The concept of corporate conflict and alternative ways to resolve it in the Asia-Pacific countries

Rybka Oleg Sergeevich ORCID: 0009-0009-9609-7727 Graduate student, Department of Civil Law and Procedure, Far Eastern Federal University 690922, Russia, Primorsky Krai, Vladivostok, Russian Island, Ajax village, 10 oleg.sergei4.rybka@gmail.com Other publications by this author

In the 21st century, corporate relations are becoming more complex, and corporate conflicts are becoming more multifaceted and sophisticated. It should be understood that neglecting the study of corporate conflicts can lead to a misunderstanding of the tools for their resolution, and this will be followed by the disorganization of corporations, as well as a deterioration in the economic performance of both a single corporation and the economy of the country as a whole.

What should be understood by a corporate conflict? We will not find this concept either in domestic legislation or in the legislation of developed countries of the Asia-Pacific region (hereinafter referred to as the APR), such as China, the Republic of Korea and Japan. What is the reason for this? This is due to the fact that the legislation of these states does not even distinguish corporations, which means that there is no concept of either a corporate conflict or a corporate dispute. But if we turn to the legislation of the Russian Federation, we can draw attention to the fact that the domestic legislator has advanced quite far in definitions within the framework of corporate relations.

Such scientists as E. Y. Tsukanova, K. V. Nefedova, E.I. Nikologorskaya, Kim Ji Hye, Tak Jin Guk, E. K. Snegirev directly and indirectly touched upon the issues of determining corporate conflict in their works. The works of these authors point to some problems in the definition of corporate conflict, compare the concepts of "corporate conflict" and "corporate dispute", but miss some features important for defining such a multifaceted concept as "corporate conflict". The issues of alternative ways of resolving corporate conflicts have been considered by such scientists as J. Tao, J. Ge, A. Saptomo, E. Lisdiyono. The works of these authors highlight some special methods of alternative dispute resolution used in different countries of the Asia-Pacific region, but during the study no scientific papers were found that would assess the possibility of using atypical methods of alternative dispute resolution in the Russian Federation.

Thus, the Civil Code of the Russian Federation establishes the concept of a corporate legal entity: "legal entities whose founders (participants) have the right to participate (membership) in them and form their supreme body in accordance with paragraph 1 of Article 65.3 of this Code are corporate legal entities (corporations).". If we turn to the legislation of the countries of the Far East, such as Japan and China, we can see that there is no concept of "corporation", but there is a similar concept of "company". So, in the legislation of Japan, namely in Article 2 of the Civil Code of Japan, there is a definition of the concept of "company": This is any joint-stock company, partnership or limited liability company." There is also an article in the Civil Code of Japan indicating that there is a "non-profit corporation of public interest" in the country. That is, in Japanese legislation, there is no separation of corporate legal entities, a corporation means any legal entity.

If you turn to the experience of the People's Republic of China, then you should refer to the law "On Companies" of December 29, 1993. The third article of this law states that a Company is a legal entity that owns property and uses property rights independently. The company is responsible for its debts with all its property.

As for the definitions of corporate disputes and conflicts, the legislators of the studied countries do not work out such issues as carefully as the legislator of the Russian Federation. Paragraph 1 of Article 225.1 of the APC of the Russian Federation states that "arbitration courts consider cases on disputes related to the creation of a legal entity, its management or participation in a legal entity that is a commercial organization, as well as a non-profit organization uniting commercial organizations and (or) individual entrepreneurs (hereinafter referred to as corporate disputes)." Having seen this norm, we can safely say that the legislator actually gave the concept of corporate disputes.

But it should be understood that the concept of "corporate conflict" is a broader concept than the concept of "corporate dispute", although some authors identify these concepts ^[1]. Not all corporate conflicts can be covered by the legal framework, this is what should be taken into account when defining corporate conflicts and identifying ways to resolve them.

