Singapore Mediation Convention and China

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The author chairing a session of a workshop on the Singapore Mediation Convention at the International Law Institute of the Chinese Academy of Social Sciences

I was very honored (and gratified) that the workshop pictured above was able to take place on 18 March at the International Law Institute of the Chinese Academy of Social Sciences (CASS).  Unbeknownst to most of the attendees, who included persons from the Ministry of Foreign Affairs, Supreme People’s Court, and National People’s Congress, I was one of the organizers.  Other participants came from the Foreign Affairs College and Shanghai office of the Singapore International Arbitration Centre. The workshop could not have taken place if not for the efficient work of Professor Liu Jingdong and assistant research fellow Sun Nanxiang. I had previously gotten to know Mr. Wen Xiantao, of the Department of Treaties and Law of the Ministry of Commerce (MOFCOM) and official Chinese negotiator of the United Nations (UN) Convention on International Settlement Agreements Resulting from Mediation (Singapore Mediation Convention or Convention) and Sun Wei, Zhong Lun partner and participant in the Convention negotiations as part of Beijing Arbitration Commission’s delegation to the negotiations as with observer status.

The Singapore Mediation Convention is intended to complement the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention, and when it goes into force, will enable international commercial settlement agreements that result from (third party) mediation to be enforced.  A summary of the Convention can be found here, and the United States negotiator, Timothy Schnabel, who proposed the Convention, wrote (in his own capacity) a definitive overview of its text, structure, history, and purpose.  As Mr. Schnabel’s article explains, the Convention is intended to promote the use of mediation in resolving cross-border commercial disputes, because it is more likely to work faster, cost less, and preserve the business relationship. From Mr. Schnabel’s article, it is clear that Mr. Wen ”vigorously participated in the formulation of international norms,” and his views had a positive impact on the eventual text of the Convention, supporting the drafting of a convention rather than only a model law and enabling enforcement of settlements that include both pecuniary and non-pecuniary elements.

From reading Sun Wei’s blogpost on the Kluwer Mediation Blog (part 2 found here)  it was clear that multiple institutions need to come to an agreement that signing and ratifying the Singapore Mediation Convention would be beneficial for China.  I noted many misconceptions about the Convention flying around the Wechatosphere.  Messrs Wen and Sun (and I)  realized that representatives from the institutions involved needed to be in the same room to be able to hear more about the Convention, ask questions and discuss concerns in a congenial environment. As a former practitioner, I thought it would be useful to have Adrian Hughes, QC and Helen Tang (Shanghai-based disputes partner of Herbert Smith Freehills) in the room to be able to speak first hand about the process of and advantages of commercial mediation in international commercial dispute resolution, as well as the enforcement process in the courts of England and Wales.

Wen Xiantao and Sun Wei took the lead in discussing the provisions of the Convention and related issues, Adrian Hughes spoke as a highly experienced international commercial mediator and litigator, and Helen Tang contributed comments from her experience representing Chinese parties in international commercial disputes.  The closed-door and invitation-only format enabled an interactive discussion among all participants. Among the many issues discussed were the implications for the courts, preventing the enforcement of fraudulent mediation settlements, and the lack of a law relating to commercial mediation.

The official report on the workshop is found here.

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Shining a light on Chinese judicial transparency

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flashlight in the dark

I last wrote on judicial transparency in December (2018), giving a quick analysis of the Supreme People’s Court (SPC)’s latest transparency policy. Two quick updates on this topic:

  1. The Fifth Judicial Reform Plan Outline (Opinions on Deepening the Reform of the Judicial System with Comprehensive Integrated Reforms – Outline of the Fifth Five-Year Reform Program of the People’s Courts (2019-2023) lists as one of the overall goals improving judicial transparency:

further deepen judicial openness, constantly improve the openness of the trial process, openness of court proceedings, openness of judgment documents, openness of enforcement information–the four transparency platforms, comprehensively expand the breadth and depth of judicial openness, improve the form of judicial openness, smooth the parties and lawyers to obtain judicial information channels, build a more open, dynamic, transparent, convenient sunshine judicial system.

