[Special Webinar] Issues on Force Majeure and Dispute Resolution under Covid-19
As the world emerges from lockdown, some of us may find ourselves trying to navigate raw uncertainties in a new normal. If you were among the 100 or so participants who tuned in to our webinar on 27 May, we hope you gained insight on moving on in a post-Covid-19 world.
During the livestream, SIMC Deputy CEO Teh Joo Lin and SIMC International Partnerships Lead Wenny Huang, together with William Ong and Sophia Feng, Partners at Allen & Gledhill, gave practical tips on resolving disputes amidst the Covid-19 pandemic, which has cast a pall on business relationships. One theme that emerged was that disputes may be better referred to mediation.
We share some key points that are based on the original 90-minute session, which is available here (in Mandarin only). Do share your thoughts in the comments section!
We thank our host, Joy Yang from the China Enterprises Association (Singapore), Allen & Gledhill and CCPIT Mediation Center, Singapore office, for the opportunity to answer questions.
In Singapore, mediation is very much encouraged, and parties may turn to mediation at any time. The SIMC Covid-19 Protocol is one such mechanism to help them.
“All my contracts have a force majeure clause. I’m well covered.”
Even if contracts have force majeure clauses, companies should know that Singapore and Chinese courts can interpret force majeure events differently from what companies may expect.
William says, “(We recommend that) in the absence of a force majeure clause or a poorly drafted dispute resolution clause, turning to litigation or arbitration (as a first means of resolution) may not be the best thing to do. The outcome is determined by an arbitral panel or a judge. Even if the judge decides in your favour, you may be unable to receive compensation simply because the counter-party is unable to pay.
Parties may consider mediation, whereby they have control over the outcome and can decide on solutions that make sense for all involved.”
Sophia stresses that lawyers and counsel should not ignore the importance of a dispute resolution clause.
She says, “We sometimes joke that the dispute resolution clause is also known as the ‘midnight’ clause but really, please don’t overlook the importance of it. The whole point about drafting a contract is so you set boundaries and responsibilities and don’t get into a dispute. But if you do, then you want to make sure there is an avenue for it to be addressed adequately.
The SIAC-SIMC Arb-Med-Arb model clause provides for a good option where parties may first refer their disputes to mediation before arbitration proceedings. The mediated settlement agreement can be converted into an arbitral award recognised by over 160 countries under the New York Convention.”
“Mediation in a Time of Covid-19 – What is that?”
The Covid-19 pandemic has led to unprecedented disruptions in the performance of business contracts and this has led to disputes. On a macro-economic level, Covid-19 has also led to economic uncertainty and predictions of a double digit plunge in world trade, according to the World Trade Organization. If businesses mediate their disputes early, they can devote their resources towards navigating other challenges, instead of diverting them towards the conduct of protracted and expensive legal proceedings. This will put businesses in a stronger position to recover amidst the growing economic uncertainty.
Wenny says, “No one could have predicted how 2020 would turn out. Given the demands of this period, mediation can help parties develop solutions based on mutual interests rather than adversarial positions. Solutions can be creative and at SIMC, parties come to a mutually agreed settlement in a matter of 1 – 2 days. Even if there is no settlement, people have a better understanding of the issues. Maintaining relationships is part and parcel of Asian deal-making, and the collaborative nature of mediation supports exactly that.”
“Thankfully, companies in Singapore can seek relief under the Covid-19 (Temporary Measures) Act. I can depend on that to resolve my issue.”
William covered the rationale, scope and mechanics of the Covid-19 (Temporary Measures) Act (“the Act”).
William says, “The Act doesn’t absolve rights; it provides breathing space. An Assessor’s determination is final. But when the relief period is over, the problem still exists, i.e.: your contractual obligations must still be fulfilled. Take for instance, a tenant – landlord dispute. After the period of relief is over, the landlord can still demand payment, and he has the right to take legal action if this is not met. However, even if a legally-binding decision is passed, the landlord may ultimately realise that it is not in his business interest to evict the tenant. Likewise, the tenant may still want to hold on to the unit. In mediation, both parties have the opportunity to discuss solutions to maintain status quo.
In Singapore, mediation is very much encouraged, and parties may turn to mediation at any time. The SIMC Covid-19 Protocol is one such mechanism to help them. It is designed to be used with any legislation, even with the Act.”
“The SIMC Covid-19 Protocol? What is that?”
SIMC launched the Covid-19 Protocol on 18 May 2020 to provide businesses with an expedited, efficient and economical means of dispute resolution during these challenging times.
Joo Lin shares, “The Protocol responds to the need for disputes to be resolved quickly while protecting businesses’ bottom lines and commercial relationships. Under the Protocol, parties will enjoy significant time- and cost-savings; disputes may be filed for S$250 and SIMC will commit to organising a mediation within 10 working days. Parties will enjoy reduced fees; for example, for disputes of less than $1M, each party pays $3,000, mediator’s fees included. To facilitate settlement, parties will be matched with experienced mediators.
We have designed the Protocol to be flexible so businesses have easy access to mediation. Given the travel restrictions, the mediation will be conducted online, with full support from the SIMC secretariat.”
“A multi-party dispute was in court for over a year. The dispute was eventually filed with SIMC… I still remember the mediator… saying, ‘since we have made the effort to be present, we shall not fight over legal rights or dwell on the wrongs. Let’s solve this once and for all.'”
“It’s already complicated. Why invite a third-party or ‘experienced mediator’ to the negotiation table?”
Essentially, you might be asking, what is the difference between mediation and negotiation.
Wenny responds, “A mediator can help parties unearth interests, especially when relationships have soured; a mediator functions as a ‘mirror of empathy’ to help the other party understand one party’s grounds; as observer, he has a vantage point (旁观者清) and can facilitate solutions without actually offering one.”
“What factors lead to a successful settlement?”
Many. Apart from an experienced mediator, the timing – the stage that the parties are at in their dispute is – is important. Another factor is the ability of counsel to discharge their roles as mediation advocates. They must be able to help their clients analyse the options on the table and provide a legal perspective on their feasibility. They can also help to draft practical and sustainable settlement agreements.
“Do you have a case example to share?”
Sophia shares, “A multi-party dispute was in court for over a year. The dispute was eventually filed with SIMC and all parties and the mediator flew to a neutral venue—that is, Beijing, for the mediation. It was a large group, and all the decision-makers made time to turn up for the mediation, suggesting their eagerness to stem the problem. It just did not make sense to continue fighting in court anymore. It also provided an opportunity for the parties to discuss their concerns in a safe and confidential environment. For the bosses it was like, ‘time is money, if I solve this problem, I can move on to other priorities.’ I still remember the mediator (who is a well-respected, retired judge from Singapore) saying, ‘since we have made the effort to be present, we shall not fight over legal rights or dwell on the wrongs. Let’s solve this once and for all.’