New commercial mediation rule bolsters business environment

On Dec 31, the State Council — China's Cabinet — issued the Regulation on Commercial Mediation, which will come into effect on May 1. As China's first administrative rule specifically targeting commercial mediation, the promulgation of the 33-article regulation marks a new stage in the systematization and legalization of the country's commercial dispute resolution mechanism.

International commercial mediation, as a vital component of diversified dispute resolution mechanisms, has unique advantages in efficiently and amicably resolving cross-border commercial disputes. The regulation not only responds to the new trend of international commercial mediation development since the entry into force of the Singapore Convention on Mediation, but also offers a solid legal guarantee for optimizing the business environment through institutional innovation.

The core of a business environment is stability, fairness, transparency and a predictable legal environment. In the business field, the efficiency and credibility of dispute resolution mechanisms directly impact the business confidence and investment safety of enterprises. The regulation establishes the independent legal status of commercial mediation, regulates the mediating organizations and procedures, and solidifies the effectiveness of agreements and their implementation connection, thus constructing a new ecosystem for resolving commercial disputes in China from three dimensions — building a legal framework for commercial mediation, improving the quality and efficacy of commercial dispute resolution, and aligning with international rules.

For a long time, there have been prominent problems in the sphere of commercial mediation in China, such as lagging legislation and haphazard rules. The ambiguous legal status, inconsistent procedural rules and unstable effectiveness of commercial mediation made it difficult for market entities to have stable expectations, limiting the role that mediation played in resolving commercial disputes.

The promulgation of the regulation fundamentally reversed this situation and established a unified and authoritative legal foundation for commercial mediation.

First, Article 2 of the regulation for the first time clarifies the independent legal status and scope of the application of commercial mediation. It limits the scope of mediation to fields in "trade, investment, finance, transportation, real estate, engineering construction and intellectual property", clearly distinguishing it from disputes such as regarding marriage/family and labor/personnel, clarifying the boundary between commercial, personal and judicial mediation, and establishing its professional attributes for commercial disputes.

Second, the regulation systematically stipulates the establishment, management and operation of commercial mediation organizations. It aims to cultivate a group of professional and standardized mediation institutions, change the previous situation of "scattered, weak, and small" mediation organizations, and bolster the overall credibility of the commercial mediation industry through market-oriented and professional service supply.

Finally, to safeguard the legal and compliant operation of commercial mediation institutions and the effective protection of the mediation rights and interests of related parties, the regulation stipulates the administrative responsibilities of mediation institutions and mediators for unauthorized mediation, and imposes fines and disqualifications in combination.

All these together create a procedural environment that respects business logic, ensures negotiation autonomy and maintains transaction security, enabling enterprises to flexibly and pragmatically resolve disputes within a trustworthy framework, thereby effectively activating the autonomy of market entities.

One of the core indicators of a rule-of-law business environment is whether the dispute resolution channels for enterprises are efficient, convenient and cost-effective. The regulation significantly elevates the quality and efficiency of commercial dispute resolutions by optimizing mediation procedures, enhancing agreement effectiveness and linking judicial confirmation, thus helping save enterprises time and cost.

Compared with litigation and arbitration, the regulation fully reflects the flexible and convenient advantages of commercial mediation as a dispute resolution mechanism. The mediation process does not require rigid evidence, cross examination and/or trial procedures, and thus related parties can directly focus on negotiating the balance of interests under the auspices of mediators. Article 18 of the regulation encourages the use of digital means such as artificial intelligence and online mediation, which is in line with the current trend of digital development and further compresses the dispute resolution cycle.

The regulation also guides enterprises to build long-term and cooperative business relationships through institutional design, reflecting the deep logic of optimizing the business environment. The principles of friendly consultation, confidentiality and good faith advocated by the regulation help related parties to resolve current disputes while maintaining or even repairing business partnerships, thus achieving a win-win situation through litigation. This plays an irreplaceable role in building a stable and predictable business ecosystem, enhancing the overall "soft power" of a business environment, and helping gradually cultivate a dispute resolution trend that prioritizes mediation in society.

In the context of enhanced integration of the global economy and the high-quality promotion of the Belt and Road Initiative, it is an important part of the national core competitiveness of the rule of law to have an internationally acceptable commercial dispute resolution mechanism that aligns with international standards.

The Singapore Convention on Mediation aims to establish a cross-border direct enforcement mechanism for international settlement agreements, and as one of the first signatory countries, China needs to align its domestic laws accordingly. The promulgation of the regulation is a crucial step for China to fulfill its international commitments and actively align with international high-standard economic and trade rules. The regulation has laid an institutional foundation for China to become a global center for resolving commercial disputes.

First, the regulation provides a direct domestic legal basis for the ratification and implementation of the Singapore Convention on Mediation.

Second, the regulation elevates the internationalization level of China's commercial mediation services with an open mind. The regulation stipulates that commercial mediation organizations may appoint mediators from overseas professionals on the basis of completing the filing procedures, supports domestic mediation organizations to establish overseas institutions, allows regional pilot projects to introduce overseas mediation organizations, encourages international cooperation and participation in international rulemaking and bolsters international mutual recognition of mediator capabilities. These moves will attract outstanding international mediators and institutions to gather in China, speed up the exchange and mutual learning of mediation concepts as well as rules between China and its foreign peers, and directly enhance the international competitiveness of China's commercial legal services.

Finally, at the practical level, the regulation sets special rules for mediation in the Guangdong-Hong Kong-Macao Greater Bay Area and China's free trade zones. Article 24 allows overseas commercial mediation organizations to establish business institutions in areas such as FTZs and Hainan Free Trade Port — approved by the State Council in accordance with relevant national regulations — to conduct foreign-related commercial mediation activities. Article 26 specifically supports the connection of commercial mediation rules and mechanisms in the GBA. Based on China's unique multijurisdictional environment, it safely and effectively explores and studies cross-regional commercial mediation experiences and cases, laying a strong foundation for promoting mediation mechanisms applicable to cross-border commercial disputes in the future.

To sum up, the promulgation and implementation of the Regulation on Commercial Mediation is a milestone in China's efforts to improve its diversified dispute resolution mechanisms and promote the modernization of governance capabilities. In the future, with the effective implementation of the regulation and the coordinated development with the Singapore Convention on Mediation, a more market rules-respecting, judicially efficient, and internationally credible commercial dispute resolution ecosystem will accelerate its formation in China.

The writer is an assistant professor at the School of International Law at Zhongnan University of Economics and Law.

The views do not necessarily reflect those of China Daily.