Center Opens for US-China Business Disputes (WSJ)

January 29, 2004

-By Phelim Kyne, Dow Jones Newswires; 8610 6588-5848; Phelim.kyne@dowjones.com

-Edited by Costas Paris

BEIJING (Dow Jones)--The new U.S.-China Business Mediation Center will make its debut Thursday, giving firms leery of the unpredictability of China's judicial system and the costs of binding arbitration a new option in business dispute resolution.

The CPR Institute for Dispute Resolution of the U.S. and the official China Council for Promotion of International Trade, or CCPIT, will sign an agreement in New York creating the new center, which will have offices in both New York and Beijing.

The new center will offer U.S. and Chinese companies a relatively speedier and more inexpensive alternative to both the domestic court system and binding arbitration to resolve business disputes,president of the CPR Institute, Thomas J. Stipanowich, told Dow Jones Newswires recently.

"Mediation can afford parties the opportunity to avoid extensive involvement with the court system," Stipanowich said.

"Relatively speaking, mediation is not an expensive process, much less expensive than going to court and having a trial or arbitrating (because) often mediation can achieve its goals within a day or two or even a few hours."

The CPR Institute is a nonprofit alliance including law firms, public institutions and corporations including General Motors Corp. (GM), U.S. pharmaceutical giant Pfizer Inc. (PFE) and Intel Corp. (INTC).

CCPIT's initiative last year to form the mediation center underlines China's intent to smooth the edges of a key trade relationship rocked by repeated U.S. criticism of China's foreign exchange regime and intellectual property right protection efforts. The U.S. is China's second largest trading partner after Japan.

The yuan is only convertible on the trade account and even then is kept in a tight band around 8.227 to the U.S. dollar, giving China what critics say is an unfair export advantage because the yuan's value has fallen in tandem with the dollar's over the past year.

Rising Trade Volume Feeds Disputes

Stipanowich said the need for alternative methods of business dispute resolution between U.S.and Chinese companies has been heightened by "an all-time high" China-U.S. trade volume of $126.3 billion in 2003.

That figure compares with China's total trade volume of $851 billion in 2003, powered by 34.6% year-on-year rise in exports to $438.37 billion and a 39.9% on-year increase in imports to $412.84 billion in the same period.

"Whenever you have cross border transactions, there are always(disputes)...including different cultural expectations, political issues and just basic communication problems that may not emerge within a purely domestic business transaction," Stipanowich said.

CPR Institute and CCPIT will select and train a total of 48 individuals by the end of 2004 to serve as the center's first cadre of professional mediators.

"Our goal is to select people who will help to credential the program (such as) distinguished practitioners of the law or leaders in the business community with skill as mediators," Stipanowich said.

Those mediators will be tasked to resolve possibly hundreds of annual business disputes between U.S. and Chinese companies ranging from contract interpretation and quality of performance to IPR issues.

Stipanowich said the success of the new mediation center hinges on educating companies that might have need of its services as well as Chinese judges that have the power to refer legal disputes to mediation.

The flexibility and relative informality that the new center offers will be a welcome alternative to traditional legal recourse, Stipanowich said.

"An informal process like (mediation) can mold itself to the needs of its participants," he said.

"It's a consensual process that puts the (disputing) parties in the driver’s seat...ultimately its up to (them) to decide when and how (they'll) solve it."

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