Commercial mediation outstanding advantages and disadvantages

Lawyer Pham Quoc Tuan - Lawyer Pham Minh Luan

Paralegal Nguyen Hieu Binh

DIMAC Law Firm

Commercial mediation (CM) is a common dispute resolution (DR) method in the world, especially in the developed countries. In addition to Negotiation and Arbitration, Mediation is deemed to be an Alternative Dispute Resolution (ADR) usually chosen by the enterprises thanks to its outstanding advantages. However, in Vietnam, this DR method is quite new. Decree No. 22/2017/ND-CP (“Decree”) dated April 15th, 2017 on Commercial Mediation, the official and sole document recently issued relating to this matter, defines: “CM is a commercial DR method agreed by the parties and assisted by commercial mediators in DR”.

Some Outstanding Advantages

Compared to other DR methods, CM is considered as a method having many advantages which the enterprise may consider using before selection.

Firstly, the voluntary and free will of the parties is promoted. Participation in the mediation process depends on the goodwill and freedom to agreement of the parties, the mediator only plays the role as a facilitator during the mediation process and has no right to judge between right and wrong. The content of the mediation agreement reached between the Parties is based on their will and provided that it is does not contravene the law and social morality, for the purpose of neither evading the obligations nor infringing upon the rights of a third party, such mediation agreement can be totally recognized (Articles 4.3 and 16 of the Decree).

Secondly, good business relationships can be maintained. Maintaining and developing business relationships is a must that enterprises are always interested in and this will be guaranteed when the parties choose the CM and their dispute is successfully mediated.

Thirdly, the information confidentiality factor is always highlighted. In principle, the information regarding the mediation must be kept confidential, unless otherwise agreed in writing by the parties or provided under the relevant legislation (Article 4.2 of the Decree). In addition, the mediator is obliged to protect the confidentiality of information of the clients, and the disputes he/she has engaged in otherwise agreed in writing by the parties or provided under the relevant legislation (Article 9.2c and 10.1 of the Decree).

Fourthly, a failure to achieve a successful mediation result will not lead to a deadlock in the DR. The parties still have the right to continue the mediation or refer this case to Arbitration or the Court (Article 15.4 of the Decree). Thus, it can be seen that CM is rather a flexible DR method.

… yet some important issues still have not been resolved.

Standards of the Mediator

Under Article 7 of the Decree, one of the standards of the commercial mediator is mediation skills, legal knowledge and other knowledge in business, trade custom and the relevant fields. How then should mediation skills be understood and which grounds based on to assess an individual acquires mediation skills? This is a rather vague factor and will cause difficulties in the process of recognize the standards of the mediator unless the guiding documents that follow do not clearly prescribe them. This can lead to a situation where the person chosen by both parties does not fall into the regulating scope of the Decree, thus, causing this mediation result unrecognized under civil procedure legislation.

In addition, one of the obligations of the mediator as stipulated in Article 9.2 of the Decree is to comply with law and the code of ethics and behavior. But so far there have been no specific regulations on such code for the commercial mediator.

Value of the Mediation Agreement

The mediation agreement may be prescribed as a clause right in a contract between the parties or mutually agreed upon by them in a separate contract (Article 11 of the Decree), may be drawn up before, after or at any point of time during the DR process (Article 6 of the Decree).

The issue to be posed is that where the parties have reached a mediation agreement (e.g. the mediation to take place at VIAC) but a party unilaterally initials legal proceedings at court, will the court accept or refuse the case and ask the parties to conduct mediation (at VIAC) first? Under current regulations, where the parties has an mediation agreement or not is not a basis for the Court to refuse the case. Thus, the mediation agreement merely has the meaning to encourage dispute resolution by this method. However, to promote the development of mediation method and to reduce work for the Court, it is necessary that the Court refuse acceptance of the lawsuit and request the parties first of all to conduct mediation.

Maintaining Confidentiality of the Mediation Process

Like to the arbitration method, the principle of confidentiality is considered the foundation of the mediation method. Nonetheless, will the parties communicate frankly and openly if the confidentiality mechanism has been not yet optimized? The Civil Procedure Code (CPC) 2015 has not yet had specific provisions on restriction of the right of the Court in convening the mediator as a witness in the lawsuit. Article 78 of the CPC 2015 stipulates that witnesses have the right to deny making a declaration if their testimonies regards a professional secret, but is the information obtained by the mediator during his/her mediation process regarded as the professional secret? In respect of evidence, the law is silent on whether the evidence given by the parties during the mediation process may not be used as evidence at the court and in arbitration except the provision in Article 109 of the CPC 2015 that the Court may not disclose evidence relating to a professional secret and a business secret under justifiable request of the involved parties. Even if such information and documentation are classified as professional secrets or business secrets, the law merely requests the Court not to publicize them, and not asking the Court to refrain from using them against a party.

Therefore, in order to encourage the development of CM and reduce work for the Court system, the CPC, if amended, should recognize the information the mediator has obtained during the mediation process as professional secret and allow the mediator to be entitled to refuse making declaration. The information given by the Parties during the mediation process must not become evidence against a party at the Court or during the arbitration.

In summary, in regulating a number of legal issues relatively new in Vietnam, Decree 22 cannot help avoiding to start some outstanding matters which need to be further improved. However, the Decree also creates the legal framework for a new DR method in Vietnam for enterprises to consider and choose in order to better protect their rights and interests.