WSG Article: Mediation: A Star in the Making as a Dispute Resolution Method for Commercial Disputes (Focus on Thailand)

Mediation: A Star in the Making as a Dispute Resolution Method for Commercial Disputes (Focus on Thailand)

November, 2021 - Anne Coulon

Article by Anne Coulon, Regional Legal Adviser, DFDL Thailand

Mediation is a confidential, fast, flexible and cost-effective dispute resolution (“DR”) method based on the mutual consent of the involved parties. Companies, contractors, individuals, banks, real estate owners, governmental bodies; or any combination thereof may be parties to commercial mediation. Breaches of contract, business torts etc. can all be successfully submitted to and/or resolved through mediation.

The parties to mediation may jointly find a solution to their dispute through a structured process, as guided and helped along by the mediator. The principle is to unearth common interests shared by the parties, to communicate, to compromise and to achieve a mutually satisfactory outcome not imposed by the courts. Through this process the parties are given greater agency and decision-making power in terms of attempting to resolve their own dispute, where they themselves arrive at a mutually beneficial solution, the ‘mediated settlement agreement’ (“MSA”) thanks to a structured process whose tempo is set by the mediator.

Mediation may be recommended by the judge during legal proceedings (“judicial” or “court-supervised” mediation). A party may, together with the other, decide to pursue this avenue of resolution at any stage before legal action is enjoined, and even (in certain circumstances) after proceedings have already begun, if both parties so agree. If this fails, a judge can still rule on the dispute. Mediation is increasingly being chosen by private parties as an alternative to a trial, at least as a first step which may, if successful, avoid such a potentially lengthy, costly and time-consuming process (“private” or “conventional” mediation).

Mediation and its benefits are increasingly recognized, particularly in Southeast Asia. The mediation process fits perfectly into the judicial landscape, as a complement to traditional legal recourse.

The success rate for dispute resolution after mediation varies around the world but stands at between 70 – 80% on average. It is almost 85% in Singapore, the jurisdiction which pioneered and shepherded development of the Singapore Mediation Convention of 2019 (“SMC”). The SMC begat a mini-revolution in international mediation and has already attracted 55 countries as signatories (Thailand has not though, as-of-yet). The SMC was premised on emulating for mediation the success of arbitration which gained worldwide traction and saw widespread implementation through the Convention on the Recognition and Enforcement of Foreign Arbitral Awards signed in New York on 10 June 1958 (the “New York Convention“).

The SMC ensures that MSAs may be enforced and recognized on a cross-border or multilateral basis, assuming that the relevant jurisdictions in question have ratified the SMC. Judges, assuming that they are sufficiently familiarized with the process and legal concepts at play may assist in applying these agreements, as though they were judgments rendered by a national court. This makes it possible to invoke an MSA and compel the other party to meet its obligations thereunder in any country that has signed up to the SMC.

Mediation is a rapid, confidential, generally more constructive and less adversarial means of resolving commercial disagreements or disputes, especially where lengthy and protracted court action could unnecessarily sour otherwise fruitful and mutually beneficial business dealings. In business litigation, it amply provides for the continuation of projects, acts/serves as a salve for relatively minor contractual conflicts and helps to preserve business relationships. Very often it even gives rise to more robust and ambitious contractual relationships.

Law and Mediation

The mediation process is not regulated as such in order to preserve its hallmarks and most attractive qualities: the autonomy of the parties (all parties must consent to the mediation) and also the freedom it confers in terms of both parties’ abilities to specify the content of any settlement agreement duly reached). On the other hand, laws may regulate the conditions and specifics on the training of mediators and other attributes to ensure that mediation is given an integral place alongside and complementary to the judicial system and other alternative dispute resolution mechanisms.

Mediation in Thailand

Mediation, a very old concept in Asia, and is now an integral part of Thailand’s dispute resolution system. Thailand has a particularly long history of institutionalized mediation. Mediation was first codified in the Thailand’s Code of Civil Procedure 1934. Several pieces of legislation have since incorporated mediation in Thai law. The Consumer Protection Act 1979 introduced mandatory mediation for all consumer cases and accordingly, parties have been requested to attend mediation before initiating court proceedings. The Consumer Protection Act 2008 (CPA 2008) made provision for court officers to assist the judges in conducting mediation proceedings in court. Later, the Thai Civil Procedure Code as amended by the Code of Civil Procedure (Amendment) Act 1999 made mediation compulsory for all petty cases. Mediation has been a process largely driven by the court of justice. Under the Thai Code of Civil Procedure, judges are empowered to conciliate the case regardless of how far the case has progressed. The judges may either conciliate the cases by themselves or appoint any person or a group thereof as conciliators with the aim of resolving and amicably settling the dispute in question. At the Case Management Hearing, the judge will ask if the parties wish to mediate the dispute. The mediation process is not compulsory however, albeit highly recommended and actively encouraged by the courts. In the event that the parties do not wish to mediate, or if mediation fails, the court will schedule trial hearing dates, which usually won’t occur until 8 – 12 months afterward.

An online mediation platform was launched in 2020 for civil disputes (ordinary civil cases, consumer cases and criminal disputes that are compoundable offenses (a settlement mechanism whereby the offending party is given the option to pay money in lieu of prosecution to avoid prolonged litigation) or criminal cases where citizens are plaintiffs. The system of online mediation is optional.

The first comprehensive law regarding mediation in Thailand was adopted in 2019, namely, the Dispute Mediation Act 2562 (2019) (“Act”). The Act established an out-of-court process for the mediation of civil disputes. However, its scope is limited, given that its provisions prescribe that only disputes with no more than THB 5 million (USD 160,000) at stake may be subject to this process. Furthermore, under the Act, when a party has demanded the other party to perform the MSA but the party against whom the demand is made fails to perform the MSA, the party making the demand may file with the Thai court a request for the enforcement of the MSA. The competent court shall issue an order to enforce the MSA unless it appears to the court that there are particular (and only very limited) grounds to refuse its enforcement. The Act finally calls for a system of private mediators to be established, subject to training and certification.

The Mediation Process

Mediation is a mode of “participatory justice”. In this confidential process, the parties are assisted in their negotiations by a neutral and impartial third party, the mediator.

Mediation can take place in a matter of hours, after which an agreement (stemming from identified common interests) can be reached. Sometimes it is necessary to repeat the sessions and often two or three sessions allow the parties to find a solution, even in the most complex disputes.

While a legal judgment is an act of pure application of existing law, the agreement reached by the parties emerges from negotiations rooted in needs specific to their particular situation. The mediator ensures the right balance between the parties and that the solution found is fair.

Conclusion

Private mediation remains a particularly fast, neutral and inexpensive dispute resolution method. Legal proceedings can be long and costly, and judicial uncertainty is an undeniable factor of insecurity. In arbitration, a third party also settles the dispute and imposes its solution. On the contrary, mediation guarantees full control of the outcome of the dispute by the parties. Business disputes at large are often difficult and expensive to litigate. Mediation provides an excellent alternative.

There’s a bright future for mediation, especially with the Singapore Mediation Convention. In Thailand, mediation is highly promoted by the courts. Most of the trial courts in Thailand have a list of court mediators. Parties can have recourse to a private mediator: lawyer, former judge, entrepreneur, etc. Many private mediators from different countries are based in Thailand. The public will need to be sensitized to the merits of mediation including private mediation too. Hybrid dispute resolution (Arb-Med-Arb) are also developing, providing parties with flexibility and cost savings. Parties simply incorporate the Arb-Med-Arb clause into their contracts.

At DFDL, we can advise you on the process of mediation for the resolution of your dispute.

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.