East is East and West is West?: A Cross-Cultural Study on the Impact of Culture on Behavior in Commercial Dispute Resolution

Department of Law Fall 2012

Master's Thesis in Procedural Law 30 ECTS

East is East and West is West?

A Cross-Cultural Study on the Impact of Culture on Behavior in Commercial Dispute Resolution

Author: Jacqueline Carsbo

Supervisor: LL.D, Senior Lecturer Hugo Fridén

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Abstract

The purpose of this thesis was to investigate the attitude towards law in the West and the Far East, the perceptions of dispute resolution methods in a cross-cultural context, and difficulties that may arise when doing business in other cultures than your own, especially with regards to commercial dispute resolution. Due to the main ideologies, the people’s relationship to the Law is considerably different in the Western society than in the Far East. In a cross-cultural conflict, this contributes to the difficulty of understanding each other’s point of view.

Through interviews, and studies of laws and doctrine, I have found that the choice of dispute resolution method, is usually made with regards to the parties’

interests, and influenced by their legal and cultural heritage. As we project our own values, thoughts and feelings onto others, we enter into negotiations with an expectation that the other party will behave a certain way. How we react in situations and how we deal with them, is based on our life experiences and cultural references, in which we have been indoctrinated since birth. Thus, with mutual respect and understanding, the parties to a cross-cultural relationship can create their own business sub-culture and establish common norms, which will facilitate their relationship and provide business success.

Due to globalization, many companies nowadays do business worldwide.

Although dispute resolution methods and procedural laws have been harmonized

in many countries, the execution of these laws still seems to be connected to the

culture. Therefore, when it comes to dispute resolution methods in a cross-

cultural dispute, due to cultural differences one might have to consider other

options, such as mediation, instead of the Western traditional ones, such as

litigation or arbitration.

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Preface

The title of this thesis is inspired by The Ballad of East and West, a poem by Rudyard Kipling, which was first published in 1889. The poem relates to the fact, that even though we are born in different cultures, we still share the fundamental sameness of being humans.

I would like to thank my interviewees for sharing their valuable experiences, my father for proof-reading the text and my thesis supervisor for the encouragement whenever I doubted myself. I would also like to thank my family and friends for their support throughout Law School.

Uppsala, December 2012

Jacqueline Carsbo

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Contents

Abstract ... 2

Preface ... 4

Abbreviations ... 8

1 Introduction ... 10

1.1 Background ... 10

1.2 Focus of Thesis ... 11

1.3 Research Questions, Method and Material ... 12

1.4 Structure of Thesis ... 14

1.5 Terminology ... 14

2 Reasons Behind Conflicts ... 16

2.1 Introduction ... 16

2.2 Desire, Imitation, and Competition ... 16

2.2.1 Imitation and the Group ... 16

2.2.2 Desire and Competition ... 18

2.3 Validation and Blame ... 20

2.3.1 The Story ... 20

2.3.2 The Scapegoat ... 21

2.4 The Conflict Triangle ... 23

2.4.1 Introduction ... 23

2.4.2 A – Attitude ... 24

2.4.3 B – Behavior ... 25

2.4.4 C – Conflict ... 27

2.5 Comments ... 27

3 Legal and Cultural Development in the World ... 30

3.1 Introduction ... 30

3.2 The Western Society ... 30

3.2.1 The Struggle of Law ... 30

3.3 Law in the Far East ... 33

3.3.1 Introduction ... 33

3.3.2 Li, Yi and Guan Xi ... 34

3.3.3 Dispute Resolution and Cultural Context ... 36

3.4 Comments ... 39

4 Managing International Commercial Disputes ... 42

4.1 Introduction ... 42

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4.2 Traditional Dispute Resolution ... 42

4.2.1 Arbitration ... 42

4.2.2 Litigation ... 44

4.2.3 Recognition and Enforceability ... 45

4.3 Mediation ... 47

4.3.1 Introduction ... 47

4.3.2 The Mediation Procedure ... 48

4.3.3 Negotiation Power and Positioning ... 51

4.3.4 The Use of Mediation ... 53

4.3.5 The Role of the Mediator ... 55

4.3.6 Conciliation vs. Mediation... 57

4.4 Comments ... 58

5 Business Relationships and Cultural Context ... 62

5.1 Introduction ... 62

5.2 Business Relationships in the Far East ... 62

5.2.1 The Building of a Foundation ... 62

5.2.2 Negotiating a Contract ... 64

5.2.3 Dispute Resolution ... 67

5.3 Comments ... 69

6 Final Reflections ... 70

6.1 The Impact of Culture ... 70

6.2 The Legal Frame ... 72

Bibliography ... 74

Official Publications ... 74

Laws ... 74

Conventions ... 74

Regulations ... 74

Travaux Prépartoires ... 75

Doctrine... 75

Articles ... 76

Other Sources ... 77

Interviews ... 77

Seminars ... 78

Other ... 78

Internet Sources ... 79

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Abbreviations

ADR Alternative Dispute Resolution

BATNA Best Alternative to a Negotiated Agreement

Brussels Convention The Convention dated September 27, 1968 regarding the Jurisdiction of a Court and the Enforcement of Judgments in Civil and Commercial Matters

Brussels I Regulation The Council’s Regulation (EC) No. 44/2001 dated December 22, 2000 regarding the Jurisdiction of a Court and the Recognition and Enforcement of Judgments in Civil and Commercial Matters

CAA Chinese Arbitration Association, Taipei EFTA European Fair Trade Association

EU European Union

ICC International Chamber of Commerce

ICC Rules of Arbitration

International Chamber of Commerce Rules of Arbitration, in force as from 1 January 1998

Lugano Convention The Convention regarding the Jurisdiction of a Court and the Enforcement of Judgments in Civil and Commercial Matters, drawn up in Lugano on September 16, 1988.

