August 29, 2024
SINGAPORE – A new multimillion-dollar airport was built, but the builders were unhappy.
The main builder, an Asian construction company, had held back payments to its subcontractor, a Chinese state-owned enterprise, because the latter could not meet the terms of the contract due to unforeseen circumstances.
After a two-year stalemate, representatives of both companies flew to Singapore, sat down in the presence of a mediator and, within a day, shook hands on a payment arrangement that satisfied both sides.
“If you want to carry on with business, then each side has to give and take,” said Mr George Lim, the Singaporean mediator for the airport project.
“You suffer a bit, I suffer a bit, we carry on, and maybe in the next project, we make more together.”
Mr Lim chairs the Singapore International Mediation Centre (SIMC), a non-profit organisation that is part of Singapore’s efforts to position itself as a hub for dispute resolution.
He is proud of his 75 per cent success rate when it comes to resolving disputes through mediation. His secret: Serving tea to calm parties down and get them into a friendlier mood.
After the centre signed a memorandum of understanding with the China International Contractors Association on Aug 27, more Chinese companies will likely take their disputes with foreign companies to Singapore for mediation.
Many of the association’s 1,500 members are state-owned companies involved in Belt and Road projects. The Belt and Road Initiative is Chinese President Xi Jinping’s signature policy to build infrastructure across the world. Chinese companies sometimes team up with foreign companies to complete these projects.
When cost overruns or delays happen, disputes arise.
Speaking to reporters on Aug 28 at Shangri-La Hotel during a ceremony to mark the 10th anniversary of SIMC, Mr Lim quoted the example of the airport project to show how mediation can be a cheaper, faster and better way to resolve disputes than suing the other party in open court – as in litigation – or behind closed doors, as happens in arbitration.
“When you sue, it is win or lose. You have to say bad things about the other parties. Usually in the end, it means a breakdown of the business relationship,” he said.
Mediation, in contrast, is a less contentious process by which both sides can try to understand the underlying concerns behind the demands and try to find a middle ground in a face-saving manner.
It allows both sides to thrash out their differences privately without the public airing of dirty linen like in a court case, he explained.
He said that although China has signed but not yet ratified the Singapore Convention on Mediation, the SIMC so far has had no problem enforcing mediation outcomes in China.
Mr Xin Xiuming, vice-chairman of the China International Contractors Association, told reporters at the Shangri-La event that while it is often the foreign partner of a Chinese company asking for disputes to be mediated outside China, there is no downside for the Chinese company to do so in Singapore instead of on home ground.
“SIMC is professional and has international influence. The outcome of the mediation is reached after mutual consultation. If I don’t accept the mediation outcome, I can always walk away and try litigation or arbitration.”
The demand for mediation services outside of China will likely grow as Chinese companies seek more partnerships with foreign construction companies.
In the first seven months of 2024, members of the association received from foreign companies contracts worth US$134 billion (S$174 billion), a 25 per cent jump from the same period in 2023, said Mr Xin.