Mediation is when a neutral third party (mediator) is retained to help the disputing parties come to a consensus. Rather than imposing a solution, a professional mediator works with the conflicting sides to explore solutions. Working with both parties together and sometimes separately, mediators can help them negotiate a resolution that is agreeable, sustainable and voluntary. Unlike arbitration and litigation, meditation on its own as a form of dispute resolution is not enforceable by the judicial system.

In China, the disputing parties generally do not engage in mediation as the first form of dispute resolution but rather as a secondary option during an arbitration or litigation where the arbitrator or judge asks if the disputing parties can come to a settlement. During this process the arbitrator or judge will act as the mediator and in doing so, a consent judgement order or arbitral award will be applied based on the settlement agreement, thus making the mediated agreement legally binding.

Arbitration is an alternative dispute resolution in which disputes are resolved outside of the judicial court system. A neutral third party(s) is commissioned to serve as a judge (arbitrator) who is responsible for resolving the dispute and renders the arbitration or arbitral award. An arbitral award is legally binding on both sides and enforceable. The disputing parties can negotiate virtually any aspect of the arbitration process subject to flexible arbitration rules then in force. Arbitrators hand down decisions that are usually confidential and cannot be appealed.

The consent to enter into arbitration is typically pre-agreed by the contracting parties and incorporated within the terms of their agreement by stating arbitration will be the form of dispute resolution and which arbitration court will be used. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Arbitration Convention or New York Convention, has about 165 member states, China included. Arbitral Awards rendered in any member state can be enforced in any other member state. However, restraint orders on assets to serve an arbitral award to be enforced by another member state may lead to difficulties in obtaining actual compensation.

Litigation is the most familiar type of dispute resolution. Litigation cases will be heard and trialed by a judicial court, usually involving two parties, a plaintiff(s) and a defendant(s). Litigation proceedings are more conservative when compared to arbitration proceedings with more stringent standards. According to the civil procedure laws of China, documentation materials and evidence produced outside of China need to be notarized and verified before submitting them to the courts and any texts in a language other than Chinese need to be translated into Chinese. A judgment rendered by the “first” hearing court is not necessarily final, as the “losing” party may appeal the judgment and a higher court is required to hear the case. When serving a judgement outside of China regarding foreign-related cases, decisions made by a court in another country can involve a lot of time and effort in obtaining a final judgment of enforceability in China.

Seeking remedies through litigation may be the only option if the parties disputing parties have not had a prior agreement as to the form of dispute resolution (i.e. arbitration).