New York Convention The Convention of the Recognition and Enforcement of Foreign Arbitral Awards, New York, 10 June 1958 Prop. Swedish Governments Proposal to new legislation

RB Rättegångsbalk (1942:740)

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TCCP Taiwan’s Code of Civil Procedure (1935)

TWD Taiwan New Dollar (currency)

UB Utsökningsbalk (1981:774)

WATNA Worst Alternative to a Negotiated Agreement

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1 Introduction

1.1 Background

Humans tend to prefer living in communities rather than alone. The benefits of living in a group have proven great advantages during the evolution. The Stone Age humans were hunters, and a group could bring down big game such as mammoths, which could feed a lot of people, whereas a lone hunter was left with smaller prey. Simply put, the group provided a higher probability of survival.

But living together with others is not always advantageous. Interaction with others can create friction, which could possibly result in a conflict. In order to live together in families, communities, and later on – even nations, it was important to get along with each other. Suppressed conflicts could be devastating for the unity of the group, especially in times where the group was associated with security and survival. Hence worth, it was important that these disputes were resolved.

Today, technological advances have provided higher living standards in most

of the industrialized countries, and we are no longer depending on the small

group for survival to the same extent. However, in contrast, our modern society

is dependent on larger collaborative groups, such as nations. One might have

expected that the improved living standards would have had an equal impact on

human behavior. However, interests collide and there are still conflicts to be

dealt with. How people tend to deal with a conflict depends on what is

considered socially acceptable and the position of the involved parties. The

methods of conflict management have developed over time within different

groups and thus differ between cultures, communities and the different legal

systems of the world. Cultural and historical differences are of great importance

when it comes to evaluating a conflict and the ethical/moral considerations

within it. A society characterized by individualism might have one preferred

method, whereas a group-oriented society may have another.

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As the world becomes globalized, the societies and legal cultures will meet and blend. What was alien a couple of years ago is nowadays a familiar issue. A well established human connection is trade. Trade has always been an important part of the development of the societies, and has contributed to the globalization.

Today, business is global and companies have partners and customers all over the world. With different cultural heritages, we behave differently and have different moral values. Due to misunderstandings, conflicts are likely to arise and later develop into legal disputes. How one might choose to deal with a conflict and dispute is not only determined by legislative rules, juridical decisions and general business customs and practices, but also by our cultural heritage.

Our attitude towards a conflict or a person is cultivated in our culture and expressed when confronted by someone who appears to be different. In the Western society, the methods of alternative dispute resolutions (ADR) have become more common and are sometimes preferred over more traditional Western methods such as plaints in courts. In the Far East, on the other hand, what we call alternative dispute resolution has been the default method when dealing with conflicts for a long time.

So, what makes one method of conflict resolution preferred instead of another? What persuades us to step out of our comfort zone? An open conflict is often something that most people are uncomfortable with, thus trying to avoid it.

Yet, people desire to resolve conflicts when they occur. This is still as important as it was in the Stone Age, even though, most of the time, our lives no longer depend on it.

1.2 Focus of Thesis

In this thesis, I will investigate the attitude towards the law in the West and the Far East, especially with regards to commercial dispute resolution. I will also treat the perception of dispute resolution methods in a cross-cultural context, and difficulties that may arise when doing business in other cultures than your own.

Furthermore, I will attempt to identify universal, as well as cultural, behavioral

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traits in conflicts and what might cause a conflict. The focus will be on private law disputes that arise in a business context. I will not deal with family disputes or conflicts between nations, nor public law. Conflicts can be intrapersonal or interpersonal. In this thesis, the focus will be on both the intrapersonal aspects which might cause the conflict and the interpersonal aspects in conflicts and disputes. However, I will not analyze the term conflict; numerous authors have already done that. Furthermore, I assume that the reader is familiar with the basic structure of litigation, arbitration and mediation procedures.

The thesis will be comparative and will focus on the psychological and cultural aspects, rather than technical details of law. The point of view is mainly from an individual or a small business perspective. Due to time restrictions and the impossibility of covering the entire world and all its different cultures in one thesis, the focus will be on the relationship between the Western and the Far East business culture. Bearing in mind that I am raised in a Western society with Civil law, it is from that point of view I will compare with the culture and law in the Far East.

1.3 Research Questions, Method and Material

Alternative dispute resolution is an accepted method to resolve disputes in the Common law countries as new means as to resolve conflict and ease the burden on the traditional institutions. The introduction of alternative dispute resolution to Civil law countries is relatively new. For example, several changes to Swedish procedural law have recently been made to accommodate this “modern” way of thinking.

Through this thesis I will investigate how different cultures deal with conflict

and disputes. Have the methods been provided through legislation or through

culture? Are the same methods suitable in the different cultural contexts? Do the

parties to a cross-cultural business relationship adapt to the other party’s’ cultural

preferences or do they create a sub-culture in which appropriate conduct is

formed?

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For an objective approach, I have used laws, regulations and guidelines on litigation, arbitration and mediation I have also studied doctrine which treats alternative dispute resolution, conflicts and procedural law. In order to get a subjective point of view on situations which might arise in a cross-cultural business relationship, I have used interviews with representaives of small Swedish companies which have shared their experiences from doing business in the Far East.

For a comparison of the preferred method for dispute resolution chosen in different countries, with regards to where the party is located and the relation between the parties, I had to study the legal options available. Since it is difficult to find translated information about conflict management and laws in many of the countries in the Far East, I have used a compilation from Herbert Smith LLP

, an international law firm – who has gathered information about dispute resolution from local Asian law firms. I have no reason to believe that this information is inaccurate.

To get an understanding of the human behavior in conflicts, I used the theory of Dr. Girard, a prominent philosophical anthropologist. His work is becoming increasingly recognized and is considered a breakthrough in social anthropology.