It is also worth noting that the definition of corporate conflict was enshrined in the Corporate Governance Code until 2014, which was recommended by the Federal Securities Commission of the Russian Federation in Order No. 421 dated April 4, 2002. In its tenth chapter, the definition of a corporate conflict was as follows: "any disagreement or dispute between a company body and its shareholder that arose in connection with a shareholder's participation in the company, or disagreement or dispute between shareholders, if it affects the interests of the company, inherently constitutes a corporate conflict, as it affects or may affect the relationship inside the society." This definition was not included in the latest edition of this Code, which was approved by the Central Bank of the Russian Federation. Most likely, this was decided due to the imperfection of the definition, the disadvantages of which may be seen further.

The concept of corporate conflict has been studied by many scientists of domestic law, and this issue has also been touched upon by foreign scientists. Let's turn to their experience for a complete picture of what a corporate conflict is.

One of the scientists, K. V. Nefedova, in one of her works compares such concepts as "corporate dispute", "corporate conflict" and "corporate legal relationship". As a result of her scientific research, she comes to the conclusion that a corporate conflict is any contradiction between subjects of corporate legal relations, including between shareholders and participants of the company, between business entities or within an economic entity ^[2]. This definition clearly does not have all the signs of a corporate conflict, and also has a very broad interpretation, because "any disagreement" is too broad a concept, because if the participants are in conflict over property that does not relate in any way to the corporation, this will no longer be a corporate conflict. But it is fair to say that in this case, the participants will not have the status of subjects of corporate relations. To identify more signs of corporate conflict, you should contact the following scientist.

E. I. Nikologorskaya in her work "Settlement of corporate conflicts in joint-stock legal relations" writes that a corporate conflict is an attitude based on a clash of rights and interests in which subjects consciously try to realize their mutually exclusive goals, the achievement of which is conditioned by their participation in corporate legal relations ^[3]. This approach to definition clearly emphasizes purpose and contradictions. Everyone in the conflict strives for their own benefit and the fact that the goals are mutually exclusive indicates the author's understanding of the corporate conflict as a rivalry that cannot be avoided. In fact, this is not the case, we must remember that there are different patterns of behavior in conflict, such as compromise (where everyone must give in to win) and cooperation (in which the parties to the conflict help each other achieve a goal).

It is also worth paying attention to the definitions of foreign authors. For example, Korean scientists Kim Ji Hye and Tak Jin Guk in one of their works gave the following definition: conflicts arising within an organization are perceived as contradictions, such as differences in views, ideas and opinions among the participants of the organization, as well as contradictions in relationships, such as emotional confrontation and the resulting absence of respect between members ^[4]. Here you can see that conflict within organizations (aka corporate conflict) is interpreted broadly, including not only conflict between participants, but also between employees within the organization, while the conflict is caused not only by a difference in goals, but also by emotional confrontation, which is not in the nature of corporate relationships. This definition also indicates the consequence of contradictions, such as "lack of respect between members", although it should be understood that this concept considers corporate conflict only as an internal phenomenon, is interpreted broadly in terms of participants within the organization and this consequence is personal and does not in itself have any material consequences.

In the course of his research, Chinese scientist Zhou Yun understood corporate conflict as behavior that interferes with the normal functioning of an organization and leads to a decrease in the efficiency of the organization, but with the right approach and control of the situation, it can lead to an increase in work efficiency ^[5]. Zhou Yun points out to us not only the negative consequences of corporate conflict, but also the positive ones that can be achieved if the conflict is not allowed to take its course. This once again proves the importance of understanding what a corporate conflict is, because with a proper understanding of the essence of such a phenomenon, it is possible to approach the problem more effectively.

The concept of corporate conflict has also been studied in detail by V. I. Malkina, the result of her scientific research should also be considered. By corporate conflict, she understands "disagreement arising between the participants of the corporation or between the corporation and its participants, encroaching on corporate and other relations in the activities of the corporation, as well as disagreements arising between the corporation or its participants with other persons (persons who are part of the management bodies of the corporation, the holder of the register of shareholders, an external investor, a depository etc.), aimed at legal relations within the corporation, characterized by opposite, mutually exclusive goals and interests of the parties to such a disagreement, aimed at controlling the behavior of the other party or changing its status or legal status" ^[6]. In this definition, it is worth paying attention to the scope of relations within which a corporate conflict may arise, and the persons who may participate in this conflict. The author points out that a conflict is a disagreement that encroaches on "corporate and other relations in the activities of a corporation," that is, it is not so important what kind of relationship it is, rather, it is important that the relationship in any way affects the activities of the corporation, affects it. Defining corporate relations, the author refers to the concept that the legislator fixed in Article 2 of the Civil Code of the Russian Federation ^[6], but this concept is too narrow for understanding corporate relations, as indicated in one of his works by E. V. Loginova ^[7], most likely in this regard, the author of this definition made an indication of other relationships. If we consider the circle of persons who participate in the conflict, according to the author, we can see that at least one participant must be either the corporation itself or a participant, since a corporate conflict may be with "other persons".

