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    Available to small and medium-sized companies! International Mediation

    1 Introduction

    International mediation is a procedure in which disputing parties select a third-party mediator to resolve international disputes through discussions through a mediator.
    Speaking of Mediation in Japan, While most people may think of mediation in family affairs, such as divorce or inheritance, international mediation is mainly used to resolve international business disputes. As the Japan representative of the Singapore International Mediation Center ("SIMC") located in Singapore since 2022, I have been involved in SIMC's work with a focus on promotional activities in Japan. So, based on this experience, I would like to introduce international mediation.

    2 How to proceed with International mediation

    (1) Institutions
     Many international mediations are conducted not in courts, but at specialized institutions of international mediation. There are various international mediation organizations in the world. The representative international mediation organizations in Asia include the SIMC mentioned above, the Hong Kong International Arbitration Center (HKIAC), and the Kyoto International Mediation Center (JIMC) in Japan. SIMC handles more than 70 cases per year. The cases range from sales and purchases, construction, intellectual property, and more. Dispute amounts vary from several hundred thousand yen to several billion yen per case. Interestingly, the majority of cases in which SIMC is used have nothing to do with Singapore. For example, SIMC is used to resolve disputes arising from transactions in Korea between U.S. and Korean companies. I believe this is because SIMC's neutrality, efficiency, and integrity are valued by companies and their agents around the world.

    (2) Method
     Most international mediations use a facilitative mediation method. This is a completely different method from the Evaluative mediation method used in Japanese courts.
     In an Evaluative Mediation, the mediator evaluates the parties' claims and, in some cases, provides predictions of the outcome in the event of a trial, etc., in order to lead the parties to a settlement. For example, in a traffic accident case, one party claims 60% at-fault and the other party claims 20% at-fault. In this case, the mediator will present his/her own opinion that the percentage of fault should be around 40% and encourage the parties to consider whether a settlement can be reached with that as a guideline.
     In a facilitative mediation, on the other hand, the mediator does not evaluate the parties' claims and does not indicate the expected outcome if the case goes to trial. The mediator will help the parties to communicate, and will guide the parties to resolve the issues themselves by making them aware of the common business interests of both parties.
     Facilitative mediation is not often used in mediation in Japanese courts, but in fact, it has a high affinity with business, and I think it is a method that is rather familiar to corporate clients. Companies are always trying to figure out how to promote a win-win relationship between themselves and their business partners by making creative proposals and negotiations, showing understanding of the other party's point of view while also advocating their own interests. This is exactly the kind of discussion that takes place in international mediation. Instead of evaluating past events by using the law as a yardstick to determine what happened in the past and which party was at fault, the facilitating (Facilitating) type of discussion is conducted from a business perspective to discuss future solutions, such as what business interests are important to the parties and how to resolve this issue to benefit the parties in the future. Facilitative mediation is a process in which the parties discuss future solutions from a business perspective, such as what are the important business interests of the parties and how to resolve the issue for their future benefit.

    (3) Without Prejudice
    The key phrase in international mediation is "without prejudice. This is the rule that even if the mediation is unsuccessful, the content of what was exchanged during the mediation cannot be used in a later arbitration or trial. The purpose of this rule is to allow the parties to communicate freely and honestly during mediation without worrying about the possibility that their statements and proposals will later be used against them in arbitration or trial, thereby leading to a successful mediation. This may not be a familiar term to you, but it is an important concept in international arbitration.
     As a related matter, in Japan, it is possible for the judge at a court mediation to be the same person as the judge at the subsequent trial, but in international arbitration, the mediator and the arbitral or trial judge are, in principle, different persons. This is also to create an environment in which the parties can talk openly to the mediator, including about matters that may be adverse to them, and thus to ensure the success of the mediation.

    (4) Time
     In SIMC, a date is usually set within one month after the application for international mediation is filed, and the date is generally completed in one day. In other words, the discussion is concluded within this one day. This is overwhelmingly faster than international litigation or international arbitration, which can take several years.

