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Navigating dispute resolution and cross-border enforcement in disputes with Chinese parties: Legal frameworks and strategies
Parties to cross-border commercial disputes often consider China as an enforcement jurisdiction. Legal frameworks and institutional arrangements have developed in response to these developments. This article looks at enforcement-related considerations for contracting parties when negotiating dispute resolution agreements.
Article
Alternative dispute resolution processes such as arbitration continue to trend in international commercial agreements, alongside the complementary trend of multi-tiered and mixed-mode dispute resolution processes, which allow parties flexibility to combine processes in resolving disputes. Mediation is typically contemplated as part of the process, either as an initial dispute resolution mechanism before escalation to arbitration or litigation, or as an intermediate step after another initial dispute resolution process.
Where the dispute is successfully resolved, a real concern for parties in cross-border commercial disputes is the enforceability of a final outcome – be it by way of court judgment, arbitral award, or mediated settlement agreement. In this context, contracting parties often look to China as an enforcement jurisdiction.
In this article, we will discuss various developments and dispute resolution clauses that contracting parties should consider in facilitating the recognition and enforcement of final outcomes, particularly where China is contemplated as an enforcement jurisdiction.
SIMC-SCIA Med-Arb Protocol
The Singapore International Mediation Centre (SIMC) and Shenzhen Court of International Arbitration (SCIA) launched the SIMC-SCIA MedArb Protocol (MA Protocol) on 25 November 2022. The MA Protocol allows the recording of any settlement agreement resulting from mediation at SIMC as an arbitral award of the SCIA and will facilitate the direct enforcement of such arbitral award in China.
Significantly, the MA Protocol applies to all disputes submitted to SIMC for mediation, and not just to disputes submitted through SCIA. A party wishing to submit a dispute to mediation at SIMC will file a Mediation Request with SIMC either directly or through SCIA, in accordance with the SIMC Mediation Rules.
Under the MA Protocol, where a dispute is submitted to mediation at SIMC through SCIA pursuant to an existing arbitration agreement between the parties, the parties agree that any dispute settled during mediation at SIMC will fall within the scope of the arbitration agreement.
Where the dispute is submitted to mediation at SIMC through SCIA:
— Mediation at SIMC shall be deemed to have commenced pursuant to the SIMC Mediation Rules.
— Unless arbitration proceedings have already commenced at SCIA when the submission to mediation at SIMC is made, arbitration at SCIA shall be deemed to have commenced only on the date when the outcome of the mediation has been received by SCIA.
— Where arbitration proceedings have already commenced at SCIA when the submission to mediation at SIMC is made, arbitration at SCIA shall be stayed until the outcome of the mediation is received by SCIA. — SIMC shall promptly inform SCIA of the outcome of the mediation. SCIA will then initiate the arbitration proceedings or resume the arbitration proceedings, as the case may be, in accordance with the SCIA Arbitration Rules.
Whether the dispute was filed first with SCIA for arbitration or with SIMC for mediation, parties may make a consent application to SCIA under the MA Protocol to record a successful mediated settlement of a dispute (either partially or entirely) as an arbitral award.
This allows the mediated agreement to be efficiently and effectively enforced in China as an award. This is particularly useful to parties with commercial disputes in China, or where the subject matter of the dispute or contemplated enforcement assets are located in China.
In negotiating dispute resolution clauses, parties may adopt or incorporate the SIMC Model Clause set out below:
All disputes, controversies or differences arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall before or after the commencement of any other proceedings, be first referred to mediation in Singapore at the Singapore International Mediation Centre in accordance with its Mediation Rules for the time being in force, without prejudice to any recourse to apply to any tribunal or court of law of competent jurisdiction for any form of interim relief.
Enforcing mediated settlement agreements as consent judgments or arbitral awards
Parties who have agreed to court litigation or arbitration may wish to refer their disputes to mediation either before or after they commence legal proceedings. If the dispute is settled through mediation, parties can combine the advantages of a flexible dispute resolution process with the advantage of enforceability and finality by agreeing to have the mediated settlement agreement recorded as a consent judgment or consent award. If mediation fails, they may continue with the legal proceedings.