Girard’s work comes from a Western point of view and though his work has been criticized as too ambitious, with questionable methods (mainly because he draws his conclusions from works of fiction rather than empirical studies), many neuroscientists agree with his theory. Aware of the criticism, I have chosen to use his theory of mimic desire, as I have found the same conclusions in the doctrine on conflict resolution that I have used as well. In order to get a deeper understanding of the social psychology in the Asian culture, especially the society in the Far East, I studied some of the work by Social Psychologist Dr.

Hwang.

1 As of 1 October, 2012, Herbert Smith LLP merged with the Australian law firm Frehills, thus forming a new firm called Herbert Smith Frehills.

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1.4 Structure of Thesis

The introduction, method and purpose of the thesis are presented in chapter one.

In chapter two, I will provide philosophical and psychological theories, which have made attempts at explaining why we behave the way we do. What goes on in the human mind and what motivates our behavior before and during a conflict and dispute?

Chapter three has been divided into two main parts, where the legal development in the Western Society and the Far East, and the attitude of law, together with the two main legal systems of the world, Common Law and Civil Law, are presented. The methods of dispute resolution and cultural considerations involved in the choice of method have developed alongside the legal and cultural development. Therefore, a brief introduction of the underlying values of the existing dispute resolution methods that are used to solve business and cross-cultural conflicts will be treated in chapter four. Based on interviews with small companies, chapter five provides an insight in how the business relationships between East and West are formed and maintained today. I will also disclose what considerations smaller companies must have regarding the choice of dispute resolution method.

My final reflections about the relationship between law, culture and human behavior and what effect it has in today’s business world and dispute resolution, will be given in chapter six.

1.5 Terminology

Award – arbitrunal award, includes: inter alia, an interim, partial or final Award.

China – People’s Republic of China

2 As defined by art.2 ICC Rules of Arbitration.

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Chinese – People living in China, Taiwan and Hong Kong, sharing the same culture that derives from Confucianism, Taoism and Buddhism.

Since the culture in Korea is similar to the ‘Chinese’ I also include Koreans.

Conflict – discrepancy caused by anything that resulted in a negative outcome and caused friction between parties. Usually the result of competition.

Dispute – refers to a conflict which derives from legal matter.

East Asia/ Far East – will be used together and means basically China, Taiwan, Hong Kong, Korea, et cetera

Face – an individual’s awareness about a public image formed in other’s mind.

Comes in two varieties; Mientze/Mianzi – determined by one’s performance, and Lian - related to one’s moral conduct.

Guan Xi – relationship, interpersonal harmony and networking. Basis for individual’s sense of self in East Asian culture.

Taiwan – Republic of China/Chinese Taipei/ Republic of Taiwan. The politically neutral term to use is ‘Chinese Taipei’, though Taiwan is most frequently used, even by the Swedish Government.

3 As defined by Dr. Hwang.

4 As defined by Dr. Hwang.

5 http://www.regeringen.se/sb/d/2520/a/14403 (retrieved 2012-10-29).

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2 Reasons Behind Conflicts

2.1 Introduction

In a conflict, what is it that makes us behave the way we do? Why do people, who live in the same area and share the same language, moral values and culture, have conflicts? In a cross-cultural conflict, is the behavior different than in an intercultural conflict? And how come, when a dispute is settled in court, the conflict might still not be resolved? According to the French philosopher René Girard, people imitate each other. He says that our cultural repertoire, such as behavior and language, is developed in order to adapt to those around us.

Girard’s theory of “mimic desire” and the concept of a “scapegoat” are both attempts to explain human attitude and behavior. How our behavior and attitude can affect a conflict will be described in this chapter, with the conflict triangle

as a guideline.

2.2 Desire, Imitation, and Competition

2.2.1 Imitation and the Group

A human child cannot take care of himself during his first years of life. His survival is dependent on someone else taking care of, and providing for him.

Therefore, according to Girard, in order to be taken care of, he imitates the sounds and behavior of the caregivers, thus proving that they belong together and justifying the care.

By imitating, we confirm our culture and within it, our social identity. These social bonds create stability in our relationships. We identify with our group;

they become a part of our concept of “self”.

Within these groups, we establish norms, social conduct and a moral community. Our norms define appropriate

6 More about the conflict triangle can be found at

http://arbetsplatskonflikt.av.gu.se/2akad/22konfliktabc.html (retrieved 2012-09-24).

7 Girard 1, about 10-15 minutes in. For the more interested reader, imitation have also been covered in the National Geographic Channel documentary “Ape Genius”, and other social psychology studies.

8 Pruitt & Hee Kim, p.29.

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behavior and influence which strategies we might choose in negotiations. Where and when the norms are well established and respected, the probability of conflicts is lower than in groups which lack normative consensus.

Our social interaction is then ruled by our cultural heritage. Our cultural values guide our attention to issues that are considered important and influence our interests and priorities. Our conduct, interpretation of situations and perception of others, have been given shared standards by our cultural ideologies.

In the Asian society, people tend to identify with their group (collectivists) in a greater extent than people in the Western society (individualists). They build relationships, called Guan Xi

, which creates a bond between the parties. We treat people outside of the group differently, compared to people inside the group. Whether you belong to the group or not will determine how you will be treated. Where the individualists emphasize the equity rule (divide accordingly to each contribution) regardless of in-group or out-group relations, collectivists only tend to use the equity rule with out-group relations. In-group members are entitled to a greater level of trust and protection, and they tend to cultivate the equality or generosity rule amongst themselves.

In the Far East, social behavior is mainly guided by Confucianism

. Although Confucianism offers extensive guidelines on how to interact with in-group members in order to maintain harmony, there are few guidelines on how to interact with out-group members. Therefore, distrust and deceptive tactics in negotiations and confrontation in conflict can be justified, since the out-group members lack the protection provided for in-group members.