    (5) Cost
     The cost of international mediation depends on the mediation organization and the lawyers you request. In the case of SIMC, the cost for a mediator is approximately $6,000 (about 600,000 yen), which includes the appointment of a mediator (in the case of one mediator), reservation of a mediation location and refreshments, and case management fees. Attorney's fees vary depending on the attorney hired, but international mediation is often less expensive than international litigation or international arbitration because of the shorter time required for resolution, which allows attorneys to compress their work time. It is even said that international mediation is not a good business for lawyers, but it goes without saying that cost-saving dispute resolution is desirable for clients.

    (6) Language
     The language in which international mediation is conducted can be chosen by the parties. For companies that prefer to conduct mediation in Japanese as much as possible, we recommend using the JIMC-SIMC Joint Covid-19 Protocol, which is jointly implemented by SIMC and the Kyoto International Mediation Center (JIMC) in Japan. Under this protocol, JIMC and SIMC jointly manage the international mediation process and, in principle, conduct the mediation process fully online. Under this protocol, two joint mediators of different nationalities can be appointed. In fact, in a dispute between a Japanese company and an Indian company, the Japanese company appointed a Japanese mediator and the Indian company appointed an Indian-Singaporean mediator, and the parties reached a settlement. Using this protocol, the Japanese parties can communicate their opinions, including nuances, to the Japanese mediator in Japanese, and also have the peace of mind of knowing that the mediation will be conducted by a mediator who fully understands Japanese culture and customs.

    3 International Mediation Success Rate

    At SIMC, the success rate of international mediation is 70-80%, a fairly high percentage. However, this is not an easy task, and is achieved only with the presence of mediators with sufficient skills and humanity, and representatives who fully understand the business of the parties and the purpose of the mediation. The mediator must have the humanity to earn the parties' trust, understand the essential issues and obstacles to resolution, and be able to guide the parties to resolve these issues on their own. The mediator must fully understand the client's business, advocate for the client's interests while also considering the other party's position, and present creative solutions. To this end, SIMC has prepared a list of accredited mediators and actively provides training for mediators and representatives.
     Even in cases where international mediation is not successful, we often receive comments from the parties that they are glad we conducted the mediation. This is because mediation has advantages other than results, such as the ability to explain one's own business position to the other party, to understand the other party's business interests and concerns, and to sort out the essential issues. Since the time and costs involved in international mediation are not large, I think it can be said that there is little to lose compared to the magnitude of what can be gained.

    4 Enforcement of Mediation Agreement

    Agreements reached through international mediation are enforceable in the countries that are signatories to the Singapore Mediation Convention. Japan has not yet acceded to the Convention, but is aiming for early accession and Diet approval, and is working on domestic legislation accordingly. At the time of writing this article, as far as SIMC is aware, there have been no cases of enforcement actions based on the Singapore Convention. Unlike a judgment rendered by a third party, a conciliation agreement is entered into voluntarily by the parties, and therefore, the need for enforcement may be less common than in the case of a trial or arbitration. However, the number of SIMC cases has increased significantly since the Singapore Mediation Convention came into effect, and we believe that the existence of the Convention may be a great source of reassurance to the parties concerned.

    5 Benefits to SMEs

    The need to resolve international disputes efficiently is common regardless of the size of the company, but rather, SMEs have a greater need to find efficient dispute resolution methods due to the limited amount of effort and cost they can spend. At first glance, international arbitration may seem difficult or expensive, but in reality, it is a very useful time- and cost-saving tool for SMEs to resolve international trade disputes.
     The dispute resolution environment surrounding SMEs has changed dramatically in recent years. A decade ago, dispute resolution was a court case. Since then, international arbitration has become widely used in international transactions, especially by large corporations, and it is now commonplace for even small and medium-sized companies to include international arbitration clauses in their international transaction contracts. International arbitration is also gaining recognition around the world, and I believe that its use will become increasingly popular, including among small and medium-sized enterprises (SMEs). I hope that Japanese SMEs will understand international arbitration as a tool that they can also use. As an attorney involved in SME legal affairs and a member of SIMC, I will continue to strive to provide useful information.