Mediation in International Commercial Disputes

Today’s society is in the midst of a globalization era, in which state borders can no longer restrict communications, trade, or the movement of products and eventually leading to the internationalization of disputes.¹ Since customs, regulations, and even cultural heritage generally specify the means of resolution, the two parties in a dispute rarely had a choice regarding how to resolve their conflict. However, history has shown that there is no one-size-fitsall approach to resolving conflicts. This is especially true in commercial relationships, as the current tendency is to become more international by pursuing new foreign markets and determining the most affordable services. The parties have increasingly found national court systems ineffective in dealing with the evolution of commercial conflicts for a variety of reasons, including cost, delay, inability to manage the complexities of international disputes, and lack of qualification of judges. In the cross-border environment, international commercial mediation has long been the preferred method of settling complicated commercial disputes.²

1. Mediation

Mediation differs significantly from the more common judge-led settlement hearings. It is a systematic negotiation led by a mediator, who is a specially trained expert.³ When performed by a qualified mediator, mediation has proven to be a very effective means of reaching an agreement.⁴ The first alternative dispute resolution laws in the EU were enacted in the 1990s. At the same time, the UN Commission on International Commercial Mediation Model Law of 2002 is fundamental. The Acts passed at the EU level, however, also govern the alternative dispute resolution. First and foremost, it concerns Directive 2008/52/EC “On Some Aspects of Mediation in Civil and Commercial Cases,” which served as the foundation for the development of national laws on mediation. Alternative procedures, on the other hand, are nevertheless uncommon in a number of countries.

For the purposes of UNCITRAL Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation 2018, the mediation means “a process, whether referred to by the expression mediation, conciliation or an expression of similar import, whereby parties request a third person or persons (“the mediator”) to assist them in their attempt to reach an amicable settlement of their dispute arising out of or relating to a contractual or other legal relationship. The mediator does not have the authority to impose upon the parties a solution to the dispute.” According to the European Union Directive 2008/52 of May 21, 2008 on certain aspects of mediation in civil and commercial matters “ Mediation can provide a cost-effective and quick extrajudicial resolution of disputes in civil and commercial matters through processes tailored to the needs of the parties. Agreements resulting from mediation are more likely to be complied with voluntarily and are more likely to preserve an amicable and sustainable relationship between the parties. These benefits become even more pronounced in situations displaying cross-border elements”. According to the definition of mediation, the most important element is that the mediator does not have the authority to force a settlement to the dispute on the parties. Because the parties’ and the mediator’s participation is voluntary, the parties have the option to terminate the process at any point. As a result, mediation is a highly informal process and in great opposition to the formality of arbitration and litigation. The following predispute mediation clause may be included in contracts: “In the event of any controversy or claim arising out of or relating to this contract, or a breach thereof, the parties hereto agree first to try and settle the dispute by mediation, administered by the International Centre for Dispute Resolution under its Mediation Rules, before resorting to arbitration, litigation, or some other dispute resolution procedure”.⁵

2. Mediation Under National Law

The notion of mediation entered into Turkish practice in its entire context with the Law on Mediation in Civil Disputes (“Mediation Law”) which was enacted in 2012. Application to mediation was become a mandatory precondition for lawsuits involving employment disputes between employer and employee with an amendment that took effect on January 1, 2018. In 2018, the similar regulation was enacted for commercial disputes, and it went into effect on January 1, 2019. According to the Mediation Law’s Article 18/A-2, with regards to cases that are within the scope of the commercial disputes, if such cases are filed without applying to mediation first, the courts must dismiss the case on grounds of absence of prerequisite without any further examination. The Commercial Courts in Turkey are dealing with a rising caseload each year, as well as cases from previous years. In Istanbul courts the proceedings take even longer compared to other cities. Therefore, mediation has become a “must” in the commercial conflicts. However, according to the Mediation Law, only Turkish citizens are permitted to undertake mediation. Therefore, in Turkey, mediation in commercial conflicts would fall short of meeting the needs and expectations of parties from various cultural backgrounds. Another issue of debate was the acceptance and enforcement of the settlement agreements at the conclusion of the mediation procedure in a foreign nation. With these issues in mind, Turkey signed the United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention) in 2019. After then, the Convention has been ratified in Turkey on 25.02.2021 and entered into force recently on 10.03.2021. Prior to the Convention, there was no agreed-upon common method of enforcement between nations in the event that a party did not fulfill its commitments or failed to comply with a settlement agreement reached through the use of a mediation procedure. As a consequence, it appears that, with the aid of the Convention, the likelihood of parties failing to comply with settlement agreements would reduce, and international commercial mediation should become a viable option to court procedures and arbitration in the near future.⁶

