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Mediation wins favour as a way to resolve disputes

The number of rows dealt with without court intervention has risen 56 pc in 10 years

PUBLISHED : Monday, 17 September, 2012, 12:00am
UPDATED : Monday, 17 September, 2012, 8:46am

A growing number of Hong Kong and Asian companies and individuals are turning to mediation to resolve their disputes rather than pursuing costly litigation through the courts.

The number of mediation and arbitration matters heard in Hong Kong last year jumped 56 per cent to 500 from 2002, according to data from the Hong Kong International Arbitration Centre.

Unlike taking court action, which requires both parties to hire lawyers to present their cases before judges, mediation gives the parties the option of hiring a mediator to hear both sides in a three-way discussion. A successful outcome will typically take about four hours.

If the mediation process fails, the parties can move on to arbitration or litigation. Arbitration is where a dispute is referred to an arbitrator who will hear the case and make a ruling.

Going to court can cost millions of dollars, whereas a standard four-hour mediation session costs between HK$10,000 and HK$12,000. Similar to litigation, the cost of an arbitration varies, depending on the complexity of the case and the length of the hearing, according to Annie Chan Wai-hing, partner and head of forensic and investigation services of accounting firm Mazars, which also provides mediation services.

"Mediation is a cheaper and quicker way to solve disputes," Chan said. "It is suitable for cases such as disputes over contracts, financial or shareholder agreements, tenancy agreements and family disputes, or cases where allegations of criminal activity are not involved. Criminal cases must be handled by the courts."

Chan expects the number of mediation cases to increase after the government-funded Financial Dispute Resolution Centre opened in June. The centre provides mediation and arbitration for people seeking claims of up to HK$500,000 against their banks or brokers.

Chan said 90 per cent of the mediation hearings ended in a decision accepted by both parties. Cases that remained deadlocked often involved emotional and personal issues. Rather than money, aggrieved parties often wanted no more than an apology.

She said many cross-border business contracts with parties in other Asian countries or mainland China now indicated that in the event of a dispute, the parties would take the matter to mediation in Hong Kong.

"Many Asian countries have confidence in the Hong Kong legal system, which is why Hong Kong can become a regional mediation centre," Chan said. "The challenge facing the development of mediation in Hong Kong arises from lawyers' concerns that if people opt for mediation, there will be fewer court cases, which would affect business."

She said the key to successful mediation was ensuring that the mediator studied the case in detail and clearly understood the concerns of both parties.

One of the most memorable mediation cases she recalled concerned a father and son warring over how to run the family business. After mediation, the son agreed to refund the investment in the business made by his father and the father agreed to let the son run the business in his own way.

"If the deadlock could not have been solved by mediation, the case would have gone to the court. The key to the success of this case was that the mother urged the father and son to keep the loving family together to avoid appearing in court. So they finally agreed to reach an agreement," Chan said.