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Overview Of Commercial Mediation

Commercial mediation means a method of out-of-Court commercial dispute resolution agreed upon by involved parties with the assistance of a commercial mediator acting as an intermediary. Currently, the legal framework for commercial mediation method is nearly adequate, especially the Government issued Decree No. 22/2017/ND-CP on commercial mediation (“Decree 22”) stipulating the scope, principles, order and procedures for mediation, criteria for a commercial mediator, the establishment and operation of a commercial mediation institution. In addition, the Civil Procedure Code 2015 has paid attention to mediation when regulating separately in Chapter XXXIII on procedures for recognition of out-of-court mediated settlement results. The scope of this article mentions some of the main contents that the disputing parties should note if choosing this method of commercial mediation.

1. Scope of resolving the dispute through commercial mediation

Commercial mediation is chosen to resolve the following disputes:

- First, disputes arise from commercial activities. This means the disputes resolved through mediation must be those arising from commercial activities, such as purchase and sale of goods, provision of services, and other activities according to the Commercial Law and the subject matters of the dispute are business entities who conduct commercial activities independently and regularly and have business registration.  

- Second, disputes between parties at least one of them is engaged in commercial activities. This case is only different in the subject which is required only one business entity, and the other party in the dispute may not be business entity, for example, individual, state body, organization, consumer… to a transaction with the business entity.

- Third, other disputes which are prescribed by law to be resolved through commercial mediation. In contrast to the two above cases, in this case, the disputes are not necessarily arising from commercial activities, and one of the involved parties /both parties is not necessarily a business entity. Currently, many laws such as the Investment Law and Construction Law also stipulate the application of mediation method to resolve investment and construction disputes in Vietnam.

2. Forms of commercial mediation

Institutional commercial mediation means a form of dispute resolution at a commercial mediation institution in accordance with Decree 22 and the Mediation Rule of such institution. Each commercial mediation institution is required to register and publicize a list of its commercial mediators as well as its own codes of ethics and conduct applicable to commercial mediators.

Ad hoc commercial mediation means a form of dispute resolution conducted by an ad hoc commercial mediator selected by involved parties in accordance with this Decree and the agreement of the parties. A person who fully satisfies the criteria for a commercial mediator and wishes to become an ad hoc commercial mediator shall register with the provincial-level Department of Justice of the locality where he/she permanently resides.

3. Order, procedures on commercial mediation

A dispute shall be resolved through commercial mediation if involved parties so agree. A mediation agreement may be established in the form of a mediation clause in a contract or of a separate agreement and shall be established in writing.

Based on the two commercial mediation forms, disputing parties have the following rights to select: (1) commercial mediators from a list of commercial of a commercial mediation institution or from a list of ad hoc commercial mediators publicize by the provincial-level Department of Justice; (2) the Mediation Rule of a commercial mediation institution for conducting mediation or reach agreement on the mediation order and procedures; and (3) venue and time for mediation. In case the parties do not reach such agreement, the commercial mediator may conduct mediation according to the order and procedures he/she finds suitable to the circumstances of the dispute and the aspirations of the parties, which are accepted by the parties.

Regarding mediation order and procedures At any time in the mediation process, a commercial mediator may put forth proposals for dispute resolution. When attaining a successful mediation result, involved parties shall make a mediated settlement agreement. This agreement is binding on the parties in accordance with the civil law. The mediated settlement agreement must bear the signatures of the involved parties and the commercial mediator. If unable to attain a mediated settlement agreement, involved parties may either continue the mediation or request arbitration or a court to resolve their dispute in accordance with the law.

4. Evaluating the pros and cons of this dispute resolution method

4.1. Advantages of commercial mediation

Mediation is one of the most common choice of involved parties to resolve their dispute because of its advantages in comparison with the litigation in Court/Arbitration, as follows:

Firstly, while litigation procedures in court stipulated in the Civil Procedure Code applies to resolve all of civil cases in general, mediation procedures applicable to disputes arising from commercial activities are more flexible. Therefore, parties can take the initiative in venue and time for mediation. Accordingly, the mediation process does not go through the number of different hierarchical levels of court, which helps companies to saving-money and time-consuming.

Secondly, this measure of resolving dispute is regarded as highly intimate. With the assistance of an intermediary, the disputing parties have an opportunity to seek the dispute solution, and still maintain their business relationship in the future.

Thirdly, thank to not disclose the mediation process, the disputing parties can keep their trading secrets confidentially, and their prestige is also not affected.

Lastly, a mediated settlement agreement may be recognized by the court according to the laws on civil procedure if either or both parties file a application to the Court for recognition of the mediation and fulfill the conditions for recognition stipulated in Article 417 of the Civil Procedure Code. The decision to recognize the out-of-court mediated settlement shall be enforced according to law regulations on enforcement of civil judgments. Therefore, in this case, the performance of mediated settlement will be guaranteed by the hierarchical levels of state’s enforcement agencies. However, if the mediated settlement is not recognized by the court, the performance will depend on the goodwill and the voluntary co-operation of each party to the dispute.

4.2. Drawbacks of commercial mediation 

Despite having many advantages mentioned above, mediation activity also has several disadvantages that causes disputing parties hesitantly when choosing this measure, includes:

Firstly, a closed and unpublicized form of resolution can lead to some negatives and illegal. This happens when the mediation activity is unprofessional, or the mediator does not comply with principles of ethics and conduct applicable to commercial mediators, the negative can arise during the mediation process which may favor on one side. Accordingly, differ from litigation procedures in court/arbitration, the mediator is unlimited to individual meetings during the mediation process to find out their wishes to the dispute. Under the confidentiality principle, the mediator may only disclose such individual meeting’s information to the other party with the consent of the meeting party. However, if the mediator accidentally or intentionally discloses information entrusted by one party, this party will be disadvantageous during the negotiation and mediation process.

Secondly, a mediator shall not make any binding decisions or impose the parties when resolving the dispute, so such dispute may be prolonged. According to the law, the commercial mediator may only put forth proposals for dispute resolution. The mediator must always respect the agreement reached by involved parties if such agreement neither violates law nor contravenes social morality. Due to these binds, if a disputing party deliberately lengthens or complicates the mediation process or because of limited legal knowledge, the mediator can not give advices or binding decisions on the parties.

Thirdly, during the mediation process, one party can request termination of mediation to conduct other dispute resolution methods at any time. Based on this feature, efforts to resolve disputes by mediation can become insignificant when one party disagrees to continue. As mentioned above, the fact that parties can control the entire mediation process is an advantage but also a disadvantage because the mediator can not force the parties to continue to resolve the dispute to the end.

Lastly, the recognition procedure of the out-of-court mediated settlement result faces many difficulties. Because the Civil Procedure Code sets out four conditions to recognize the out-of-court mediated settlement result stipulating in Article 417, the court will have to re-examine whether the parties' mediation fulfils these conditions? Particularly, the fourth condition is “contents of the successful mediation are totally voluntary and are not contrary to law, neither contrary to social ethics nor for evasion of obligations towards the State or the third party.” Proving the “contents of the successful mediation are totally voluntary” will be a great challenge because the whole process of mediation must be conducted in a manner that ensures the confidentiality of the case. Logical reasoning shows that in the case of a party requesting the court to recognize the mediated settlement agreement, it usually happens when the other party fails to comply with that agreement. The fact that the other party can appeal any of the fourth conditions to request the Court to review the entire contents of the mediated agreement or the mediation process. This leads to prolonging the process of recognizing mediated settlement agreement or not recognizing it.
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