Top court promotes mediation in business disputes

China's top court has pledged to strengthen cooperation with commercial federations to promote mediation in resolving business disputes, aiming to better protect the legitimate rights and interests of enterprises and support the development of the private sector.

On Thursday, the Supreme People's Court, in conjunction with the All-China Federation of Industry and Commerce, released details of 10 notable cases, highlighting the role of cooperation between judges and business experts in resolving disputes involving private enterprises.

"Commercial experts can apply their business acumen and experience to craft targeted solutions for resolving disputes among private enterprises. They can harness the benefits of mediation, such as low cost, high efficiency and the preservation of amicable relations," the top court said.

"This approach is conducive to achieving a win-win outcome by facilitating creditor repayments, providing relief to debtors and mending cooperative relationships," it added.

In one case, a small company that primarily supplied materials received numerous orders from a construction engineering enterprise for a project. Although the two sides had not signed a formal contract, their continued transactions involving supply, delivery and payment established a de facto sales relationship.

After repeated demands for payment of 224,700 yuan ($33,522) went unanswered, the small company filed a lawsuit against the construction engineering enterprise at the Pingshan District People's Court in Shenzhen, Guangdong province.

As the facts of the dispute were clear, and both parties agreed, the court referred the case to mediators from the local commerce federation for pre-litigation mediation.

During their preliminary investigation, the mediators found that neither side disputed the amount owed. Instead, the main disagreement concerned how and when the debt should be repaid.

The mediators explained the legal risks and commercial implications to both parties. The construction engineering enterprise was warned that failure to repay the debt could damage its reputation and future business prospects, while the supplier was informed that mediation could provide a quicker resolution with safeguards incorporated into the agreement.

The mediators also adjusted the repayment schedule to better match the construction company's cash-flow situation, easing the supplier's concerns over indefinite delays.

The dispute was ultimately resolved through mediation, and the court subsequently confirmed the legal validity of the agreement.

The SPC praised the cooperation between the court and local business experts, saying mediation provides a cost-effective and efficient alternative to litigation.

"For private companies, especially small and micro ones, such solutions resolve their problems and support their ongoing business operations," the top court said. "Additionally, this approach helps avoid antagonism between enterprises and the time-consuming nature of formal judicial proceedings, thereby reducing the cost of rights protection for private enterprises."

The top court also highlighted the importance of an online platform it established with the All-China Federation of Industry and Commerce.

In another case, a wire and cable company signed multiple contracts with a smart equipment company between September and December 2023 to supply wire and cable products, delivering them to locations designated by the latter.

A subsequent settlement showed that the smart equipment company owed 267,300 yuan to the wire and cable company. After repeated payment demands went unanswered, the wire and cable company filed a lawsuit at the Shushan District People's Court in Hefei, Anhui province.

Both companies were high-tech small and micro enterprises with limited capacity to withstand risks, and a prolonged dispute could have hindered their sustained and healthy development.

The grassroots court therefore initiated mediation through the online platform, examining the companies' operations and cash flow while seeking to ease tensions between the two sides.

Ultimately, with judicial guidance, the mediators resolved the case online, reducing dispute-resolution costs for the two small and micro enterprises and helping foster a sound, law-based business environment, the top court said.

caoyin@chinadaily.com.cn