Successful Deals
Mediation on the Investment and Labor Dispute
来源: 作者: 时间: 2013-4-19 9:51:58

Mediation on the Investment and Labor Dispute


Foreign Merchant and local government had reached an Acquisition Agreement, which stipulated that the state-owned property right will be transferred in consideration of the assumption of debts and the reallocation of approximately 10,000 employees by the foreign merchant. Foreign merchant failed to fulfill their contractual obligations due to the influence of financial crisis, and the sole corporation established also delayed in the payment of wages and social insurance fees in large amount, thus, a great strike and large-scale petitions were caused. Upon the request of local government, mediation centre mediated and arbitrated such dispute and proved to be very effective.

Issue of case: foreign investment and labor disputes

Applicant: Ministry of SASAC, Local Government

Respondent: Staffs and workers of Sole Corporation established by foreign merchant

Details of case

In 2006, the foreign merchant had signed an Acquisition Agreement with certain state-owned conglomerate (target company), which stipulated that the assets of target company will be transferred in consideration of the assumption of debts and the reallocation of approximately 10,000 employees by the foreign merchant, and foreign investors commits that huge amount of capital will be invested in each year to ensure the development of target company and the achievement of the goal of overseas listing; meanwhile, any dispute occurred shall be submitted to China International Economic and Trade Arbitration Commission for arbitration.

After the conclusion of such, the foreign investor established a sole company at applicant’s location, which shall be responsible to accept the assets of Target Company and reallocate those respondents. At the end of year 2007, financial crisis occurred, such foreign investors experienced financial strain, thus failed to fulfill their commitments in such Acquisition Agreement, which resulted in the operational difficulty of target company, reduction of workers’ salaries and welfares, failure to pay overtime cost and dissolution of labor contract with over 2000 workers, and failure to pay a large amount of social insurance fee. Meanwhile, in order to solve the financial strain situation, Sole Corporation transferred the land in city centre owned by Target Company to developer, which caused strike and large-scale petitions of respondents. They required the government to terminate the Acquisition Agreement with foreign merchants and reinstate their workers’ statuses of state-owned enterprise. Applicant believes that: currently, the principle contradiction is that the breach of labor contract by sole corporation shall be submitted to labor arbitration according to law; the breach by foreign merchant may be submitted to arbitration and foreign merchant may be required to implement such contract. Both parties can not reach a unanimous consent, thus, the event of petition aggravated. The local government established an investigation group to solve this problem, applicants required China Council for the Promotion of International Trade/Mediation Center of China Chamber of International Commerce (hereinafter referred to as “Mediation Center”) to intervene such case as an investigating group.

Mediation Process

Such event not only involves the breach of foreign merchant, but also involves labor and capital disputes and the reallocation problem of original staffs by state-owned department. Secretariat of Mediation Center have two different opinions on whether such case can be accepted: first, the labor and capital dispute and large-scale petition do not fail in the scope of accepting cases of commercial mediation, and in case that such dispute is not solved properly, an adverse influence might occurred to the reputation of Mediation Center; second, although seeing from the appearance, such case involves labor and capital disputes, the root of such disputes are caused by the breach of foreign merchant, i.e. “commercial dispute”. As an impartial third party, Mediation Center has the duties of solving such disputes, and in case that such case can be solved properly, it will become the “walking advertisement” of promotion the propaganda of Mediation Center, however, Mediation Center shall not intervene such case as a governmental working group, but as an independent third party to mediate such case. After carefully studying, the mediation center reached a unanimous consensus on the second opinion, and promptly made an statement to the local government, meanwhile, timely explained to the applicants and obtained the understanding of the local government and applicants.

Applicants’ claims:

1.the respondents shall support the arbitration claims of applicants on “requiring foreign merchant to continuously perform their investment obligation under and compensate the losses caused by their breach”;

2. with respect to such labor and capital disputes, the respondents shall raise labor arbitration toward relevant department according to law

Respondents claims:

1. Applicant shall applied for arbitration, requiring to terminate Acquisition Agreement

2. Applicant shall be in charge of reinstating the respondents’ staffs’ status in state-owned company.

Mediation Tribunal reviewed both parties’ claims and materials. After fully understanding the dispute backgrounds introduced by both parties and consulting China International Economic and Trade Arbitration Commission for relevant professional problems involved, the Mediation Center believed that: the fundamental reason for raising the claims mentioned above by respondents is that they have no confidence on the development prospects of the foreign merchant and their sole company, consider that it is more guaranteed to reinstate the staffs’ status of state-owned enterprise; the previous claims raised by applicants are based on the fact that such Acquisition Agreement has been signed for many years, and current situation did not meet the contractual or statutory termination conditions, thus the breach liability of foreign merchant is available to investigate; meanwhile, listened to the introduction of local government; currently, it is not rare to see such case that the Ministry of SASAC transfer the assets under the condition that foreign merchant shall undertake the debts, currently, workers have already obtained the compensation for status change. If, as required by applicants, application for arbitration is made, they can not win such arbitration, and even if they win, problems that how to recover the assets transferred and how to reinstate the staffs’ status of state-owned enterprise are still unsolved, which might cause larger social issues, and seriously impact on local investment environment.

