Mediation indispensable for solving international commercial disputes

As global entities expand their footprints in Shanghai, the need for efficient and effective dispute resolution mechanisms has never been more critical. Mediation, once considered a secondary option, is now moving into the spotlight as a necessary method for resolving commercial disputes among foreign entities in Shanghai.

Hermes Pazzaglini heads the Shanghai office of the Italian law firm ADVANT Nctm, where he specializes in corporate and commercial matters. He is also one of the 13 international mediators on the panel of the newly established International Commercial Mediation Center in Shanghai.

Launched on May 20 this year, the Mediation Center, under the auspices of the China Council for the Promotion of International Trade, aims to create a professional and international panel of mediators, involving 161 mediators from 11 countries and regions.

"Mediation is ideal for cases that are both small and complex, and it's entirely voluntary; no party is compelled to participate," Hermes said. This voluntary nature encourages parties to seek amicable solutions based on mutual interest.

Moreover, what sets mediation apart from the public nature of litigation is its confidentiality.

"It's a process where you can say, 'I know I'm wrong on this part,' but the mediator is bound to keep their mouth shut," Hermes added.

This made mediation a top choice for companies wishing to protect their strategies and reputation.

The process of mediation involves skilled negotiation, characterized by intense dialogue between the parties.

"There will be a session with both parties, divided into two parts: one face-to-face, where they can talk, sometimes shout, but that's okay," Hermes said.

After the emotions are vented, "there is the second part, back-to-back mediation," where the mediator goes back and forth between the parties, negotiating in separate rooms for a whole day.

In addition to the benefits of relatively low time and cost, mediation is often considered by foreign businesses in Shanghai because of its neutrality.

"When disputes arise, having a mediator who is not from China creates a greater sense of fairness among the parties involved," Hermes said.

This trend not only underscores the openness, but also reflects the inclusive spirit that defines Shanghai's legal services on the global stage.

Hermes also praised the integration of the Singapore Convention on Mediation into the Mediation Center's rules.

"According to the convention, if a mediation agreement is enforceable in one member state, it should be enforceable in others as well."

This could lead to a more consistent approach to enforcing settlement agreements across borders, though Hermes acknowledged potential challenges in implementation.

Having lived in Shanghai for over 20 years, Hermes has seen the city evolve, becoming more convenient and accessible for international businesses. As a lawyer, he has noticed significant advancements in accessing litigation services, "such as the online court messaging system," he added.