Resolution of Conflicts, Options under Mexican and Chinese Laws

04/18/23

Associate Professor Alan KirtleyUniversity of Washington School of LawSeattle, Washington U.S.A.kirtley@uw.edu

Doing Business in China

Panel 1 – Trade and Investment Patterns between Mexico and China

Panel 2 – Mexico and China in the WTO Panel 3 – Negotiating Successfully with the

Chinese Panel 4 – Chinese Structures and

Government Procedures Panel 5 – Resolution of Conflicts

Program Outline

Discuss the problem of domestic litigation to resolve international business disputes

Review of available alternative dispute resolution mechanisms

Consensual vs. Adjudicative Processes Considerations when selecting a provider and

for drafting ADR clauses Panel discussion, with audience participation,

best practices for resolving international disputes

Anticipating Future Conflicts

Conflicts arising out of business transactions are inevitable

Lawyers must anticipate those conflicts Include mechanisms for resolving for

resolving future conflicts in the contract itself

Pitfalls of Litigation in International Business Key questions for litigation –

What choice of governing law? Where should a dispute be handled? What venue? Can assets be reached? Are court judgments enforceable? Is the dispute resolution clause in a contract

unambiguous? Have parties taken the necessary formalities to

have an enforceable contract?

Dispute Resolution Processes

Continuum of ADR Processes: Negotiation Mediation or Conciliation Mini-Trial Mediation > Arbitration Arbitration > Mediation Arbitration

Dispute Resolution Processes

Court Arbitration

Ad

jud

icat

ion

Med

iati

on

N

ego

tiat

ion

Rights-based orInterest-based

Mini-Trial, Med-Arb, Arb-Med,Hybrid Processes

International Dispute Resolution

Arbitration is the dominant process for resolving international commercial disputes

There are good reasons to consider other forms of alternative dispute resolution

Parties may craft dispute resolution clauses that fit their particular transaction and needs

Parties may use a series of processes

International Dispute Resolution

Benefits of consensual processes Disputes can be resolved:

Faster Less expense Less adversarial setting Privately and confidentially While maintaining a good business relationship

International Dispute Resolution

Benefits of consensual processes: Disputes can be resolved based on the parties business interest rather than legal rightsParties can design the process(es) that fit their particular needsParties can chose a third-party neutral with

Substantive law expertise Technical expertise Process expertise

International Dispute Resolution

Benefits of consensual processes:Parties are more likely to comply with an agreed upon resolution than one imposed by an arbitratorParties maintain control of the outcomeCulturally the Chinese prefer to resolve disputes consensually rather that reverting to formal processes

International Dispute Resolution

Shortcomings of consensual processes: Resolution may not be rights based Information may be revealed in consensual

that could harm arbitration Lack of finality Extra expense and time of unsuccessful

consensual process

International Dispute Resolution

Benefits of arbitration: International arbitration is well developed Organizational providers of arbitration services

have rule and procedures in place Process will end with an enforceable decision –

arbitral award

International Dispute Resolution

Short comings of arbitration: Arbitration process is:

Very complex Very time consuming Very expensive Adversarial setting damages business relationships Parties lose control of the outcome Concerns about recognition and enforcement of the

award by a domestic court

International Dispute ResolutionA series of dispute resolution process steps may be desirable:First Step – Negotiation

After notice of dispute Executives meet within 30 days to negotiate

Second Step – Mediate or conciliation If negotiation is unsuccessful Parties agree to mediate or conciliate within 45 days

Third Step – Arbitration If mediation or conciliation is unsuccessful Parties agree to arbitrate

International Dispute ResolutionBenefits of a step process:Dispute can be resolved quickly Resolution can be based on business considerationsBusiness relationship can be maintained

Short comings of a step process:Multiple processes can be

Time consuming Expensive

Arbitration Between Chinese and Mexican Entities

Global Arbitration Review http://globalarbitrationreview.com

China (1987) and Mexico (1958) are signatories to the Convention on Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)

Arbitration Between Chinese and Mexican Entities

Mexican arbitration law incorporates the UNCITRAL Model Law on Arbitration

China has its own arbitration law that varies significantly from the UNCITRAL Model Law on Arbitration

Arbitration Between Chinese and Mexican Entities

Chinese arbitration law requires that the parties choose arbitrators from lists provided by one of the Chinese designated arbitration commissions (180 commissions in China)

Mexican arbitration law allows for more flexibility

Arbitration Between Chinese and Mexican Entities Chinese arbitration bodies (180 commissions)

e.g.: China International Economic and Trade

Arbitration Commission (CIETAC) Shanghai International Arbitration Center

(SIAC). Beijing Arbitration Commission (BAC).

Arbitration Between Chinese and Mexican Entities

Mexican arbitration bodies e.g.: Mexican Chapter of the International Chamber

of Commerce Arbitration and Mediation Commission of the

Mexico City Chamber of Commerce (CANACO)

Mexican Arbitration Center (CAM)

Agreement Formalities

Chinese law requires that the arbitration agreement include:Expression of parties’ desire to submit dispute to arbitrationScope of the matter(s) to be arbitratedSelection of the arbitration commission to administer the arbitration

An arbitration agreement that fails to name the institutional arbitration provider is likely to be invalid under Chinese law.

Arbitration Between Chinese and Mexican Entities

Mexican law requires that the arbitration agreement include:In writing signed by the partiesUnderlying contract has a legal purposeParties consent was not due to error, fraud or duressParties had legal capacity to sign

Considerations in Selecting the Arbitration Provider Rules and procedures Cost Arbitration Panel Place of arbitration Language of proceeding Representation by foreign lawyers Law to be applied Enforceability of the award Appeal rights

Choice of Substantive Law

Both Chinese and Mexican law:Allow the parties to a foreign-related contract to choose the governing substantive law for any controversy arising under their contract

Recognition and Enforcement of Awards

China and Mexico are increasingly integrating their economies with the rest of the world

As a result, both Chinese and Mexican courts are trending toward greater enforcement of foreign arbitral awards

Where to Arbitrate

Nonetheless, avoid arbitrating in Mainland ChinaChinese courts have greater authority to review and overturn arbitration awards rendered inside Mainland China

Compromise would be to arbitrate in Singapore or Hong KongArbitral awards are treated as rendered by a signatory of the New York Convention

Model Dispute Resolution Clause

Hong Kong International Arbitration Rules http://www.hkiac.org/en/arbitration/model-

clauses#2 Following UNCITRAL rules

Mexican International Chamber of Commerce http://www.iccwbo.org/products-and-services/

arbitration-and-adr/dispute-boards/standard-icc-dispute-boards-clauses/

Model Dispute Resolution Clause

International Chamber of Commerce: http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/standard-icc-arbitration-clauses/

Model Dispute Resolution Clause

Center for Public Resources (CPR) http://www.cpradr.org/RulesCaseServices/

CPRModelClauses.aspx

American Arbitration Association: https://www.clausebuilder.org/cb/faces/index?

_afrLoop=718555635514284&_afrWindowMode=0&_adf.ctrl-state=e6k0qail6_71

Questions for the Panel

From the Mexican prospective: What are the greatest concerns regarding dispute resolution?What process have been most successfully used to resolve international commercial disputes?Which dispute resolution providers have been most helpful?

Resolution of Conflicts, Options under Mexican and Chinese Laws

Associate Professor Alan Kirtley

University of Washington School of Law

Seattle, Washington U.S.A.

kirtley@uw.edu