consequences of non-compliance - japan, china & singapore · consequences of non-compliance -...
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ASAConferenceMultiTierDisputeResolutionPracticalIssues–PracticalSolutionsConsequencesofNon-Compliance-Japan,China&Singapore
15September2017YoshimiOharaNagashimaOhno&Tsunematsu
Multi-TieredDisputeResolutionClausesinAsia
▪Asianculture:Resolvingdisputesthroughgoodfaithnegotiations▪Multi-tiereddisputeresolutionclause:PopularinAsia
Escalationclause Prearbitrationmediation
▪ Validityandenforceabilityofmulti-tiereddisputeresolutionclausesisdiverseamongAsianjurisdictions.
Projectmanager↓
Topmanagement ↓
LitigationorArbitration
Negotiation↓
Mediation↓
LitigationorArbitration
Japan
TypicaldisputeresolutionclauseinJapan
▪AgoodfaithnegotiationclauseinaJapanesecontract:
“Whenanissuethathasnotbeenprovidedforinthisagreementarisesinthefuturethepartiesshallnegotiateingoodfaithtodealwithsuchissue.”
▪AtypicaldisputeresolutionclauseinaJapanesecontract:
“AnydisputewhichmayarisebetweenthepartiesinconnectionwiththisAgreementshallbesettledamicablybetweentheparties.Ifthepartiesareunabletosettleadisputeamicablysuchdisputeshallbereferredtoandfinallysettledbyarbitrationin[Tokyo]underthearbitrationrulesofthe[JCAA].“
Japan-Mediationaspre-conditiontolitigationisvalidbutnotenforceable
ElpidaMemoryv.Hitachi,NEC,TokyoHighCourtdecision,22June2011
TheHighCourtrefusedtodismissthecasebasedonPlaintiff’sfailuretocomplywithapre-litigationmediationclause.
Multi-tiereddisputeresolutionclause
Step1: ThePartiesshallconductgoodfaithnegotiationsfor60days.Step2: APartymaysubmitthemattertoaneutralmediatorwithin30days.Step3: APartymayrequesttheJCAAtoappointamediatorifthePartiesfailtoagreeonamediator.Step4: IfmediationdoesnotfullyresolvethedisputethePartiesmayinitiatelitigation.
Japan-Mediationaspre-conditiontolitigationisvalidbutnotenforceable
ElpidaMemoryv.Hitachi,NEC
Facts
-29.01.2009 ElpidasoughtreimbursementofUSDtoHitachiandNEC-February,March2009 Statuteoflimitationbariflawsuitwastobedismissed-24.07.2009 Elpidainitiatedcourtannexedmediation-12.01.2010 Courtannexedmediationfailed-25.01.2010 ElpidafiledlawsuitagainstHitachiandNEC-08.12.2010 TokyoDistrictCourtdismissedElpidalawsuitduetoitsfailuretomediatewhichwasapre-conditionprecedenttolitigation.-01.10.2010 Elpidainitiatedprivatemediation
-29.01.2009 PlaintiffsoughtpaymentfromHitachiandNEC
-February,March2009 Plaintiff’sclaimtime-barrediflawsuithadbeendismissed
-24.07.2009 Plaintiffinitiatedcourtannexedmediation
-12.01.2010 Courtannexedmediationfailed
-25.01.2010 PlaintifffiledlawsuitagainstDefendant
-08.12.2010 TokyoDistrictCourtdismissedthecaseduetoPlaintiff’sfailuretomediatewhichwasaconditionprecedenttolitigation.
-01.10.2010 Plaintiffinitiatedprivatemediation
Japan-Mediationaspre-conditiontolitigationisvalidbutnotenforceable
ElpidaMemoryv.Hitachi,NEC
ReasoningoftheTokyoHighCourtdecisionGeneralobservations:- Arighttolitigateisafundamentalrightandreluctanttoenforceprelitigationobligation.- ConsistencywithADRlawwhichisextremelyreluctanttorestrictarighttolitigate.
Whenapartyinitiateslitigationdespiteanagreementtomediatethecourtmaystaylitigationproceedingsforuptofourmonths,butnotdismissthelawsuit,upontheparties’jointapplicationtostaythelitigation.
Specificconsideration:Ifthecourthaddismissedlawsuit:- Plaintiff’sclaimwouldhavebeenpartiallytimebared.- Plaintiffwouldhavebeenforcedtopaycourtfeestwice(approximately150,000USD)ifmediationfails.
