Book Chapter: Can You Leave Your Hat On? An Empirical Study of Med-Arb/Arb-Med in China

While arbitration usually comes with a high cost in terms of both time and money, alternative dispute resolution such as mediation has been used to settle the disputes in many cases. However, whether an arbitrator can and should act as a mediator in a pending arbitration is one of the most controversial issues in international arbitration.

UNSW Law’s Herbert Smith Freehills China International Business and Economic Law (CIBEL) Centre member Associate Professor Kun Fan’s book chapter “Can You Leave Your Hat On? An Empirical Study of Med-Arb/Arb-Med in China” provides empirical evidence on the attitudes and actual practice of hybrid Arbitration and Mediation process (arb-med) in China, which may bring some insights for other jurisdictions.

Supporters of arb-med consider the mission of arbitrators includes “the facilitation of settlement”, whereas the opponents have the concern that arbitrator’s facilitation of settlement may at the risk of breaching natural justice and the impartiality of arbitrators in the event that mediation fails and arbitration resumes.

In the chapter, Associate Professor Fan thoroughly reviewed several previous empirical studies on the general attitudes of arbitrators in settlement facilitation conducted by other academics between the 1990s to 2000s. She found that the majority of the practitioners saw settlement facilitation as one of the goals of arbitration, and a significant number of cases were settled amicably before an award was rendered, though the percentage varied markedly depending on the legal background of the practitioners. Previous studies show that “East Asian arbitrators tend to play a more active role in promoting settlement.”

To fill the gap of lack of country study on med-arb and to theorize the arbitrators’ personal experiences in arb-med, Associate Professor Fan and the world leading arbitrator and scholar Professor Gabrielle Kaufmann-Kohler conducted in-depth personal interviews in 2007, followed by an online survey conducted by herself with a number of Chinese practitioners who have actual arbitration experience between 2011-2012. 

Mediation has been frequently utilised to settle disputes in China. Associate Professor Fan analyses that the success of arb-med there relates to the country’s long-term-oriented society and the high level of power distance, which makes people consider more about maintaining relationships with the counterparty and place less weight on procedural fairness.

Associate Professor Fan’s study empirically depicts a big picture of arb-med in China, including who and when raises the idea of mediation during the arbitration proceedings, settlement rate of disputes, techniques the mediators utilise, main factors that contribute to settlement and barriers to settlement. 

Base on the interviews and survey responses, Associate Professor Fan summarised that the Chinese arbitrators are “generally optimistic about the prospect of the arb-med” with 80.6% of the respondents believe that “the practice of combining arbitration with mediation in China will be accepted and adopted by an increasing number of jurisdictions.” 

She also listed several safeguards that an arbitrator should take in an arb-med process to avoid the potential risks of breaching natural justice, which she got from the survey responses. These measures could be constructive for countries with a low level of power distance to adopt arb-med. However, Associate Professor Fan noted that adjustments are needed for other jurisdictions to adopt the Chinese model, where further studies are required.

“Greater efforts still need to be made in order to familiarize arbitrators with the practice of facilitating settlement and to implement the necessary procedural safeguards, so that arb-med can be used effectively to improve the efficiency of the dispute resolution.”

This Chapter has been published in The Comparative Law Yearbook of International Business Volume 41a edited by Christian Campbell in March 2020. It was originally published as “An Empirical Study of Arbitrators Acting as Mediators in China” in Cardozo Journal of Conflict Resolution in 2014.