Business disputes in Asia to rise as crisis worsens

Experts to gather in Singapore to raise awareness of mediation as most efficient way to resolve disputes

Singapore, 21 May 2009 – Commercial disputes in Asia are expected to rise as the economic crisis worsens and riding on this trend, mediation centres in the region are wooing businesses to turn to mediation as a more efficient and effective way of resolving conflicts.

To raise awareness of mediation, experts from the region as well as from U.S.A., U.K., France, New Zealand and Australia, will gather in Singapore next month for a two-day conference titled “Mediation Diversity – Asia & Beyond.” The inaugural Asian Mediation Association (AMA) conference (第一届亚洲调解协会会议), hosted by the Singapore Mediation Centre (SMC, 新加坡调解中心), is expected to draw over 250 professionals.


The conference, taking place at the Marina Mandarin Singapore hotel from 4-5 June, will have as its keynote speaker the 2008 Nobel Peace Prize laureate President Martti Ahtisaari. He will meet the media after his speech. The former Finnish president played a leading role in brokering international peace deals. He was Special UN Envoy for Kosovo and facilitated negotiation between the Indonesian government and the Free Aceh Movement.


Among the key issues to be discussed are how mediation can help companies survive the recession and the significant roles of “giving face” and culture in Asian mediation. Other topics include the rise of Islamic financial mediation in Asia and cross border mediation.


AMA was set up in August 2007 to promote and facilitate the use of mediation to amicably settle business and commercial disputes. Its present members include the SMC and its counterparts in Hong Kong, India, Indonesia, Malaysia and the Philippines.


Speaking at a media briefing to announce the conference, Mr Sundaresh Menon, Senior Counsel and Board Member of the SMC, said the global credit crunch and downturn will probably lead to a rise in bankruptcies and corporate defaults, and courts will see more cases of national and cross-border business conflicts.


Drawing on Singapore’s past experiences, Mr Menon pointed out that during the 1998 and 2001 recessions, the workload of the Subordinate Courts hit record levels. In respect of the civil caseload, 41,385 writs were filed in 1999 and 44,969 in 2002. They were higher than the total writs filed in 2007 (32,724 writs) and 2008 (38,596 writs).

 

Mr Menon said: “We expect the number of commercial disputes in Singapore to go up this year like the last two crises as companies run into difficulties and fail to meet contractual obligations. Already we are seeing some signs. For example, the number of writs filed in the High Court in 2008 saw a 24% rise over the previous year. And the increase in the first quarter of 2009 over the same period last year was 48%. ”


Mr Menon urged companies and individuals to use mediation to resolve their disputes. In mediation, the process of dispute resolution is managed by a mediator, who may be a respected and senior member of the legal or another profession.


Outlining the benefits, Mr Menon pointed out that, unlike arbitration, the outcome of mediation is determined by the parties. Furthermore, mediation is non-adversarial, focuses on problem-solving, maintains relationships and helps save cost and time as there are no long-drawn public hearings which incur substantial legal fees.


Disputing parties can select the mediators, keep proceedings and settlement private, develop creative and pragmatic solutions, as well as avoid court proceedings.


Citing the Singapore experience, Mr Menon said that since it began operation in 1997, the SMC has mediated 1,422 cases with S$1.7 billion of assets in dispute. Of these, 75% were settled and of the resolved cases, more than 90% were settled within a day. Mr Menon added: “Our clients have also enjoyed tremendous savings from using SMC mediation services.”


The savings from mediating a dispute as against litigating it in court could amount to hundreds of thousands of dollars in legal and hearing fees.

Sylvia Siu, JP, Chairman, Board of Governors, Hong Kong Mediation Centre, expects more legal proceedings such as bankruptcies, winding up and disputes over structured financial products.

 

She said that there has been growing awareness of the efficacy of mediation in Hong Kong since the recent implementation of the Civil Justice Reform of the Judiciary and the Mediation First Pledge Reception.


