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When in June a Kenyan court blocked construction of the country’s first coal-fired power station, it was not only a blow for the project’s Chinese backers, say lawyers, it was also a sign that China’s Belt and Road Initiative (BRI) might benefit from better dispute resolution.
Local judges blocked the plant’s construction on environmental grounds and finding that the project owner had failed to consult local communities. Through mediation, the Chinese investors and Kenyan government might have been able to come up with a mutually beneficial arrangement, experts contend.
The scope of the BRI, a $1tn infrastructural programme, extends from the southern Pacific to Europe, Africa and Latin America. Through it, China aims to finance roads, ports and other infrastructure such as power stations in some of the world’s poorest areas.
According to the World Bank, the potential network of BRI infrastructure would touch about 70 countries. While it may make for large scale economic opportunity, it also raises the possibility of myriad international commercial disputes.
The Chinese government is looking, therefore, for ways to settle BRI disputes efficiently. This month, China was one of the first countries to sign the Singapore Convention, the new UN protocol on the enforcement of mediated settlement agreements.
Meanwhile, the non-profit Singapore International Mediation Centre and the China Council for the Promotion of International Trade — a Chinese state body charged with developing business co-operation with other countries — recently established an international panel of mediators to handle disagreements arising from BRI projects.
Other dispute resolution bodies around the world have also recognised the importance of offering mediation to counterparties of BRI projects. The Paris-based International Chamber of Commerce (ICC), whose international court of arbitration has resolved about 23,000 commercial disputes since its creation in 1923 — released guidance on mediation of BRI quarrels last year.
The ICC has also set up a court commission to develop its approach to BRI disputes, headed by Hong Kong-based Justin D’Agostino, global head of disputes for law firm Herbert Smith Freehills. “Belt and Road presents a rare opportunity to rethink how complex multi-party, international disputes are resolved,” Mr D’Agostino wrote recently in a note to potential BRI counterparties.
“For centuries, dispute resolution has been anchored to adversarial processes,” Mr D’Agostino added. “But there is a concerted effort to encourage mediation clauses in Belt and Road agreements, with provision for arbitration if mediation fails.”
Styles and preferences for commercial dispute resolution often differ from culture to culture, says Jack Coe, international commercial arbitration masters programme faculty director at Pepperdine Law School near Los Angeles.
Many business cultures prefer arbitration, he says, whereby an arbiter decides on the virtue, or otherwise, of quarrelling parties’ arguments. Some societies, meanwhile, may favour the use of potentially less combative methods of dispute resolution, such as mediation, in which parties involved reach voluntary agreement.
Mediation has “been around for decades” in the US and UK as an alternative to arbitration or litigating disputes in the courts, says Mr Coe. The UK in particular, with its strong legal reputation and deep international ties with Commonwealth countries around the globe, has been a traditional hub for international commercial dispute resolution, including mediation.
Mr Coe notes that in some legal cultures, “infrequent use of commercial mediation may reflect a preference for compulsory processes such as arbitration, that do not depend on voluntary participation to run their course”. Though, as he adds, it is “tough to speak in generalities because cultures aren’t monoliths and attitudes can vary from industry to industry”.
Arbitration is still the norm in Asia, even though some Asian cultures have a reputation for consensus building, say lawyers in the region. “The reality is most people want to settle disputes amicably if they want an ongoing business relationship,” notes Jones Day Singapore partner Matthew Skinner. “So there is always a place for settlement.”
In Europe, apart from London and Paris, Geneva is also popular. The dozens of international organisations hosted by the Swiss city include the World Intellectual Property Organisation’s arbitration and mediation centre, which is widely used for entertainment, technology and other IP disputes.
Dubai is looking to establish itself as a centre for mediating disputes in the Middle East, says Mr Skinner. Disputes in the Gulf region are particularly common in large-scale construction projects involving multiple contractors.
In the US, New York and Washington are traditional mediation centres, while Miami, with its long established Hispanic connections, is becoming an increasingly popular destination for Latin American counterparties to mediate disputes. Los Angeles-based Jams, which boasts of being the world’s largest private alternative dispute resolution provider, also offers cross border services with Latin America, which it runs out of Miami.
Asia, however, is viewed as the growth area. “The most actively developing market outside of the US right now is Asia,” says Chris Poole, Jams chief executive. “That is why we have a representative in Beijing and a partner organisation in Shanghai,” he adds.
China’s BRI and Singapore are key driving forces. Its eye on the future, the Singapore government has just finished the expansion of a dedicated alternative dispute resolution centre, the Maxwell Chambers Suites, in the city’s old traffic police headquarters.
The centre is officially scheduled to have “the highest concentration of case management offices anywhere in the world”, in the full expectation of seeing “more high-value cross-border disputes managed in and out of Singapore”.
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