In July 2009, the Supreme People’s Court issued document Fa Fa  No. 45 officially establishing a controversy and dispute resolution mechanism that marries litigation with mediation, otherwise known as the litigation and mediation linking mechanism. Since that time, the debates in various circles on the pros and cons of such a mechanism have not ceased. And the anxieties, frustrations and perplexity that this unfamiliar mechanism has elicited among foreign parties have far exceeded the praise.
At the beginning of 2013, a basic-level people’s court in Shanghai selected a number of individuals from among practising lawyers to assist and participate in litigation and mediation linking work, with one of the lawyers from this firm being among those selected. First-hand participation for close to half a year has revised our original opinion on the litigation-mediation mechanism.
Scope of application
Looking at the current situation of the above-mentioned basic level people’s court in Shanghai, the litigation-mediation mechanism has almost become a set preliminary procedure in all civil procedure cases. Once the court’s case filing chamber receives a case, it assigns it a litigation-mediation case number, which it then sends to the trial courts. This also marks the formal start of the litigation and mediation linking procedure. Subsequently, the judges of the trial courts who are assigned full-time to litigation-mediation work, or the organisation or individual assigned by the court, will be specifically responsible for advancing the case’s litigation-mediation procedure, for example, litigation-mediation scheduling, face-to-face mediation, collection of procedural materials, and follow-up mediation tracking.
The case may be placed on the docket directly or placement on the docket may be brought forward before the expiration of the litigation-mediation procedure period if: i) either of the parties applies for opposition to jurisdiction; ii) either of the parties submits an application for preservation measures; or iii) the recipient of the service of documents is a foreign national or stateless person and service needs to be effected through the judicial assistance channel.
Direct placement on the docket or bringing placement on the docket forward is not mandatory in the foregoing circumstances, rather the presiding judge in the case will decide based on the circumstances of the case. If either of the parties is strongly opposed to mediation and the delay entailed by the litigation-mediation procedure would cause a material and irreparable loss to the interests of either party, and this is communicated to the presiding judge, it is possible that he or she may decide to bring forward the official placement of the case on the docket.
The express provisions of the Civil Procedure Law on the time limit for trials of civil cases are one of the important factors that parties will consider when deciding whether to instigate a litigation procedure. At present, the problem with the litigation-mediation mechanism is the arbitrariness of time limits: certain courts do not have any set time limit when putting the mechanism into effect, or they fail to strictly adhere to the time limit, undermining the reasonable expectation of litigation efficiency held by parties, and likely leading to a complete aversion to the mechanism.
However, there are also certain courts that have proactively established sound regulations on the time limits for the litigation-mediation mechanism. Taking the basic-level court of the place where this law firm is located as an example, on the one hand it expressly provides for a non-extendable three-month time limit for the litigation-mediation procedure, and on the other it vigorously enforces this time limit through its internal adjudication management system. If a settlement cannot be reached in a case within three months, the court’s internal adjudication management system automatically places the case on the docket.
However, the three-month time limit gives rise to a limitation on the exercise by parties of their litigation rights because they cannot terminate the litigation-mediation procedure early and instigate the trial proceedings, regardless of whether they have a desire for mediation. For a party that wishes to resolve a dispute urgently by way of litigation, the three-month wait is a waste of time. On the other hand, an unavoidable mediation procedure objectively has the effect of a “cooling-off period” and is conducive to mitigating a party’s psychological resistance. Our firm’s lawyer, who participated in the litigation-mediation work, observed that in cases where the dispute was relatively minor and the amount involved relatively small, litigation-mediation had a success rate of between 60% and 70%. This is an astonishing figure, signifying that the majority of cases were filtered out before going to trial, permitting judges to allocate more of their efforts towards complex and difficult cases.
Impact on subsequent trials
Pursuant to article 67 of the Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures, the admission of facts involved in a case made by a party as a compromise in order to reach a settlement agreement, or for the purposes of reaching a settlement, may not serve as evidence against such party in any subsequent litigation. In the course of mediation, the mediators usually emphasise this provision to the parties with the hope that the parties will overcome this worry and fully express their views on the case, so as to facilitate a summary of points of contention by the court.
However, notwithstanding the existence of the above-mentioned provision, the views expressed by the parties at the mediation stage will unavoidably have some degree of influence on the trial judges’ thinking. For example, when judges face a situation where they cannot reach a decision on the evidence submitted by either party in support of a certain fact, the statements previously made by the parties at the mediation stage could become the basis for the formation of “psychological evidence” by the judges; or, when the judges are determining how to allot the liability between the parties, they may take the baseline mentioned by one of the parties during mediation into consideration. Accordingly, we would advise readers that when they participate in a litigation-mediation procedure, they fully consider the consequences, and if they are strongly opposed to undergoing mediation, they should do their utmost to avoid any substantive confirmation or expression of their stance that could have a negative impact in the subsequent trial.
Vincent Mu is a senior associate and Daniel Qian is a trainee at Martin Hu & Partners
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