On the basis of full communication and analysis and upon the request of both parties, mediator communicated face-to-face with thousands of workers in the meeting called by the local government. First of all, the mediator explained that the unfair treatments suffered by respondents were caused by the labor contract violation of overseas-funded enterprise, the fundamental cause for that is the violation of Acquisition Agreement by foreign merchant. Under such circumstances, it is necessary to clarify the differences between the two parties that triggered different relations and legal entities. As for the liabilities of foreign merchants, applicants shall hold their responsibility according to Acquisition Agreement; with respect to the liabilities of overseas-funded enterprise, respondents shall commence labor arbitration, and their responsibilities cannot be mixed up with each other.

Some workers understood the mediator’s explanation. But most of workers indicated that they didn’t understand, and requested the mediator to use “vernacular” in explanations that common people can understand, and some workers even sharply doubted the mediator’s good faith, and restlessness and fierce emotion occurred in the crowd. Then the mediator adopted cases that are popular and easy to understand and the story-telling method to “interpret” current case, which indicated that “everyone knows about the drama of “Madan Chun Heung-lin, and is it right when Bao Zheng ordered the death penalty of Chen Shimei?” “Yes” unanimously answered by workers, mediator explained, “if it is a misjudged case based on existing law, and as people says “life for a life, Chen Shimei never killed anyone, and the killer arranged by him stung by his conscience, instead of killing someone else, he killed himself. Although Chen Shimei is the principal criminal, and he committed an attempt murder, he did not deserve a death penalty. Similarly, if SASAC request for arbitration to terminate such contract, the arbitration tribunal not only take reasons into consideration, but also the stipulations of law and contract, then the arbitration request for termination of contract raised by SASAC will not be supported. If the contract cannot be terminated, your wishes of reinstating the staff’s status of state-owned enterprise won’t be achieved.” Then, most of workers understood, but some workers still wondered that is there any punishment on foreign merchant? Then, the mediator answered that: “yes, let us make a metaphor, if a woman came to the market and brought a pair of shoes in discount for her husband. She found that such shoes were too small after getting home, how to solve such problem?” some workers said that “return”, other says that “exchange”. Then the mediator continued that “such woman came back to the market and require to return such good, the salesclerk told her that the goods in discount cannot be returned, but to be exchanged, and the store may return her round-trip expense, is it ok?”, the workers answered “OK”, “Yes”. Then the mediator says “for the same reasons, because the foreign merchant violate the contract, SASAC are entitled to require the foreign merchant to perform their obligation of capital contribution and compensate the damages caused thereby; the sole corporation violates its contract, workers and staffs are entitled to raise labor arbitration and require the sole corporation to implement its obligations and compensate corresponding losses, how would you say?” workers said “OK”! After that, mediator answered questions raised by some workers with patience from the angles of legitimization, rationality, reasonableness and transposition consideration, and earned the understanding and applause of workers and staff.

Mediation Result

With the help of mediator and under the support and coordination of local government, both parties reached an unanimous consensus: respondents support applicants to commerce the arbitration for requiring the foreign merchant to perform the contract and compensate the damages, and coordinate to provide relevant evidence; meanwhile, the trade union shall represent respondents to initiated labor arbitration against sole corporation and entrust attorney.

Such mediation case gained comparatively ideal result. Currently, the governmental working group has already entered into ordered process. The mediation works, especially the performance in the communication meeting, earned the praise of leaders of local government.


Whether Mediation Center can intervene in such large-scale petition caused by the breach of foreign merchants, and the perspective and identity of such intervention are questions that need to be discussed thoroughly. “Promoting exportation, promoting increase, promoting stability and promoting harmony” are the major responsibilities of local government, which is also an inescapable duty of the Mediation Center; it shall play its due functions according to its own institutional feature. In this case, Mediation Center shall stick to the principles of “providing timely help, but non-undertaking the whole thing”, “intervention rather than sinking-in” and the mediation method of “edutainment” shall be used for reference.