Attire

The first thing we may notice is people’s attire, which often reflects the general attitudes of formality or class of the society, and may indicate religious or moral beliefs as well. Some cultures dress overly casually and others formally. There is an age-old standard of respectable business garb, and it is always safer to dress conservatively, at least until you have tested the waters and understood what is de rigeur and what is not.

Manner of address

Should we refer to people formally, with their title and full name, or is it acceptable to use only their first name? People in some cultures may be insulted to be called by their first name upon first meeting, or even thereafter in a dispute resolution process.

Face

Possibly the most important element in interpersonal relations in most of Asia, be they private, business or diplomatic related, is the matter of face – a concept sadly lacking, and consequently misunderstood, in the West.

Almost every Asian culture values face, or respect of self and others. Many Western cultures seem to consider disregarding, or even insulting, each other as an acceptable means of communication – in some places, such as New York and Paris, almost an amusing competitive sport. But even an unintentional insult to an Asian, particularly in the presence of any third party, can have a devastating effect upon the entire future relationship with such person, possibly jeopardising the ability to do any business with them whatsoever.

Maintaining one's temper is a prime example of maintaining face. Losing one’s temper loses face not only for the person against whom one is ranting, but also for the rantor. Losing one’s temper may lose the negotiation or throw a mediation off track altogether. Insulting a witness may be standard operating procedure in US courts, but in the international dispute resolution arena it can be extremely bad form indeed.

The lesson for the neutral: Always treat everyone with respect.

Communications

Some cultures eschew either negative or positive responses. The Japanese are extremely reticent to say ‘no’, as are most Indonesian cultures, such as the Javanese. Any expression of negativity is considered bad form. The Javanese, in fact ,will never admit to any negative opinion nor give negative criticism, a disparaging comment being considered a face-destroying insult. Other cultures, such as some eastern European ones, avoid positive or enthusiastic reactions and invariably will give a negative response, decline or criticise – at least in the first instance.

Time

Time may have very different significance from one culture to another. The concept of wasting time is very much a Western one. The West primarily sees time as money, and saving time is equated with cost efficiency. In many parts of Asia, on the other hand, time can be a negotiating tool, or a means to give or withhold face. Making a visitor wait for an hour or more after an agreed appointment time is normally intended to unnerve the visitor and make them lose face. On the other hand, arriving right on time will give face and show your respect or enthusiasm. In other parts of Asia and northern Europe, strict punctuality is invariably expected – even demanded. Some Chinese companies have been known to force employees to stand in the corner, embarrassed in front of their co-workers, as punishment for arriving late to work.

The West says: ‘strike while the iron is hot’. Asia says: ‘let the dust settle’. How do we, as neutrals, reconcile these contradictory philosophies?

Religion

Among the more important cultural aspects that may differ greatly from one group to another are the practices and tenets of religion. Even an unconscious failure to respect and accommodate another’s religious practices can be a serious – even fatal – error in judgment.

Manner of dress - in particular, headwear - may be the first clue one will have of someone's religion. For example, Islamic women will have their hair covered with a headscarf of some nature; Israeli men will usually wear yarmulka; Sikh men will wear turbans. People's names may also give you a clue. But these indications are not always present or obvious to a neutral of a different religion.

An important aspect is that of prayer times, which the neutral must be sure to observe. At least a two-hour lunch break should be scheduled on Fridays if there are Muslims involved, as well as a short break at about 1500 every day, for prayers. The high holidays of any religion need to be respected and no hearings should be scheduled on those days.

Truth

Certain cultures view the concept of truth differently. Indonesia presents a good example. Within its 250 varied languages and cultural groups there may be totally opposing attitudes: any neutral dealing with an Indonesian party must of necessity be aware of their cultural backgrounds in order properly to evaluate party or witness testimony. The Javanese majority are extremely self-contained and courteous and will rarely give an open and full response to any question, for fear of offending someone. To a Javanese, truth can be a very dangerous weapon if it falls into the wrong hands. The Batak peoples, from the northern part of Sumatra, on the other hand, will tell you exactly what is on their mind, often rather aggressively, whether you ask them or not. Other cultures may fall somewhere in between.

