Mediation is low risk.
If the case settles, it’s over. It is also cost effective and could saving lots of time and costs compared to litigation. Bringing a case to trial in court is expensive! It is also found that mediation on contract disputes has shown some impressive results. Over 80% of the disputes that are voluntarily submitted to mediation are satisfactorily resolved. A business contract may contain a mediation clause. By using such a clause, the parties to the contract agree to mediate first in case of disputes. A mediation clause could be:
Sample Mediation Clause
"All disputes, controversies, or differences arising out of or in connection with this agreement shall first be submitted to the Hong Kong Professional Mediation Association for resolution. The disputes, controversies or differences shall be referred within [No. of days] days from the time they arose. The parties agree to participate in mediation in good faith and undertake to abide by the terms of any settlement reached.
The benefits of the mediation clause flow from the expectation of higher rates of settlement in mediation since the parties' voluntary implementation of the mediation clause. This suggests a willingness to work together to find a solution to their dispute.
Recently, in a growing number of jurisdictions, courts have affixed their imprimatur by enforcing mediation contract clauses.
In U.S., Fisher v. GE Medical Systems, the court endorsed the concept gleaned from a line of cases that endorse the notion that mediation is akin to arbitration as a process, "that falls under the preference for non-judicial dispute resolution." The court also expressed that federal policy was favoring arbitration in its broadest sense and applying it to mediation.
Sample Mediation & Arbitration Clause
“In the event of any dispute, controversy, difference or claim arising out of or relating to this contract, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations (hereinafter referred as the “disputes & claims”) arising out of or relating to it, the parties shall first seek settlement of that dispute & claims by mediation through Hong Kong Professional Mediation Association. A mediator is appointed by the chairman of the Hong Kong Professional Mediation Association to conduct the mediation.
If the disputes & claims is not settled by mediation or the mediation is called off by a mediator within 10 days of the commencement of the mediation, the dispute shall be referred to and finally resolved by arbitration administered by the China International Economic and Trade Arbitration Commission (CIETAC) Hong Kong Arbitration Center for arbitration which shall be conducted in accordance with the CIETAC’s arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties.
1. The seat of arbitration shall be … (Hong Kong).
2. The venue for oral hearing shall be … (insert a place, for example, Hong Kong, Beijing, Tokyo, etc.).*
3. The arbitrator/s is/are appointed by the Chairman of Hong Kong Professional Mediation Association. The number of arbitrators shall be ... (one or three).
4. The arbitration proceedings shall be conducted in ... (insert language, for example, Chinese, English, etc.).