Thus, to become an in-group member worthy of protection, it is important to build a solid Guan Xi with new Asian business partners.

9 Pruitt & Hee Kim, pp. 26–27.

10 Lewicki et al, p. 352.

11 More about Guan Xi, see further down 3.3.2.

12 Hwang 1997-98, p.19; Pruitt & Hee Kim, p. 60.

13 More about Confucianism, see further down 3.3.2.

14 Pruitt & Hee Kim, p.60.

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People live in groups and in order to belong in the group, we need to be desirable. When being desirable, other people imitate and a group of alikes is created. For example, in the Western society today, the more things we have and the more expensive and luxurious they are, the more desirable we get. Girard claims that our desires are shaped by imitation of those around us and that the things we want are not desirable in themselves, but because someone else’s desire have made them attractive. We want to be like the ones who have them, in order to prove that we belong. Furthermore, Girard claims that there is no such thing as a natural desire. We either have an instinct, such as eating when we are hungr, or a desire, created by someone else’s attention to the desirable object.

In this context, imitation is not doing the same thing as someone else, but doing what others are doing. For example, if one of the parties to a conflict acts differently, the other party will do so as well. The desire to distinguish oneself from the other creates a desire for the other party to distinguish themselves as well. Therefore, the more different the “enemy” seems, the more alike the parties actually are. They no longer imitate each other’s desire for the object, but each other’s antagonism.

Competere means “to join together to reach the same goal”.

Initially, the shared desire motivates and encourage co-operation; however, when people want the same things, they soon become obstacles for each other. As humans, we want to be loved; we want others to love what we love and to desire what we desire.

But the moment they do, they become obstacles for us, and stand in the way of getting what we want. Thus, the closer we are, the more we want the same things, and when we want the same things we become competitors. When we compete, the competitor becomes more interesting than the object of the competition, which causes antagonism. We are no longer intrigued by the object, but by the

15 Girard part 1, about 10 minutes.

16 Girard part 1, about 20 minutes.

17 Girard part 1, about 18 minutes.

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obstacle that stands in our way of reaching the object, which creates conflict.

Usually, the competition starts when one of the parties feel deprived of something in comparison to the other party.

When both parties to a conflict want to win, they both desire the same goal, and have become obstacles to each other. The goal is no longer to find a solution that would benefit both parties, the goal is to defeat the obstacle and win the competition.

In both litigation and arbitration, the focus is on the “win”. One party is awarded “right” and the other “wrong”. These dispute resolution methods could be referred to as “rights-based” procedures, but they do not deal with the actual reasons as to why there is a conflict, thus leaving the issue unresolved. A mediation or conciliation procedure, where the mediator brings out the interests of the parties, thus giving the parties the opportunity to figure out what caused the conflict and how to best resolve it, instead of competing with each other, could be referred to as an “interest-based” procedure.

A classic example, which shows the advantages of shifting focus from competition to problem solving, in order to benefit the parties, is that of the two girls that are fighting about an orange.

They both desire the orange, but what they do not know is that they want it for different purposes. The more one girl wants it, the greater the desire becomes for the other. If they do not break the spiral of conflict that is created, the conflict will further escalate. If they communicate with each other instead, they will find out that even though the perception is that they desire the same thing (the orange) they have different desires regarding the use of the orange. One of the girls wants the peel and the other the juice.

The circumstances of the situation would emerge during an investigation, conducted by a judge or mediator, but in litigation, the judge would find who has the better right to the orange and give the whole orange to one of the girls. In

18 Girard part 1, about 13–18 minutes.

19 Pruitt & Hee Kim, p. 30.

20 Girard part 1, about 19 minutes.

21 Moses, p. 14.

22 Fisher et al, pp. 58–59.

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mediation, the mediator could help the girls to find an interest-based solution. By compromising, they can both “win”, but depending on how that compromise is executed, the win will be either big or small. If by compromising without communication, they can divide the orange in two and each get one half.

However, if they communicate and discover each other’s desire, they can divide the orange so that they both get what they want (one gets the peel, the other the juice). Thus, an interest-based solution has a higher probability of resolving the conflict and also repairs some of the damage done to the relationship between the parties.

In the Western culture the focus is usually on being right and claim a win. As will be described further down (3.3), the considerations in a dispute differ greatly in the Far East. When trying to resolve a cross-cultural dispute, I believe that using a variety of conflict-solving approaches might lead to smoother processes, and in the end, happier participants. One way to find an interest-based solution was developed and presented at Harvard by Professor Fisher and constitutes of four steps: First, separate the people from the problem. Then, focus on the parties’ interests – not their positions. Third, invent options that would be of mutual benefit. Finally, use only objective criteria when proposing a solution.

2.3 Validation and Blame

2.3.1 The Story

Conflict can be defined ”as perceived divergence of interest”

. But what causes that divergence? In a conflict, each party presents a “story”, which consists of their perception of the event that resulted in a negative outcome, their truth.

When the stories are incompatible the conflict arises.

When the parties believe that their perception is the only truth, the story creates a barrier to a settlement.

23 Fisher et al, p. 17.

24 Pruitt & Hee Kim, p. 13.

25 Ibid.

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Until that story has been told, heard and given validation, not even money can solve the issue, only hide the problems temporarily.

Validation is important for every human: “You were seen, you were heard and you matter”

. We all want to feel that we have a purpose, doing what we are doing. When interacting and communicating with others, the importance of validation should be kept in mind. When validating the party, they feel acknowledged and respected. Through mediation, the mediator can make sure that the parties get to tell their story to someone, thus, in the mediation process, the parties can be validated and move on from their positions and instead focus on the issue at hand. In litigation, the positioning is often strengthened in the quest for a “win”, and the story never gets to be validated by the other party, leaving the conflict to some extent unresolved.

