Finding middle ground

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Singapore Mediation Centre’s executive director, Ban Jiun Ean, discusses the art of mediation, the impact of the Singapore Convention on Mediation, emerging trends in the sector and the possibilities for online dispute resolution

Asia Business Law Journal: Can you give an overview of the Singapore Mediation Centre’s (SMC) business?

Ban Jiun Ean: The majority of our cases are from Singapore, although that is not always the true picture, because we have parties that are based in Singapore but they are actually foreign entities with offices in Singapore, which is a big hub for regional offices. So, while they may run their disputes out of the Singapore office, because that’s where the legal counsel is based, the dispute may actually involve an incident happening outside Singapore.

There’s a lot of overseas disputes run by Singapore companies, or overseas disputes run by entities that have their offices in Singapore, and run it from here. We have an average of about 450 to maybe 500 cases a year, of different sizes from a mediation point of view. Cases can go as large as US$50-100 million in this field, commercial cases, and then we have smaller cases that are less than US$60,000, which come in certain industry schemes that we have with government agencies. These schemes would involve things like employment disputes, family disputes, medical disputes and so on.

Our settlement rate is about 70%, which is close to, or even exceeding, what is seen globally. On average, our mediation cases take about a day to resolve. Usually, by the end of the day, you will have a clear idea of whether or not this can be settled.

Sometimes parties will go off and think about it, and they will settle a few days later. Sometimes parties will request a second session to try to push to the finish line. But the majority of our cases, about 90% of them, will settle within a day. From a case law point of view, from this year, understandably, covid has upended everything that we do, including the fact that Singapore actually had a lockdown for two months – we were unable to actually conduct any mediation cases.

mediationSome cases moved online during that season, but because of the suddenness of covid-19, many parties were not equipped, or trained, or comfortable with online mediation at that time. It got better over the months. Now we’re seeing more and more online mediation. But right when covid hit, a lot of parties were reluctant because of the uncertainty of the situation, they were more comfortable with postponing the mediation, rather than trying to force through an online mediation. So, we’ve had about 200-250 cases so far.

We see that the case numbers are growing quickly in recent months. When covid-19 first hit, I think there was disruption, but not yet quite the economic trouble and turmoil that we now see. Six months down the line, companies are folding, companies are struggling to pay their bills. Events are cancelled. Employment is being lost.

I think this is the point where our mediation cases are really beginning to grow because on one hand there are more disputes than usual. In addition, parties are also struggling financially, and there’s less appetite to go and fight in courts, or use arbitration. There’s the very real risk for some of these disputes that the other side is going to become insolvent in a matter of weeks or months.

Any money you get now in hand is far better than getting a paper judgment that is worth nothing because the company has already folded by then. So, the appetite for mediation has grown tremendously through covid, which we are sad about. It’s a pandemic and a lot of people’s lives are very badly affected.

We expect more and more cases for the years to come because some of these disputes will emerge downstream in a few years’ time; some of it will be because companies will struggle on because the economy is not going to improve so quickly for at least another year or two. Somewhere further down the road, there will be financial difficulties and disputes will arise. So, we do see that there will be a lot of mediation work in the pipeline directly related to the pandemic.

I’ll say that maybe about 20% of [cases] are now conducted online. And the vast majority of those took place after the lockdown. Before the lockdown, we had hardly any that went online.

ABLJ: What is your outlook for the economy in general and what trends are you seeing in dispute resolution?

Ban Jiun Ean: This is one of those things that doesn’t sound nice saying, but it’s a fact, the dispute resolution business in general is a bad-news business. When other people are getting bad news, the dispute resolution industry tends to become very busy. And it’s one of those things that you don’t like to make it look like you’re profiting off other people’s troubles. But really, if you boil it down, that’s really what you’re doing. You’re having work because someone else is having a fight.