The Mediation First Pledge Reception was supported by the Department of Justice of HKSAR, Hong Kong Mediation Centre, Hong Kong Law Society, Hong Kong Bar Association, Hong Kong Federation of Women Lawyers, Hong Kong Consumer Council, Hong Kong Federation of Insurers and Hong Kong Mediation Council.


Over a hundred pledges were signed by corporations and institutes including Sun Hung Kai Properties and Proctor & Gamble. By signing the pledge, organisations commit themselves to considering mediation as a first resort before adjudicatory proceedings, in order to avoid the expense, risk, and loss of control that usually come with full-blown litigation.

Fahmi Shahab, Executive Director of The Indonesian Mediation Center, also expects more business conflicts as a result of the downturn. “I’m positive the economic crisis will trigger a rise in disputes in Indonesia ranging from debt restructuring, breach of contracts to labor disputes. As a result we are likely to see more mediation cases. But we still need to ramp up awareness of mediation especially with decision makers at the companies’ board level. They don’t have a good understanding of mediation and its benefits.”

Mediation is still at a nascent stage in many Asian countries. Datuk Haji Kuthubul Zaman Bukhari, Chairman of Malaysian Mediation Centre, noted that there is a low level of awareness in Malaysia as lawyers there see mediation as “a threat to their livelihood.”

He noted that a Mediation Bill to make mediation compulsory is awaiting approval from the Malaysian cabinet.

The commercial world in India has also yet to fully embrace mediation. Justice Madan B. Lokur, Judge, Delhi High Court, Delhi Mediation Centre, said: “They still believe in arbitration. We're trying to educate them through lectures, circulation of brochures on the advantages of mediation and the mediation process, but there is still this resistance to change or to try out something new and different.”


He added: “Most people don’t really understand the difference between Lok Adalats, the people's courts, and mediation. They think that mediation is only a variant of Lok Adalats and since Lok Adalats are firmly entrenched in our system and working well, why should we try its variant.”


“We are trying to educate whoever we can on the differences between Lok Adalats and mediation. The message is slowly going through. Mediation will succeed if a few key players accept its usefulness and propagate it more actively.”


Most mediation centres in Asia handle both individual and corporate disputes, At SMC, construction disputes take the lion’s share with 38.6% of the total number of disputes.


For media registration for the Inaugural AMA Conference, please email [email protected]. More information on the conference is available at www.asianmediationassociation.org.

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About Singapore Mediation Centre
The Singapore Mediation Centre ("SMC") is the flagship mediation centre of Singapore. It was officially launched on 16 August 1997. The SMC is a non-profit organisation guaranteed by the Singapore Academy of Law. It is linked institutionally with many professional and trade associations and receives the support of the Supreme and the Subordinate Courts of Singapore and the Singapore Academy of Law. The SMC has successfully spearheaded the mediation movement in Singapore and is dedicated to the promotion of amicable and efficient settlement of disputes. It aims to create an environment in which people can work together to find enduring solutions to conflicts and tensions created by human interactions. It contributes to the building of a harmonious society, and a thriving business community, by broadening awareness of, and providing access to, constructive means of dispute resolution and conflict management.


About Asian Mediation Association
The Asian Mediation Association was set up in August 2007. It promotes and facilitates the use of mediation to amicably settle disputes in Asia. AMA also provides a regional dispute resolution infrastructure for conflict management and dispute resolution that will support the increasing cross-border investment and trade activities of the fast growing Asian economies. AMA is made up of member organisations involved in mediation, which are based in Asia. Presently the AMA members are the Delhi Mediation Centre, the Hong Kong Mediation Centre, the Indonesian Mediation Center, the Malaysian Mediation Centre, the Philippine Mediation Center and the Singapore Mediation Centre. The Singapore Mediation Centre also serves as the AMA Secretariat.

Foo Kim Leng (Ms) Assistant Director, Corporate Communications
Singapore Academy of Law
Tel: +65 6332 5365/9635 8850 Email: [email protected]