In the event of a cross-cultural commercial dispute, the situation becomes even more complex. In addition to each party’s story, they have different cultural references, which affect their perception of the event that caused the negative outcome. If the story is revealed and validated, the barrier is removed and the parties can shift focus from competition to reconciliation.

Revealing the story thus has a therapeutic value and a huge impact on the reconciliation procedure.

2.3.2 The Scapegoat

Historically, scapegoating – the act of blaming someone, or something, for a negative outcome that is due to other causes – has been used as an excuse for various events; for example, the witch hunt and the Holocaust. Scapegoating still occurs today in various forms.

It is said to derive from a Biblical story, in which a goat carried the people’s sins into the desert, although recent theories claim it to be a strategy to use in order to reduce guilt and maintain perceived personal control. When an event

26 Schwartz, p. 310.

27 Oprah, October 14, 2011.

28 Schwartz, p. 312.

29 Pruitt & Hee Kim, p. 219.

30 Rotschild et al, p. 1148.

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results in a negative outcome, one does not really feel comfortable taking the responsibility for it. By displacing blame onto a scapegoat, the feeling of guilt can be reduced, which then results in a lower perceived responsibility for the relevant negative outcome.

Scapegoating is also said to be a strategy for maintaining the perceived moral value of oneself.

When scapegoating in conflicts, the parties could either scapegoat each other, themselves, or find a common scapegoat (a third party) who would be given the blame for both of them. Neither of those actions would actually resolve the dispute, nor would it be of any help in attempts of resolving the dispute. The presence of a viable scapegoat reduces the willingness of the individual to take responsibility and work towards a solution of the negative outcome.

The parties tend to adopt a zero-sum perspective (i.e. one winner and one loser), which in turn encourages hostile competition and generates a perception that one has been treated unfairly by the other party.

It is not uncommon for one of the parties to adopt responsibility and self- blame when the conflict is mild, as an attempt to remain in control. Self-blame is more likely to cause shame than guilt, which in turn causes a different behavior than scapegoating (see below, 2.4.2). However, as the conflict escalates, the party tends to find more and more “evidence”, in order to convince themselves that the other party is responsible for the negative outcome of the event that caused the conflict, and therefore should take blame.

With the focus on the competition, scapegoating is an easy way to turn attention to the obstacle instead of the object. In the event of a dispute with multiple parties, the appointment of a scapegoat would leave the others free of guilt, thus being able to prove that they have more “right” to a specific outcome.

The appointment of a scapegoat would bring the other parties together, as they found common ground. A group, with all its benefits of belonging, would be

31 Rotschild et al, p. 1151.

32 Op Cit, p. 1149.

33 Op Cit, p. 1160.

34 Pruitt & Hee Kim, p. 54.

35 Op Cit, pp. 54–55.

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formed, with the parties as members. The scapegoat would be an out-group member in the conflict, thus not worthy of the others protection or moral considerations.

When all parties in a conflict accept liability for the negative outcome of the event that caused the conflict, the perception of common ground and compability of interests increases the probability of resolving the dispute. In order to move forward in a conflict, scapegoating needs to be addressed and dealt with.

2.4 The Conflict Triangle

2.4.1 Introduction

The conflict triangle is a model which divides a conflict into three corners.

B

A C

The A-corner is all about the parties’ attitude. What they feel and desire, and their perception of the event that cause the conflict, is connected to this corner.

Their story, perception of the other party and main interests are, among other emotions, hidden in this corner and needs to be addressed. Usually, their attitude needs to change, before the conflict can be resolved.

Despite the parties’ attitude, how they choose to channel their attitude is represented in the second corner of the triangle, the B-corner. The behavior in a conflict could either escalate the conflict and eventually bring it to stalemate, or facilitate the dispute resolution procedure. Choosing a strategy could be difficult,

36 The Conflict Triangle, as presented in Lindell II, p. 29.

37 Ibid.

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but usually the unconscious behavior provides a strategy before the party makes an active choice.

In the third and final corner of the triangle – the C-corner – we find what the parties claim that the conflict actually is about. The negative outcome – the

“thing” – that is incompatible with the parties’ perception. The issue within this corner is usually the one that is addressed when the conflict surfaces. This corner is usually perceived as the reason people go to court, or turn to ADR.

2.4.2 A – Attitude

Theoretically, in a commercial conflict, the A-corner should not have as much importance as in, for example, a family dispute, where emotions run high.

However, in a cross-cultural context the differences between the parties prove that they do not belong in the same group, thus reducing the need to take care of the other. The attitude towards the other party might therefore be more hostile than if the opponent was a kin, which in turn causes frustration in the other party.

An attack on their group is received as an attack on their own self-worth.

During the conflict, the parties’ perception of the reality and the other party might change. A good mediator can bring the parties closer to each other instead of further apart. By acknowledging the parties attitudes, the process can be speeded up – and it might even prevent future disputes.

In this corner, intrapersonal issues, such as the party’s desire to compete with, or to hurt, the other party, need to be dealt with. Forgiveness is one important part of reconciliation, which can be achieved if the story is revealed. The party can forgive himself, or find it within himself to forgive the other party, even though they have not yet communicated.

Forgiveness can also be interpersonal, where the parties communicate with each other, ask for forgiveness, thus acknowledging the others’ suffering, which is a first step towards reconciliation.

38 Pruitt & Hee Kim, p. 31.

39 Op Cit, p. 221.

40 Op Cit, p. 223.

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Therefore, the importance of this corner should not be overlooked. Even if the dispute at a first glance might seem superficial, there’s always something lurking in the shadow, which needs to be addressed in order to resolve the dispute. Angry people do not listen; therefore, they need to be able to express their anger before calming down. Having the parties apologize in the beginning of the process will take the edge of their hostility. However, the apology needs to be honest. A sarcastic apology might worsen the relationship between the parties, thus making reconciliation even more difficult to achieve.