And we are seeing that the economy is going to be in a very, very bad state for quite a long time, at the very least because it will be months, or at least a year, before you can even get back to a kind of level of travel and tourism, and general economic activity, that we saw before covid hit. I am just talking about the level. It doesn’t even begin to address the damage that has been done for months and months, where people had no work, people struggled financially. No income. Industries were badly affected. Small businesses were destroyed, large businesses like airlines were destroyed.

All that damage cannot even begin to be fixed and restored [quickly], that is going to be something that will be an entire decade before you see the kind of situation where not only do you have economic activity that is something that we’re more used to seeing, but all the damage has already been done to people who have lost work, or companies that have folded, or are just much weaker now, will really be sort of fixed and restored – that will take years.

And that’s not to mention that the way the economy runs has also been upended. The assumptions about how we do business, such as I need a huge office in the downtown area, because people don’t do their work effectively from a long distance away, and we make them commute. That’s a fundamental assumption that has been completely smashed in the past six months.

We think that there will be this long-term rebalancing and restructuring of the economy that’s going to take place, because all these assumptions that we have become very used to are going to be challenged. And when that happens, a lot of the traditional companies will struggle to do things the way they used to do. A lot of the smaller companies that provide a particular service may now find that the demand for their service has dried up.

All this will lead to a lot of problems with fulfilling of contracts of delivering services, and of paying. And that would be downstream again, disputes that will lead to the need for dispute resolution. So, I think that the impact on the Singapore Mediation Centre, or dispute resolution industries and institutions and practitioners in general, is that for the next few years, we’re all going to be very busy.

ABLJ: What will be the impact of the Singapore Mediation Convention, which has come into effect this year?

Ban Jiun Ean: The most important thing to understand is that this is an international treaty, this is a convention, and the main focus of it will be international work, cross-border disputes, not necessarily disputes within a jurisdiction. This is actually to fill a gap that existed for a very long time in the mediation space, which was already addressed in other areas of dispute resolution. For example, in arbitration there’s the New York Convention, which has been around for a long time. Over 150 countries have signed that.

If you go for arbitration in certain signatory countries, and you have an arbitration award that was rendered out of the arbitration, you can have that enforced in any of these signatory countries, because of the New York Convention. You can go there and you present it to a court, and if the court is satisfied that it is authentic, it was genuine, and was conducted in one of these countries, they will have to enforce it, rather than you having to start a legal action and go through the whole process – call your witnesses, call your evidence and everything, and it’s very costly and requires familiarity with the local laws, and so on.

It’s messy. But arbitration solved it years ago with the New York Convention.

But there’s been no equivalent for mediation. With a mediated settlement, rather than an arbitration award, if you have a mediation settlement agreement in hand, it’s not quite the same as arbitration because of the nature of arbitration processes, the judgment is by a third party, an arbitral tribunal or an arbitrator. There is a fair chance that the parties are not necessarily happy with the outcome because it was a decision rendered by someone else. For arbitration, the convention was important because then I can go to a court in that country and I present it in the court, and it has to order the payment.

In mediation, it is slightly different because the nature of mediation is not the same as arbitration and mediation. There is no neutral who will decide and give a judgment or an award. In mediation, it is a person who’s facilitating the discussion between the two sides and helping them to bridge their differences, manage their expectations, and think of options, so that eventually they can come to an agreement on their own and sign what is called a settlement agreement.

The majority of mediation cases that settle will see voluntary compliance from both sides, simply because they just want to move on and want to end it. But there will be a minority of cases where the parties may settle and agree, but later they don’t comply. It’s a very small minority, but it exists.

When you have a cross-border dispute, and you have a settlement agreement in hand, you can’t go and compel the other side to follow it, like you can enforce an arbitration award, because there’s no such New York Convention for mediation. If you want to enforce it in that country, you have to go to the courts.

You’re suing them in that country, which defeats the whole purpose of the mediation. So, what does the convention do to solve this? It now puts mediation at the same level as arbitration, in terms of enforcing it globally. Now, if I have a settlement agreement in hand, the mediation was conducted in the country that is a signatory to the Singapore Convention, and I’m trying to enforce it in a country that is also a signatory to the Singapore Convention, I can just go there and file it in the court.