3. Overview of Mediation Proceedings

The mediator begins the mediation session with an informal opening statement in which s/he explains the mediation process and the duties of the parties. Following that, each party will make their opening comments and intended conclusion.⁷ In most cases, the mediation process terminates with the parties reaching a settlement agreement specifying the rules to which they must abide.⁸ The agreement will be binding and enforceable in a court of law once it is signed by both parties. If the opposing side agrees, a party may later request the mediator to amend the settlement agreement. In Turkey, unless the parties agree on a mediator ranked within the list, mediation applications will be made to the mediation bureau within the jurisdiction of the competent court with regard to the subject of the dispute at hand, and a mediator will be selected by the mediation bureau from a list presented to the relevant presidency of justice commissions. If the parties achieve an agreement, the necessary mediation fees will be shared equally by the parties. According to article 18/A-2 of the Mediation Law, if the parties are unable to reach an agreement, the plaintiff must include the mediator’s final report demonstrating that the parties followed the mediation process but were unable to reach an agreement, and a lawsuit can be filed in the competent first-instance courts. In the event that the parties achieve an agreement, the mediator and the parties will sign a memorandum of understanding and it will serve as a court of judgment in Turkish courts.

4. Advantages and Disadvantages of Mediation

The cost and speed of the process are the two most important advantages of mediation.⁹ As a result, it appears that the optimal technique for resolving commercial conflicts would be one that provided benefits in terms of both time and money. The mediation allows disputing parties to keep their present relationship by settling disputes through a win-win solution and establishing solid long-term commercial relationships as a result.¹⁰ The mediation can be especially beneficial when the parties seek to maintain a commercial relationship that would be jeopardized by aggressive judicial or arbitral proceedings.¹¹ The World Bank is aiming to promote international commercial mediation in collaboration with the International Finance Corporation (IFC), while courts in some jurisdictions are increasingly rigorous about the parties’ obligation to mediate.¹² These activities imply that consensus-based dispute resolution is becoming more institutionalized. The problem is whether and to what degree international commercial mediation can replace international commercial arbitration.

Alternative procedures for resolving commercial conflicts have a number of advantages, but they also have a number of drawbacks, such as the mediator’s specific approach to each dispute, proper control over the actions of intermediaries, and the use of technique.¹³ Because mediators do not have the same legal expertise as judges, they may be less competent of resolving complex legal matters.In addition, generally there is a lack of precedent in mediation. As a result, predicting the success of various issues is challenging. Another disadvantage is that it is likely that the parties are hesitant to be bound by the laws of another party’s territory. As a result, the parties may agree on the applicable legal rules.

Conclusion

In conclusion, mediation is currently a welldefined procedure that may be utilized to resolve any sort of commercial dispute, both domestical and international. It is clear that parties involved in a commercial dispute who choose not to go to court for a variety of reasons can always resolve it through an alternate approach which is mediation. It should also be highlighted that in today’s changing world, the commercial parties are unwilling to participate in the resolution of conflicts in court due to trial delays and some other economic factors. Even though mediation has some disadvantages that should not be disregarded, it offers a lot of advantages. The procedure is faster and less expensive, which are the major benefits for the commercial parties. The cross-border mediation is changing the face of international commercial disputes, which implies that both attorneys and mediators must adapt to this change in order to give the best possible services to their clients.