surveying, handwriting experts, cableway technical directors etc in the past and can advise on the choice of an expert for clients who have such a need.

Early neutral evaluation

Early neutral evaluation (“ENE“) is an informal without-prejudice process not administered or recognised by the HK IAC but which may be useful to the resolution of a dispute.

In ENE, an independent third party considers the claims made by each side and gives an opinion, either on the likely outcome or on a particular point of law. The opinion is non-binding; the parties can use it if they wish in considering how they want to proceed with their case. The opinion can be the basis for settlement. ENE can be particularly valuable to get an opinion on a point of law or to get a more realistic view of the chances of success at trial.