Singapore-Multi-tiereddisputeresolutionclauseisvalidandenforceablebutmustbestrictlycompliedwith.
InternationalResearchCorpPLCvLufthansaSystemsAsiaPacificPteLtdandanother[2013]SGCA55
Thecourtfoundthattheclauseisclearenoughtobevalidandenforceable.However,thecourtsetasidetheTribunal’sjurisdictionaldecisionduetoLufthansa’failuretocomplywithprearbitrationnegotiationclause.
Multi-tiereddisputeresolutionclause
AnydisputebetweenthePartiesrelatingtoorinconnectionwiththisagreementshallbereferred:Step1: toacommitteeconsistingoftheParties’ContactPersonsortheirappointeddesignatesfortheirreviewandopinion;Step2: toacommitteeconsistingofDatamat’sdesigneeandLufthansaSystems’DirectorCustomerRelations;andStep3: toacommitteeconsistingofDatamat’sdesigneeandLufthansaSystems’ManagingDirector,andStep4: ifthematterremainsunresolvedthedisputemaybereferredtoarbitration.
Singapore-Multi-tiereddisputeresolutionclauseisvalidandenforceablebutmustbestrictlycompliedwith.
InternationalResearchCorpPLCvLufthansaSystemsAsiaPacificPteLtdandanother[2013]SGCA55
FactsAtleastsevenmeetingswereheldbetweenthepartiesbetween2005and2007beforearbitrationwasinitiated.
RulingsThemulti-tiereddisputeresolutionclause:validandenforceablebecause:-Clauseisclear-Itsetsoutmandatoryfashion-Withspecificity
Preconditiontoarbitrationwasnotfulfilledbecause:-Personnelwiththetitleandhierarchydesignatedinthemulti-tiereddisputeresolutionclausewasnotinvolvedinthenegotiation.ThePartiescontemplatedthatanydisputewouldbeescalatedupthehierarchiesoftherespectivepartieswithrepresentativesofincreasedseniorityandsimplemeetingsbetweensomepeopleoftherespectiveorganization,discussingavarietyofmatters,wouldnotsuffice.
China-Courtreluctanttosetasideawardduetofailuretomeetmulti-tiereddisputeresolutionclause
ShenzhenMawanPowerCo.v.RunHeDevelopmentLtd.Co.,theSupremeCourtDecision,8May2008
TheSupremeCourtenforcedanarbitralaward,dismissingtheRespondent’sallegationthatarbitrationwasprematureduetotheClaimant’sallegedfailuretocomplywithapre-arbitrationnegotiationclause.
Multi-tiereddisputeresolutionclause
“AnydisputewhichmayarisebetweenthepartiesinconnectionwiththeperformanceofthisAgreementshallbesettledamicablybetweentheparties.IfthepartiesareunabletosettleadisputeamicablysuchdisputeshallbereferredtoandfinallysettledbyarbitrationinCIEATACShenzhendivision.Anarbitrationawardshallbefinalandbindingupontheparties.“
China-Courtreluctanttosetasideawardduetofailuretomeetmulti-tiereddisputeresolutionclause
ShenzhenMawanPowerCo.v.RunHeDevelopmentLtd.Co.,theSupremeCourtDecision,8May2008
FactsThepartiesdisputedoverwhetherornotthepartiesnegotiatedingoodfaithpriortothearbitration.
RulingsApre-arbitrationnegotiationclauselacksspecificitywithoutanyspecifictimelimitsfornegotiation.Apre-arbitrationnegotiationclauseconsistsoftwoelements:amicablenegotiationandafailuretoagree.Whilethepartiesdisputeastowhetherornotthepartiesamicablynegotiatedthefactthattheclaimantinitiatedarbitrationitselfsuggeststhatthepartiesfailedtoreachsettlement.Accordinglyevenwhenthecourtisunabletoascertainwhetherthepartiesnegotiatedamicablyapartymayinitiatearbitrationsolongasthesecondelementismetandthesecondelementisdeemedtobemetbaseonanfilingofarbitrationrequest.
LessonstobelearnedinAsia
Draftingamulti-tiereddisputeresolutionclause:✓ Unequivocal✓ Specific:timelimit,specificparties,mandatorynature
Implementingamulti-tiereddisputeresolutionclause:✓ Strictlycomplywitheachstep
Enforcinganarbitralawardunderamulti-tiereddisputeresolutionclause:✓ Examinewhethertheclauseisunequivocal,specificandmandatoryornot✓ Maynotbeenforcedincertainjurisdictions,suchasJapan