One of the authors who gave the most extensive concept of corporate conflict in their works is E.K. Snegirev. In one of his works, he defines a corporate conflict as "a conflict with the mandatory participation of a joint-stock company, shareholders, the head or management of the company and certain third-party structures that either have already become or want to become shareholders of this joint-stock company and take appropriate unfriendly, as a rule, actions in order to join the shareholders and achieve control over the enterprise." ^[8]. This definition also raises the question of the range of participants in the corporate conflict. The author also points out that the source of conflict may be both persons associated with the corporation and others who are trying to influence the corporation from the outside.

Looking back at the definitions already studied, we can conclude that one of the problematic issues is the issue of the range of participants in the corporate conflict. The participants of such a conflict are described in the definition of O. V. Osipenko in the most detail: "a corporate conflict is a lasting significant disagreement between the company's shareholders, shareholders and top managers, bodies subordinate to them, the management apparatus and the workforce of the enterprise, members of collegial management bodies, as well as between the company as a whole, represented by its majority participant or management bodies on the one hand, and external participants in corporate relations in a broad sense, including public authorities, control and supervisory structures (law enforcement, antimonopoly, environmental, tax, etc. authorities, regulators of corporate relations), creditors and debtors of the company, its other significant counterparties, the population of the administrative division in whose economy this the company plays a prominent role among other stake holders (interested parties), the subject of which is a systematic assessment of the quality and effectiveness of corporate governance or the right to co-own the company's business (rights certified by securities issued by this company)." ^[9].

In this definition, the participants in the corporate conflict are indicated in great detail, but at the same time it can be noted that the author divided them into two camps: those who are in any way connected with the corporation or are part of it, and the so-called external forces – government agencies, contractors and investors, as well as other interested parties faces. That is, the author considers the corporate conflict as a counteraction of the corporation and external "ill-wishers".

At the end of the study of the concept of "corporate conflict", it can be concluded that when defining this concept, you may encounter problems such as:

1) determining the circle of participants in the conflict;

2) the definition of the concept of "corporate relations", which is often used in the concept of corporate conflict;

3) is this conflict only internal, only external, or both;

4) determining the consequences of a corporate conflict: is it always a negative phenomenon or can it serve as an impetus for effective business management and the possibility of taking into account the interests of all participants.

Drawing a conclusion from all of the above, the following signs of corporate conflict can be distinguished, namely:

1) a conflict is always a confrontation of the goals, views and intentions of its participants, although not always completely mutually exclusive;

2) a corporate conflict can be both internal and external, and the range of participants in the conflict is limited only by the fact that at least one participant must be either the corporation itself or a person who is part of it (participant, managing staff or labor collective);

3) disagreements between the parties to the conflict should be related to the activities of the corporation;

4) corporate conflict can bring both harm and benefit, for example, it can push for changes in a corporation whose economy has stagnated.

Based on these signs, it is possible to give the most accurate definition of a corporate conflict, namely: a corporate conflict is a confrontation of the goals, interests and rights of participants in corporate relations within an organization, as well as a disagreement between such participants and other interested parties, which is directly related to the activities of the corporation.

An equally important issue for discussion is the question of possible ways to resolve a corporate conflict. In this paper, the experience of Asia-Pacific countries such as the USA, China and Japan will be considered, since it was in the USA that alternative dispute resolution methods were first used, developing programs to ease the burden on the law enforcement system and make the dispute settlement procedure simple and transparent ^[10]. And in China and Japan, the culture itself disposes to non-judicial conflict resolution, based on this, interest in their conflict resolution methods is only increasing.