2.4.3 B – Behavior

With the human tendency to scapegoat, a behavior closely connected to the A- corner (see above, 2.3.2), the choice of strategy depends on where the blame is, and how we behave relates to our cultural context. Asian people tend to feel partly responsible for the conflict in a greater extent than Western people, mostly because they believe that they have failed to uphold the universal harmony.

However, as will be presented below (5.4), they are sometimes more than happy to blame a third party (an out-group member) for a negative outcome, in order to uphold the Guan Xi between the parties of the conflict.

One common strategy is avoidance, where the parties either avoid each other inactively, or withdraw from each other completely.

This strategy is frequently used, especially in the Far East. Avoidance is also the preferred strategy when the party self-blame, as he feels shame, rather than guilt. Guilty people usually want to make amends, whereas shame causes the person to hide from others disapproval in fear of losing one’s social identity.

By avoiding the conflict, a superficial relationship can be upheld. However, if the conflict is with an out- group member, the superficial relationship is not as important to uphold, as with an in-group member. Collectivists prefer to hand over the conflict to a third

41 Seminar Norman 111012.

42 Pruitt & Hee Kim, p. 59.

43 Op Cit, p. 38.

44 Op Cit, p. 55.

26

party, who will help with reconciliation. By submitting the conflict to a third party, the parties are avoiding direct confrontation, but the conflict gets addressed and the problem solving can begin.

Confrontation is a strategy which is the complete opposite of avoidance,

and might be preferred by the Western society. When the party is focused on its rights, confrontation is a way of claiming them. If the other party is from another culture, a confrontation might be perceived as hostile and further escalates the conflict. On the other hand, a party which is used to confrontation might become frustrated if the other party avoids dealing with the conflict, which also causes the conflict to escalate.

When both parties trust each other and are concerned about each other’s welfare, a problem solving strategy is encouraged.

With problem solving, the parties have to engage in each other’s outcome in order to make it work. With communication and a perceived common ground, the parties can end the competition and instead work together to find a solution that would benefit both.

When the focus is on problem solving, the reconciliation process – the process of repairing the relationship – can begin.

In order to solve the conflict, the parties need to change their attitude. As mentioned above (2.4.2), forgiveness and validation can help acknowledge the other party, thus making the shift from competition to conciliation smooth.

Within the group – and culture – a silent language and a social adhesive develop. The behavior is guided by the silent language of the group. This language creates a standard of acceptable actions in certain situations. While this language may seem permanent and stale, it is constantly changing in order to adapt to changed circumstances. Culture and nationality is not the same thing.

Within a nation, there might be several different cultures. When speaking of Europeans, one has to keep in mind that, for example, Germans and French

45 Pruitt & Hee Kim, p. 212.

46 Op Cit, p. 38.

47 Op Cit, p. 61.

48 Op Cit, p. 218.

27

behave very different.

In China, approximately one fifth of the world’s population lives, thus providing great differences in culture and behavior, depending on the region. People also have different personalities that are nonrelated to their nationality or culture. The silent language follows the group dynamic. If the group is changing – so is the language. When the language changes – so does the behavior.

2.4.4 C – Conflict

Conflicts can be divided into different kinds of conflict, such as issue-based conflicts, relational conflicts, structural conflicts, interest-based conflicts and distributional conflicts. Some of these are based on the perceived competition, and other are based on actual competition.

Whatever the type of conflict, it is usually described by a specific event which causes a negative outcome.

Whatever the type of conflict, it imposes harm and is inconvenient for the parties.

Usually, the conflict does not begin in this corner, but in one of the other corners. The specific event that causes the negative outcome is just an excuse for the parties to address the conflict. All corners interact with each other, and the B-corner needs to be managed before the C-corner can be resolved or settled. Finally, reconciliation can begin when the A-corner is addressed.

2.5 Comments

In some cultures, communication is indirect and additional interpretation is embedded in the context. In other, communication is direct and the information has less relation to the context. Therefore, the same information might have a different meaning, depending on who is receiving the information.

This

49 Lewicki et al, p. 367.

50 Pruitt & Hee Kim, p. 251; Lindell II, p. 29.

51 Op Cit, p. 18.

52 Op Cit, p. 31.

53 Lewicki et al, pp. 361-362.

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discrepancy leads to miscommunication. The misunderstandings do not only occur with words, but also when interpreting actions.

In the Western society, we are used to direct communication and expect a reaction to an action. For example, when I ask someone a question I expect a prompt answer. In the Far East, it is more common to have a period of silence before answering, as a token of respect, giving the question an appropriate amount of time for reflection.

Together with the Eastern curtsey of giving evasive answers, rather than confrontation or direct rejection, the different interactive behavior between East and West causes frictions that might lead to misunderstandings and conflicts.

When two parties from different cultural backgrounds do business with each other, they have to understand each others’ differences in order to make the business relationship a pleasant one. If both parties portray one another in a negative way, it may be a continuing source of underlying conflicts. As an example, individualistic people might seem very selfish, disloyal and ignorant of the needs of the group in the eye of a collectivistic person, whereas a collectivistic person might come across as weak and inefficient.

A conflict is seldom only about the “thing”. The conflict triangle can be used as a guide when trying to figure out a solution to a conflict. It is important that all corners get attention. Depending on the conflict, some corners deserve and need more attention than others. Validation of parties, for example, belongs in the A- corner, and needs to be addressed, regardless if the conflict arose from personal injury, family matters or a breach of contract. Validation can change both the parties’ emotional state of mind and the parties’ attitude towards the conflict.