How can a neutral evaluate a statement, answer, or the conduct of a party or witness without understanding the cultural forces at work beforehand?

Yes and no

Some cultures even have differences in the meanings of ‘yes’ and ‘no.’ Indonesians will rarely answer ‘no’ to any question. They may use the word for ‘incorrect’ if an error is made in a statement. If asked if they have seen, read or done something which they have not, they will not answer ‘no’, but rather ‘not yet’. Similarly, the term for ‘if’ is used instead of ‘when’ when discussing a planned action. This open-endedness, or uncertainty, reflects the Islamic philosophy that everything is in the hands of Allah. If asked if they will do something, most Indonesians will answer ‘Insha Allah’, (God willing).

Even the use of ‘yes’ may be misleading. When a witness says ‘yes’, do they mean ‘yes, I agree’ or only ‘yes, I understand’?

Corporate culture – powers and responsibilities

The relative powers and responsibilities of the corporate organ may differ greatly from culture to culture, as may the administrative requirements for rendering corporate acts binding upon the company and/or third parties.

Do the shareholders have the power to dictate actions of a company, or only the ability to appoint or remove directors? Is the board of directors required to act in the best interests of the company, or those of the shareholders?

Attitudes on borrowing/lending

Certain cultures may reflect different attitudes towards borrowing and lending, and respective rights and obligations in that regard. For example, Islam does not permit interest to be charged. We are now beginning to see a great increase of Sharia banking transactions, which are structured so that the incentive of the lenders is in other forms. However, there may easily be situations that arise to be mediated or arbitrated where a loan agreement with an Islamic party borrower does call for interest and such borrower might fail to pay on religious grounds.

Mediators in particular must be sensitive to these conditions and seek to find some other way for the lender’s expectations to be fulfilled without causing the borrower to violate their religious obligations.

Some cultures even have a perception that it is wrong or unjust to force a borrower to repay its indebtedness when the economic situation has changed unfavourably. This may be why many banks are still reticent to call for arbitration in their financing documentation, having the perception that arbitration necessarily means compromise.

Legal systems

Common vs. civil law

Another important aspect of cultural differences is found in the legal systems, in particular the most prevalent ones: common and civil law.

The general theory of common law practice is that the facts should evolve during the course of the proceedings and it is up to the opposing counsel to extract a party’s evidence and determine its position. Whereas, in civil law, each party is expected to present its case clearly and adduce whatever evidence it needs for proof. Discovery is basically unknown in civil law practice, and where applied in arbitration invariably of very limited, specific, scope.

Mediation techniques

In a mediation, where the parties come from different legal systems, their expectations as to the role of the mediator may be vastly different. Some jurisdictions restrict mediators to a facilitative role only, while in others it is common for the mediator to take a more proactive role in formulating suggested solutions.

Cultural considerations may also affect whether parties will even attempt to mediate a dispute. In many Western jurisdictions, mediation is so common that parties have no hesitancy in suggesting, or even insisting on, such attempt first. However, in some Asian and Eastern European jurisdictions, suggesting mediation may seem a loss of face and/or an admission that the party does not believe its case is strong enough to win in an adjudicated procedure.

Other differences between legal systems include:

• the civil law concept that all contracts must be performed in good faith;
• the common law requirement of consideration;
• the divergent views on sanctity of contracts; and
• the way changed circumstances are dealt with in each.

Conclusion

Arbitrators, and to some extent mediators, hold a unique position in international commerce. The jurisdiction with which we are vested often spans international cultures and a multitude of diverse laws and legal systems, and our decisions are for the most part not appealable. No judge in any court has such responsibility.

It is thus our duty, if we accept an appointment to adjudicate a dispute involving a culture of which we are not conversant, to make every effort to familiarise ourselves with the cultural values and idiosyncrasies of the parties and the project venue.