But once the court is satisfied that this indeed took place in Singapore, and this was indeed an agreement that they agreed to, the court will stop there, go no further, and immediately enforce it because it’s the convention. It is a treaty requirement that the countries signed.

This is good for cross-border business because there’s that certainty that if you agree to something, you will live up to it.

For in-house counsel, this will be very valuable because it adds another option into your arsenal for dealing with a dispute that is cross-border. In the past, you were limited in that you would have to either sue in that country, or you would have to go for arbitration and then bring an award there. But arbitration itself is a costly process. Mediation is faster, cheaper and a lot better at preserving business relationships, which is actually sometimes more important than the dispute itself. Sometimes both companies are happy with whatever the outcome, provided that their long-term business relationship is not damaged.

So, mediation is actually the perfect tool for that, it’s a process where people talk, people get to air their grievances, share their viewpoints, and they realize that it’s a misunderstanding, put options on the table, brainstorm together. The whole process preserves the business relationship, compared to fighting, evidence, you didn’t do this, you didn’t pay, you said this, I want my money, etc. Acrimonious. Even if you win, you may lose in the long term because parties don’t want to work with each other anymore.

mediationABLJ: Can you explain hybrid models, such as arbitration-mediation-arbitration, which are gaining in popularity?

Ban Jiun Ean: It’s a very good tool that is sophisticated, but many lawyers and in-house counsel are still not very familiar with it. Increasingly, we see the adoption of it in contracts because it’s very powerful when you marry the benefits of arbitration and mediation. The benefit of arbitration is the power to compel people to participate, and even if they are very difficult, I can have the arbitral tribunal give the award.

If you don’t show up for arbitration, the arbitration award can still go forward because once it’s a validly constituted tribunal, it can render an award. If you don’t want to show up and fight your case, if you don’t show up and give your evidence, that’s your problem. The tribunal just listens to the other side and then you will probably lose the case. The benefit of arbitration is that, for unwilling parties, you can force them to the table.

The downside of arbitration, as I mentioned, is it’s a costly process and a time-consuming process.

It’s a very drawn-out, time-consuming process involving very, very highly trained, highly educated, well paid individuals. So the process is expensive. But it renders a certain finality, usually people are looking for that, especially if one side doesn’t want to answer your phone calls or emails.

Arbitration is not good for preserving business relationships.

Mediation shines in those areas – cost, time, flexibility, the preservation of goodwill and business relationships, and even coming up with interesting ways to solve a problem where there are only certain things that an arbitral tribunal can award. Mediation is about problem solving. Anything that you can put on the table creatively is possible as an outcome.

That’s the power of mediation, where you expand the universe of options in the conversation and end up with a creative way to solve the problem that you could normally not have solved just by talking how much you owe me, how much I can pay; arbitration and even court judgments are limited to that linear approach.

So that is something which, when you marry that power, the flexibility of the process and on the outcome with the compelling power of the arbitration process, you get a very interesting tool. I can force you to the table, but let’s talk. After we talk, we may actually come up with a great solution. If it doesn’t work, we will fall back on the arbitration. We will go and just get someone to settle it. Either way, there’s an outcome, it’s just whether we’re happy with it or not.

It’s a very interesting tool, and I actually encourage people to think seriously about it – arb-med or arb-med-arb.

ABLJ: Are there other similar hybrid models for dispute resolution?

Ban Jiun Ean: There is also another model, med-arb-med, where you actually put mediation first, you give an attempt to talk it over, and if it doesn’t work, then we escalate it to arbitration. And if the arbitration proceeds, along the way, to a certain extent, you can come back to mediation if you want.

The question people ask is that if I really tried mediation at the start and it didn’t work, why would I want to mediate again later on?

