Introducing Binding Mediation to Cross-Strait Circumstances

Despite the non-binding nature of mediation and not in international BIT practice, recently making mediation binding has been a new-born in the field one new form deriving in the United States.²⁹³ This new system is called “binding mediation.”

293 See Ryan N. Bowers et al. v. Raymond J. Lucia Companies, Inc., (4th App. D.) (filed May 30, 2012).

In this case

participate in a full day mediation. If, at the end of that mediation, the Parties have failed to reach an agreement, the Plaintiffs shall provide to the mediator their last and final demand,

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Binding mediation is a relatively new form of alternative dispute resolution.²⁹⁴ It has finality similar to that of binding arbitration but first allows the Parties to work together, with the assistance of mediator, to come to a settlement agreement that both parties should find to be fair and equitable.²⁹⁵ The distinctive and significant differences between Med-Arb and binding mediation is their respective results. While the result of a Med-Arb is an award, the result of a binding mediation is a neutral evaluation of the fair settlement value,²⁹⁶ but the basic idea of having a decision that Parties act accordingly does not change in either of the two suggested procedures.

In “binding mediation”, the parties exhaust the mediation process without reaching settlement, and ask the mediator to render an award for them without the presentation of additional evidence. The parties agree prior to the award that they will abide by

which demand shall be some amount between $100,000 and $5,000,000, and the Defendants shall provide to the mediator their last and final offer which offer shall be some amount between $100,000 and $5,000,000. The mediator shall then be empowered to set the amount of the judgment in favor of Plaintiffs against Raymond J. Lucia Companies, Inc. by choosing either Plaintiffs’ demand or Defendants’ offer, such binding mediator judgment to then be entered as a legally enforceable judgment . . . .

(cited from Robert E. Nuddleman, An Interesting Way to Resolve a Case: Mediation/Binding Baseball Arbitration (May 31, 2012),

http://blog.griegolaw.com/2012/05/31/an-interesting-way-to-resolve-a-case-mediationbinding-baseball-ar bitration/ (last visited Jan. 9, 2012)).

294 In nowadays practice of “binding mediation,” parties to disputes are non-State. It might seem more reasonable to introduce this idea to Art. 14 of Cross-Strait BIA (Investment-Related Commercial Dispute).

However, the author asserts that as long as the mediation proceedings are well arranged, resolving Investor-State disputes via “binding mediation” is possible. Example of a binding mediation, available at

http://www.constructiondisputes-cdrs.com/PDF%20files/BINDING%20MEDIATION%20AGREEMENT .pdf (last visited Jan. 16, 2103).

295 Binding Mediation: Defining the Process,

http://www.constructiondisputes-cdrs.com/about_binding_mediation.htm (last visited Jan. 9, 2013). See also JOHN W.COOLEY &STEVEN LUBET,ARBITRATION ADVOCACY 263 (2d ed., 2005).

296 See COOLEY &LUBET,supra note 295, at 263.

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whatever the mediator decides. As with med-arb, a written agreement, executed by the parties, identifying the role of the neutral, the issues to be decided, as well as potential appellate issues and party waivers is necessary.²⁹⁷

Although the term may seem to be an oxymoron, the parties had voluntarily agreed in writing to a mediation in which the neutral was empowered to make a decision if the parties were unable to settle.²⁹⁸ Once parties know that the mediation agreement has binding effect, automatically they would act pursuant to the outcome. Given that the mediation referred to under Cross-Strait BIA is not the same as the one in either China or Taiwan in terms of mediation rules and procedures, and that the mediation procedure has not yet been release, the procedure embedded under such mediation shall reflect the binding effect.

When introducing “binding mediation” to Cross-Strait BIA Investor-State dispute settlement mechanism, the authors has to made known the difference with nowadays practice is that parties to the dispute are non-State ones. The idea of borrowing this new dispute resolution method is to deal with the crucial issue that none of the dispute

297 Id.

298 Michael P. Carbone, Binding Mediation/Baseball Arbitration (July 2012),

http://www.mediate.com/mobile/article.cfm?id=9295 (last visited Jan. 9, 2013). See also Damon Thayer

& MacKenzie L. Smith, The Recorder in Practice: Binding Mediation, A Trap for the Unwary – While Now Sanctioned by the California Appellate Courts, This Approach to Dispute Resolution is Flawed in Several Ways,136(31) ESSENTIAL CAL.LEGAL CONTENT (Jul. 30, 2012),

http://jenner.com/system/assets/publications/10484/original/501081203_Jenner_.pdf?1348064604 (last visited Jan. 9, 2013). But see Akeb G. Sailer, Binding Mediation is No Mediation At All, J.CONSUMER

ATT’YFOR SCAL.ASS’N (Jan., 2007),

http://www.alansaler.com/Article-BindingMediationIsNoMediationAtAll.pdf (last visited Jan. 9, 2013).

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settlement channels in Art. 13 offer binding force. Taking into consideration party autonomy and flexibility as cross-strait characteristic in resolving disputes, Parties shall be granted the right to sign an agreement prior to the initiation of mediation stating should parties fail to come to an agreement through mediation after a specific period of time, mediator is authorized to render decision and parties should act accordingly, which the author believes is possible to adopt this procedure in mediation proceedings by the inclusion of it in standard mediation rules that all Cross-Strait Investment Dispute Settlement Institutions shall follow. In this sense, the awkwardness of not having arbitration mechanism under Cross-Strait BIA can be avoided, and that since the final outcome mediators given falls within the range of what both Parties can accept (when it comes to the amount of compensation) or the “best guess” that shall satisfy both Parties, the two sides shall abide the result willingly.

5.3.2.3 “Good Faith” Requirement in Annex

In Annex to Cross-Strait BIA, mediation settlement agreement according to the content of the reached consensus shall be produced and signed by parties.²⁹⁹ With the concept of Med-Arb or “binding mediation,” not only does the agreement automatically becomes binding, the proposed plan can also provide key to problems when there is no

299 Art. 2.(2) Annex to Cross-Strait BIA.

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consensus between parties. However, if there is doubt on directly adopting the proposed plans, as it is clear that actively participate in the mediation in good faith is an obligation that Parties bear.³⁰⁰ The term “good faith” forms a foundation that parties are required to give an unconditional guarantee that they would cooperate in progressing mediation as expeditiously as possible,³⁰¹ and it is also an important element in bridging the existing rules and the extra flavors.³⁰²