Mediation highlighted as way to resolve private firms’ disputes

The Supreme People's Court and the All-China Federation of Industry and Commerce have pledged to introduce innovative measures to help private enterprises resolve disputes, strengthening legal support for the private sector.

On Thursday, the top court and the federation released details of 10 notable cases involving private enterprises, highlighting the importance of cooperation between judges and commercial mediators in resolving business disputes.

One case involved a small building materials company that supplied materials to a construction engineering firm without signing a formal contract. Despite their ongoing business relationship, the construction company owed the supplier 224,700 yuan ($33,522).

After repeated requests for payment went unanswered, the supplier filed a lawsuit with the Pingshan District People's Court in Shenzhen, Guangdong province.

Given that the facts of the case were relatively clear, the Pingshan court referred the dispute to pre-litigation mediation through an online coordination mechanism.

Mediators found that the two sides agreed on the amount of the debt but differed over how it should be repaid. The construction company, citing cash-flow difficulties, sought a deferral or installment payments, while the supplier, concerned about financial security, demanded full payment upfront.

The mediators explained the legal risks and commercial implications to both parties. They told the construction company that failure to repay the debt could damage its business reputation and affect future cooperation, while informing the supplier that mediation could provide a faster resolution and that safeguards could be incorporated into the agreement.

To facilitate a compromise, the mediators adjusted the repayment schedule to better accommodate the construction company's cash flow. The revised arrangement addressed the supplier's concerns about potentially prolonged delays and made the repayment plan acceptable to both sides.

The dispute was ultimately resolved through mediation, leaving the door open for future cooperation between the two companies. The court subsequently confirmed the mediation agreement.

The Supreme People's Court said the case demonstrated the effectiveness of cooperation between judges and commercial mediators, noting that mediation can provide private enterprises with a more cost-effective and efficient alternative to litigation.

Such an approach, it said, can not only resolve disputes but also help maintain normal business operations and support the continued development of private enterprises.