Alternative Dispute Resolution

by
Ir Dr Lam Siu Shu Eddie
MSc PhD PgD(Law) PCLL CEng FIStructE MIMechE FHKIE RPE
RSE Class-1 Registered Structural Engineer PRC RI
Barrister Mediator

(Dated: September 2014)

 Construction contract
• Modern construction contracts have proviso for alternative
ways out of conflict so as to prevent as far as possible a
deadlock for litigation.
• It usually commences with negotiation
– to provide means of preserving a working relationship between the
parties that were in dispute.
– Unsuccessful: unequal negotiating power (large Co. v sub-contractor)
• Should negotiation fail, the parties might meet again to try
and negotiate a settlement with the assistance of a mediator.
• Should mediation fail, the parties might appoint an
arbitrator to hear the dispute, usually in a manner similar to
court proceedings.
Clause 86 of Government form
• … any dispute or difference … between the Employer and
the Contractor in connection with or arising out of the
Contract or …
• It shall be referred to and settled by the Architect.
• Failing that or … then either the Employer or the Contractor
may within 28 days after … request that the matter be
referred to mediation …
• If the matter cannot be resolved by mediation, or if either the
Employer or the Contractor do not wish the matter to be
referred to mediation … the matter shall be referred to
arbitration …
 iRiver HK v Thakrai [2008]
4 HKLRD 1000
• The case is related to
– an exclusive distribution agreement (mp3) between the parties
– with Thakrai alleged of selling competing products.
• Dispute began in 2004, … and the appeal was concluded in
2008.
– Damages awarded was HK$1M
– Dispute incurred HK$4.7M
• Court of Appeal express regret that the parties did not attempt
mediation.
 What is mediation?
• When the parties are in good faith, mediation may offer a
quicker and less costly proceeding.
– Assists negotiation
– Confidentiality (as different from open Court)
• It is not mandatory but all government-related construction
contracts contain a mediation clause.
• Mediation can terminate at any time
– when any of the parties withdraws from a mediation process.
• Mediation may be appropriate
– where the parties have a desire to preserve the working relationship
they enjoy and
– to ensure continued performance while the dispute is settled
 The mediators
• The mediator’s task is
– not to resolve the issue for the parties but
– to help them to find their own solution
• The mediator may offer creative recommendations in the
mediation process
– Enable a venue for the parties to meet and speak up
– To express difficulties
– How about an apology?
– Discuss the matter parties privately with consent of the other parties
• If successful, the mediator will prepare a mediated agreement
which is enforceable under the rules of contract law.
 Drawbacks
• As mediation process stops when any of the parties
withdraws from a mediation process, the mediator is
handicapped due to lack of power.
• After the Civil Justice Reform in 2009, the Courts may
penalize a party if it does not have a genuine intention to
mediate
– Cost sanction
– Cost on punitive basis
• Genuine intention = attended substantive sessions
– To be decided by the mediator
• Enforcement of mediation agreement
– May need to apply to the Court to enforce the mediation agreement.
 What is arbitration?
• Arbitration is a legal process which results in an award (and
is not to be described as a judgment) being issued by the
arbitrator or arbitrators.
• Confidentiality (as different from open Court)
• For an arbitration to take place, the disputing parties must
agree to take their dispute to arbitration.
– Build-in under the contract before the dispute
– Or agreed to arbitrate after arising of the dispute
• If parties have agreed to arbitrate, the courts will normally
refuse to hear their case to force the reluctant party to honor
their agreement to arbitrate.
 The award
• Arbitration awards are final and binding on the parties
– can only be challenged in very exceptional circumstances.
• Arbitration awards made in the HKSAR can be enforced in
more than 120 jurisdictions
– which are signatories to the New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards.
• i.e. Foreign courts will honour the arbitration awards
• In contrast to arbitral awards, judgments of the national
courts are not easily enforceable internationally.
• Enforceability
– This is one of the reasons why international disputes would normally
be resorted to arbitration.
 The arbitrators
• Individuals with a wealth of experience in the relevant
industry or somebody with a background relevant to the
technical issues in dispute.
• Another reason why arbitration is becoming the method of
choice for resolving disputes for international disputes is
neutrality.
– For international projects, there are “foreign” regulatory to face.
– There are worrying thoughts that those disputes will be governed by a
foreign law and will be determined through litigation in a foreign
court.
– The presence of an international arbitration tribunal is often vital.
• The arbitrators are selected and agreed by the parties.
 New developments
• Arbitration Ordinance: Cap 609 to supersede the old Cap 341
– Primarily, there is only one regime under UNCITRAL Model Law.
• As private venue, the arbitrators have limited power.
– s53: Power to make preemptory order to compel compliance
• Points not taken upon lapse of time to submit relevant documents
• Cost order against a party
– s37: Power to grant preliminary orders on ex parte basis
– s35: Power to make order for preservation of assets
• Government adopts a multi-tier dispute resolution mechanism
– Government contract includes mediation (not in private contracts)
– Use of dispute resolution advisor or dispute resolution board
– Partnering with the contractors
End