The SIMC has established arbitration-mediationarbitration protocols with the Singapore International Arbitration Centre and the Singapore Chamber of Maritime Arbitration. Where parties have agreed to adopt these protocols, any settlement of disputes reached through mediation at the SIMC after the commencement of arbitration shall be referred to the arbitral tribunal. A consent award may be made on the agreed terms. Such consent award would, subject to local legislation and/or requirements, be generally enforceable as an arbitral award in convention countries under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). China is a contracting party to the New York Convention.
The Singapore International Commercial Court (SICC) and the SIMC have established a litigation-mediationlitigation (LML) framework with a view to promoting the amicable resolution of international commercial disputes. The SICC is a division of the General Division of the High Court and part of the Supreme Court of Singapore. Established in 2015 to hear transnational disputes that are international and commercial in nature, the SICC bench comprises a diverse panel of eminent international and local specialist commercial judges.
Where parties have agreed to do so, the successful mediated settlement terms of a dispute (either partially or entirely) submitted to the SIMC may be recorded by the SICC as a consent order of court. Such order would, subject to local legislation and/or requirements, be generally recognised and enforceable as a foreign court order in convention countries under the Hague Convention on Choice of Court Agreements 2005 (Hague Convention). China is a signatory party to the Hague Convention.
Parties may adopt the SICC-SIMC LML protocol by incorporating the LML Model Clause into their agreements, or by separate agreement at any time such as after a dispute has arisen. The LML Model Clause is set out below:
Agreement (supplemental to a Basic Jurisdiction Clause) to resolve a matter through a LML framework
[A dispute, controversy or claim having arisen between the parties concerning [define dispute] (the “Dispute”), each party hereby irrevocably submits the Dispute to the exclusive jurisdiction of the Singapore International Commercial Court.] The parties further agree that despite the commencement of proceedings in the Singapore International Commercial Court, the parties will attempt in good faith to resolve the Dispute through mediation at the [Singapore International Mediation Centre], in accordance with the Litigation-MediationLitigation protocol for the time being in force between the Singapore International Commercial Court and the [Singapore International Mediation Centre]. [Any settlement reached in the course of mediation may be recorded by the Singapore International Commercial Court as a consent order on agreed terms.
Singapore – China: MOU on the management of BRI disputes
The Supreme Court of Singapore and the Supreme People’s Court of the People’s Republic of China have agreed to each develop and implement a LML framework, through the SICC and the China International Commercial Court (CICC), respectively, by a Memorandum of Understanding (MOU) signed on 1 April 2023 on cooperation on the management of international commercial disputes in the context of the Belt and Road Initiative (BRI) through a LML framework.
Parties to BRI disputes may consider adopting either of the following LML Model Clauses mentioned in the MOU:
Where the parties choose to resolve the dispute in the SICC
Each party irrevocably submits to the exclusive jurisdiction of Singapore International Commercial Court any dispute arising out of or in connection with this contract (including any question relating to its existence, validity or termination).
The parties agree that after the commencement of court proceedings, they will attempt in good faith to resolve any such dispute through mediation in accordance with the Litigation-Mediation-Litigation Protocol of the Singapore International Commercial Court.
Where the parties choose to resolve the dispute in the CICC
Each party, according to the procedural law of the seat of the court, irrevocably submits to the exclusive jurisdiction of the China International Commercial Court any dispute arising out of or in connection with this contract (including any question relating to its existence, validity or termination).
The parties agree that after the commencement of court proceedings, they will attempt in good faith to resolve any such dispute through mediation in accordance with the Procedural Rules for the China International Commercial Court of the Supreme People’s Court.
Conclusion
Contracting parties to international commercial agreements look to mixed-mode dispute resolution processes as affording more flexibility and efficiency in achieving dispute resolution. It is no less important to ensure the enforceability and finality of resolved outcomes. Contracting parties ought to consider carefully the particular dispute resolution and enforcement options that are available in their specific circumstances when negotiating dispute resolution agreements.
Authors: Lynette Chew and Grace Lu
Authors: Lynette Chew and Grace Lu