As mentioned above, miscommunication causes friction. The friction changes the parties’ attitude and perception of each other. When the attitude changes, so does the behavior. When the parties realize that they have the same interests and both benefits from co-operation, the friction might be suppressed. If the attitude and behavior changes and the parties start to compete with each other, rather than

54 Lewicki et al, p. 370.

55 Op Cit, p. 369.

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working together, the friction can no longer be suppressed and a conflict might be created. Sometimes, the “thing” is finally an excuse for the parties to address the changes. When scapegoating, the party blames the other for the friction, hence, the conflict escalates. Of course, not all competition results in a conflict.

Healthy competition makes room for innovation and development.

A conflict can be managed, settled or resolved.

The parties’ attitude towards the conflict, and how they choose to deal with the dispute, has been cultivated by the legal development in their society, which will be further investigated in the following chapter.

56 Pruitt & Hee Kim, pp. 223–224.

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3 Legal and Cultural Development in the World

3.1 Introduction

Modern legal systems are a result of historical developments throughout the world. The legal systems have been divided into legal families, which, according to Zweigert and Kötz, constitute “a distinctive mode of legal thinking”

, thus making the perception of a situation different depending on where you come from. In the Western society, it began with the same stem, the Corpus Iuris Civilis, but in the 11th century two different legal systems started to develop, side by side, and became known as Civil law and Common law.

In this chapter, I will investigate the perception of the law, both Civil law and Common law.

Furthemore, I will introduce the perception of the law in the Far East. Besides introducing these different legal values, I will also emphasize the cultural differences and what input it has on the view of conflicts and methods of resolving disputes.

3.2 The Western Society

3.2.1 The Struggle of Law

The Civil Law, in the sense of Continental European private law, derives from the reception of Roman law and the Corpus Iurus Civilis. Together with Canon Law, the Roman law was taught at universities throughout Europe. It created an Ius Commune, which later became the general European Law; not with shared legal rules, but with shared legal culture, especially in trade and commerce.

Mainly due to the fact that Civil law was taught at universities and made up of abstract rules, it needed to be written and accessible to the public. Because the law is made up of abstract rules, it can be applied to different individual cases,

57 Zweigert & Kötz, p. 69.

58 Ibid.

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which then can be related to each other. Codification is how the Civil law currently presents itself.

The Common Law, on the other hand, has been called “an accident that should not have happened”

. The English Common Law was gradually developed, case by case, in the courts and is therefore “judge made”. While Civil Law is systematized with abstract rules which all apply to different situations, Common Law, when applied, is individual, concrete and refrains from generalization.

The Common law is based on tradition and community, thus, England had no use of codification. Where Civil law applies abstract rules, applicable to all situations, the Common law turns to established principles and makes new rulings.

In 1215, the Great Charter of the Liberties of England, and of the Liberties of the Forest, also called Magna Carta, gave the citizens protection from absolute authority. It gave the citizens a right to freedom, protection of property and right to due process, judged by peers or through law.

Common Law has since then been viewed as the ultimate guarantee for freedom and protection from absolute authority.

Magna Carta was also the inspiration to many of the British colonies as they were developing their legal systems, and to the US Constitution.

Compared to the English Common law, which is based on the feudal society, the American Common law is based on the ideology of an equal and democratic society.

During the Enlightenment, Voltaire and Rousseau, among others, claimed that

“man was a rational and responsible creature who acquires at birth an inalienable right to freedom of conscience, belief and economic activity”

. They claimed that because a man is born free, the state, which is bound by legislation,

59 Zimmermann, p. 23.

60 Seminar Nygren, 120126.

61 Zweigert & Kötz, p. 69.

62 Seminar Holm, 120212.

63 Zweigert & Kötz, p. 195.

64 Seminar Holm, 120212.

65 Zweigert & Kötz, pp. 80–81.

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has to provide the citizens their equal rights, and to guarantee freedom and protection.

During the codification, inspired by the visions of the Enlightenment, most moral or political theories were shaped in terms of individual rights. The perception, that a “right” needs to be protected against any restriction is, at least in the Western society, still vibrant. Rights have been given normative power, but, if people claim rights that have not been recognized through laws or regulations, their claims have no value. “Human rights” is one example of rights which have been given strong normative power, and which in the Western society is considered being a universal right.

Our fundamental right to freedom is established through law, and all other rights could be referred, direct or indirect, to this basic right. Influenced by the ideologies from the Enlightenment, we consider freedom to be a right, which is given to us just because we are humans and therefore is a universal right. Though, in other societies they might not share our view.

What is it then that would justify a limitation of our given rights? According to Dwarkin, our rights can be restricted in order to establish the limits in relation to other competing rights, or when our rights are in the way of social benefits.

These restrictions are, just as our rights, provided through law and the codification has been given sole and unquestioned authority.

Thus, the Western law is rights oriented (it accommodates our given rights) and law centered (our rights are given and restricted through law). In order to make sure we can maintain our rights, the law also had to be conflict oriented.

One principle, which characterizes the attitude of both Civil law and Common law, is the struggle of law. It means that even though the purpose of the law is peace and protection, in order to achieve it, one must struggle. Because the individual was given rights through the law, he was also given the power to refer

66 Ibid.

67 Simmonds, pp. 147–148.

68 Op Cit, p. 152.

69 Op Cit, pp. 153–154.

70 Zimmermann, p. 25.

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a dispute to the courts. The courts would then, based on the law, find who could claim the “right” in the matter and impose a settlement of the dispute. With this attitude towards law, it is considered being one’s duty, owed both to himself and to the idea of law itself, to fight for his rights. Thus, the Western procedural laws are rights oriented, individualistic and written.

3.3 Law in the Far East

3.3.1 Introduction

When comparing the perception of law in the Far East with the Western law, one has to keep in mind that it is not only a comparison between the Far East and the West, but also that the Law within the Eastern countries differs. Due to colonization, both Civil and Common law can be found throughout Europe and in many Asian countries.