Sometimes, what you’ll find is that in the process of building your case for an arbitration – gathering your facts and doing your homework, and when you actually start an arbitration, you have to present your evidence, your arguments – you get to see what the other side is saying, and what the other side is using as evidence to strengthen their case against you. That changes people’s minds.

So, this is another model that also has its own benefits. But it has a different kind of flow, and parties need to be very clear what they want to pick, because they achieve different results. But they’re both interesting tools. And they both have their place.

ABLJ: Can you tell us about the SMC’s digital transition, and the future of online dispute resolution?

Ban Jiun Ean: We are very thankful that our digital transformation journey actually started in about September last year. We actually started six months before the pandemic hit, which brought us a lot of time to get ready.

When we embarked on this journey of going digital, we said we need to start putting some of our systems in a digital form, and start putting some of our documentation in a digital form. We need to start putting our processes in the digital form, and start putting our stuff online. And we need to enable all our staff to be able to use these digital tools, wherever they are. So we actually equipped every single employee with laptops, even before the pandemic hit, and started to develop processes and systems that allow us to work remotely. And then the pandemic hit, which is almost like, “Wow, we dodged a bullet right there”.

Our staff were not used to it because we had only been doing it for a short while, but at least the technological challenges had already been addressed. Everything had been put in place.

So our digital journey had already begun in that respect. But the big goal that we are striving towards is not just digitalizing our existing processes, that’s low hanging fruit, and we expect to complete it by the middle of next year.

The real goal we are aiming towards is to create an online dispute resolution system that is partially automated, which means we can handle a very large volume of cases without any human intervention. And that’s a very important goal that we must hit if we are to go into a lot of these very large, unaddressed markets, where there’s a lot of cases, mostly consumer cases, where the dispute volume is very, very high, but the dispute quantum is not very high.

When you go down the list to very small cases, understandably, there’s very little appetite to pay. Who will pay $100 to resolve a $50 case? So, after a while, there’s just no money there for anyone to run these services.

For SMC, our goal is to build a system that is online and automated, which would drastically reduce the cost of running a service. We should then put it within reach of these people and this market.

I think this is really for us, the big thing that we’re working towards now, using our digital tools. To build that online dispute resolution system that is automated in large parts, and therefore very low cost to run, and we can use it for this market. And the prices that we will charge for that service will be very affordable, and they will use it.

ABLJ: You are speaking at the TechLaw.Fest 2020 on online dispute resolution. What are your expectations from the event?

Ban Jiun Ean: I think we are all very realistic and mindful that this [online dispute resolution] is, first of all, a topic that is not new. It has been talked about for more than 10 years. Although the level of sophistication of the conversation has grown over time, as we all collectively understand the issues better, technological achievements and progress in the background have also informed the way the conversation is going. The conversation has evolved, but it’s not new.

People have always talked about using AI [artificial intelligence] or machines, computers, to solve disputes of various types and sizes. What we hope to achieve now is, first of all, at the lowest level, to add to the conversation, to add more insight, bring together things that we ourselves, from different parts of the world and in different arenas, have experienced and seen and learned, and try to come together and answer some of the questions that are being posed at the panel discussion.

We track with some clarity a path forward that we say, ok, now after we leave TechLaw.Fest, we want to continue to move this development in this direction, because we’re all sharing our knowledge and agree that this is probably the most promising direction to realize online dispute resolution in the near future. [Or] this may be actually a red herring and we should ignore it, [or] this is useful, but we are not ready for that, and it is probably a five-year-away problem that we will get to eventually.

But this is a near-term on-the-horizon thing that really, we should be going at with high priority because it’s just around the corner. So that’s the kind of conversation that we want to have on this panel, to be able to maybe do a little bit of crystal ball gazing, and try to forecast what we think will be practical developments that will be of benefit to the market.

You don’t want this just to be a theoretical conversation where academics and engineers keep talking endlessly about online dispute resolution and how great it can become, but the actual user on the ground, your businesses, your individuals or companies – they’re still waiting.