The transparency developments highlighted in the Fifth Judicial Reform Plan Outline will be guided by the policy document Supreme People’s Court’s Opinion Concerning the Further Deepening of Judicial Transparency  (Judicial Transparency Opinion 最高人民法院关于进一步深化司法公开的意见)) that I wrote about in December.

2.  The article I mentioned as being in the academic article production pipeline has finally emerged.  It can be found here. It is a chapter from the book Transparency Challenges Facing China and examines some recent developments in China’s judicial transparency. It suggests that although the scope of judicial transparency is inevitably shaped by the requirements to keep state and trial work secrets confidential, the Supreme People’s Court, within the boundaries of what is politically achievable, is taking concrete steps to expand the scope of judicial transparency.  The article focuses on information on judges and courts, statistics and big data, and judicial normative documents, digging into relevant court rules and highlighting Chinese language commentary.  The article shows that views on judicial transparency within the Chinese judiciary are not as monolithic as an outsider might have initially assumed.

 

Financial disputes in the Chinese courts

The details on the total number of financial disputes in the Chinese courts in 2018 are unknown (perhaps to be revealed in Supreme People’s Court President Zhou Qiang’s upcoming report to the National People’s Congress), but several recent white papers by Shanghai courts provide a glimpse into some of the issues in 2017 and 2018 (and in Pudong, with further historical data).  Local Shanghai judges comment that the caseload is likely to increase in in 2019.  Those white papers are a bilingual white paper on financial dispute resolution, published by the Shanghai Higher People’s Court late in 2018, and two white papers by the Pudong District Court, one on consumer financial cases and the other surveying the past 10 years of financial cases (full text of this report has escaped me, per my earlier blogpost).

Some of the facts and figures from Shanghai are:

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Financial cases accepted & closed, Pudong New Area Court, 20008-2018

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financial consumer protection cases in Pudong, 2014-2017 (accepted & closed)

There were many fewer second instance (appeal) cases. One of the many reasons is that court performance indicators discourage appeals.

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According to the Shanghai Higher People’s Court, the largest proportion of cases were credit card disputes (149,609) year-on-year growth of 52% (83% of financial disputes); 16,528 financial loan contract disputes, (9.2%) up 14.5% year-on-year;4,319 financial lease  disputes (1.6%), with the year-on-year growth of 45.17%; 2,927 insurance disputes, up by 30.6%;and 1,246 securities and futures disputes.  Credit card cases are not under the jurisdiction of the new financial court and the judges attributed the increase in disputes in the large increase in the number of credit cards issued.

On P2P cases, those rose from 315 in 2015 to 663 in 2016 and 1508 in 2017.  I surmise that those numbers are likely to have gone up in 2018.

The Shanghai Financial Court reported that they accepted 1897 cases during calendar year 2018.

In their report, the higher people’s court judges noted that in 2017, a total of 49 bond defaults occurred, of which 29 were public bonds and 20 were private bonds, of which 11 ended up in litigation, all of which were actions brought by institutional investors against bond issuers. Some bondholders sued the issuers for anticipatory repudiation and required the issuers to pay principal and interest, raising new issues for the courts. The judges noted that with the economic “deleveraging” policy, market liquidity will tighten further,  which they predicted will further trigger bond default disputes.

Tao Xiuming, a law firm partner and member of ICC China, who contributed to a 2016 study that the ICC issued on financial institutions and international arbitration. wrote (with several colleagues) a chapter on financial dispute resolution in the Beijing Arbitration Commission’s Commercial Dispute Resolution in China: An Annual Review and Preview (2018) (2018)  (for some reason the book does not seem to be on the publisher’s website).  He commented that not only was 2017 the starting year for tighter financial risk control, it also coincided with a marked increase in the number of defaults and bankruptcies, leading to many disputes and that the government’s change in national macroeconomic policy has an impact on the adjudication of financial disputes.
Tao noted that to facilitate the Central Government’s macro policy on tighter control on financial risks, the Supreme People’s Court issued Several Opinions on Further Strengthening Financial Trials and that “the Chinese courts can and will adapt to the ever-changing macroeconomic policies to align to the activities of modern commerce.” He does not mention the reason is that the courts must serve the greater situation (服务大局), as emphasized by the latest judicial reform plan.