For example, the People’s Republic of China (hereinafter China) and Japan both have fundamentally different legal systems, where the latter is highly influenced by the Western legal models.

However, the three major cultural traditions, Confucianism, Taoism, and Buddhism, have had profound influence on the traditional Eastern societies and characteristic methods of dispute resolution. These philosophies, ideals and ethics have influenced most countries throughout East Asia.

Because my interviews are with Swedish companies, having business relationships with companies in China, Korea and Taiwan, my comparisons and conclusions will mainly deal with, but not be limited to, these countries. It is important that the reader keep in mind that, although I generalize and stereotype, the Far East consist of many nations, with different cultures. It is also important to keep in mind that all humans have different personalities. Thus, I will focus on the cultural emphasizes and the underlying values in the Asian society.

71 Zweigert & Kötz, p. 70.

72 Op Cit, pp. 287–288.

73 Hwang 2009, pp. 934–935.

34 3.3.2 Li, Yi and Guan Xi

Where the order of the Western society is regulated by Rules of objective law;

the order in the East Asian society is based on social relations, which is regarded as a part of the natural order. This attitude towards law originates mainly from the Confucianism.

In China, Confucianism was developed by Confucius (551–479 BC). After a short turbulent time with rivalry princes, it was established as state-ideology by the philosopher Dong Zhongshu (176–104 BC), an ideology that lasted until the revolution of 1911 AC. Confucianism influenced many of the surrounding Asian countries, and is still present today as it provides guidelines for people on how to interact with each other.

The Western concept of personality is based on the Ptolemaic view of human nature where the individual stands alone against the world. The culture in the Far East is based on the Gaelian view – in which the individual, and all things living, are embedded within an integrated, harmonious universe.

Within this universe, Guan Xi – an “interpersonal ideology of interdependence where no individuals have meaning unless they connect their lives with others”

– is very important for the individual’s sense of self.

The concept of ren, (humanity) which encourages benevolence and guides the person in order to maintain social relationships, is one of the guidelines of proper behavior for the Confucian person. It also guides the person how to classify relationships and how to behave in different social constellations.

The principle of respecting the superior could be termed righteousness (yi) – which is often translated into justice, (however, is not to be confused with the Western concept of universal justice)

and it is considered righteous to let this principle guide the decision-making. These principles and concepts constitute the appropriate behavior, called li, which is

74 Zweigert & Kötz, pp. 286–288.

75 Op Cit, p. 288.

76 Hwang 2000, p. 164.

77 Hwang 2000, p. 160.

78 Ibid.

79 Hwang 2000, p. 159 and p. 167.

80 Op Cit, p. 168.

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individualized for each situation and depends on the Guan Xi between the parties.

Based on Confucianism, the natural harmony and balance of the world is not to be disturbed. Based on the view of Mengzi, it is believed that a Confucian person is intrinsically good and improvable and perfectible if lead by example and by education. With this point of view, legislation was to be used only where the universal order had been deeply disturbed and the state must intervene to impose a criminal sanction, or for state administration.

Since legislation was limited to criminal law and state administration, variations of conflict resolution regarding “private law” developed outside of the courts. If someone believed that someone else had neglected li in his behavior (acted wrongfully), it would be yi to call for dispute resolution. However, if resorting to a judge and insisting on his rights, the person who felt wronged, would do just as wrong himself. Historically, the parties were not prohibited to bring the conflict to state courts, but an attempt to local conciliation was according to li, especially if the conflict was within family or caused a risk of harming interpersonal Guan Xi. During this conciliation, the parties had to bear in mind that a rejection of the proposed solution by a respected conciliator would not fare well with the community. The person who would act as a conciliator was usually the head of the family or another respected person with a superior status.

By not taking the dispute public, and by compromising, the disputing parties would “give face” instead of tearing them off, thus reestablishing the interpersonal harmony according to li.

As mentioned above, the parties were allowed to take the matter to state courts if they rejected the solution proposed by the conciliator. But by doing so they disrespected the principle of respecting the superior, thus harming the Guan Xi in the community. Because of this, a very small amount of private law disputes

81 Zweigert & Kötz, p. 288; Hwang 2000, p. 168.

82 Zweigert & Kötz, pp.288–290.

83 Zweigert & Kötz, pp. 289–291; Hwang 1997–98, p. 25.

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ever came to the courts and this way of dispute resolution is still present today.

Conciliation procedures, where the head of the family or village resolves the dispute, are still common in the countryside, whereas in the cities it is more socially accepted to bring disputes to the court.

3.3.3 Dispute Resolution and Cultural Context

Even though the Confucianism has had a great influence on the countries in the Far East, the influence from the Western civilization also has had an important role in their development of dispute resolution. Today, most Asian countries have Civil Procedural laws and the court system is well developed. The methods of dispute resolution differ, but some countries are more distinctly connected to tradition than others. Countries that have a closer connection to the Western civilization have abandoned more traditional dispute resolution methods such as mediation or conciliation to a bigger extent than others.

For example, in Singapore, an old colony of Great Britain, mediation is provided by court if the parties choose to try it.

Whereas in other countries, such as Indonesia, Taiwan and Vietnam, the parties of a dispute are required to submit to in-court mediation or a conciliation procedure before regular court proceedings can commence.

When comparing the different countries, it is possible to distinguish a pattern;

if the relationship between the parties is such that will continue after the dispute is resolved, ADR is considered the default dispute resolution method. Examples of such relationships are usually family members, employers/ employees and business partners. In Taiwan, there are even economic aspects to consider, for example, if the dispute regards property valued less than TWD 100 000 the

84 Zweigert & Kötz, p. 291.

85 Interview Ms Yang, 120907.

86 Herbert Smith, p. 99.

87 Op Cit, pp. 45, 106 and 122.