Understanding that the concept of corporate conflict goes beyond the concept of corporate dispute, fixed by the legislator in the Russian Federation, and in many other countries this concept is not fixed either, leads us to the fact that ways to resolve conflicts and disputes should not be sought only within the framework of the main method of dispute resolution considered by law – judicial. It is also necessary to turn to alternative methods and consider which methods are being considered by scientists from the Asia-Pacific countries and how effective they consider them.

What exactly are the methods in the Asia–Pacific countries included in the concept of alternative dispute resolution (in the English version of ADR - Alternative Dispute Resolution)? If we turn to the scientific research of J. R. Miller, a scientist from the USA, we can see the classification of ADR used in the USA and enshrined in the United States Code: "

· Reconciliation;

· facilitation;

· mediation (mediation);

· Fact-finding;

· shortened trial (mini-trial);

· Arbitration;

· The use of ombudsmen, and

· any combination of the above." ^[11].

If these methods are compared with the methods set out in Article 138.2 of the APC of the Russian Federation, namely "negotiation, mediation, including mediation, judicial reconciliation, or the use of other conciliation procedures, if this does not contradict the law," we can see differences in understanding alternative dispute resolution methods, it is also noteworthy that in in the legislation of the Russian Federation, this list is open, rather than in the United States.

Mediation has always been the most common ADR in the world. The most commonly used type of mediation is mediation (this is proved by a huge number of scientific papers devoted to this method), as one of the oldest and simplest ways of alternative conflict resolution, so it usually has a similar concept everywhere. As for reconciliation, it is somewhat similar to judicial reconciliation in the Russian Federation, the third party is also a specialist in law (or even in certain legal issues), which not only helps to resolve the conflict by improving mutual understanding between the parties, but also, after examining the circumstances of the case, can fully advise and propose a solution to the conflict in the form of his expert opinion ^[12].

Facilitation is understood as a type of mediation in which a third party helps rather than solve an already existing conflict, but rather avoid it in the course of work, in which a contradiction may arise ^[13]. That is, it does not even look like a way to resolve a dispute, it is rather a way to prevent it. It is better to prevent a conflict than to allow it, and then solve it, trying to avoid negative consequences.

It is also worth paying attention to such an "alternative method of dispute resolution" as "fact-finding". It is difficult to call this a way of resolving disputes, it is rather a certain stage or a certain stage towards resolving the conflict, but, undoubtedly, it can remove some questions about the truth of certain circumstances. In the USA, a third party is also involved in this ^[14], so, like the previously discussed methods, this method can be equated to a type of mediation. If you pay attention to Article 138.6 of the APC of the Russian Federation, you can see that one of the results of conciliation procedures may be an agreement on the circumstances of the case. So, if we single out fact-finding as a separate ADR method, we can say that it is also used in Russia.

An abbreviated trial or mini-trial is a process unlike simplified proceedings in the judicial process of the Russian Federation, since in the United States this concept means the following: each party briefly presents its point of view on the disputed issue; at the end of the mini-trial, representatives of the parties or the parties themselves seek to resolve this issue independently during the exchange opinions ^[15]. If they cannot do this, an impartial consultant (given that this happens in court, which means that this person is a judge ^[14]) can act as an intermediary or express an opinion on the likely outcome of a shortened trial. An abbreviated trial is a special kind of ADR that sometimes occurs during a regular trial rather than before it. This method is often used in business disputes, where it is necessary to take into account managerial and economic considerations ^[15]. If we are considering shortened proceedings, we must understand that this is a form of the trial itself, in which there are no other parties, consultations and the like. Shortened proceedings can only take place in court, but simply with some procedural features that allow you to save money and time. This method is very similar to judicial reconciliation, which was introduced in the Russian Federation not so long ago and has not yet gained popularity within the framework of judicial practice. This method seems to be an interesting alternative to the judicial process, but the possibility of its application depends on the awareness of corporations about this method and its advantages.

Is it possible to use an ombudsman in corporate conflicts? If we use the concept of "corporate conflict" in a broad sense, and include the labor collective in the list of participants, then it is undoubtedly possible. This is indicated by the work of some scientists ^{[16] [17]}. Ombudsmen help defend the rights of employees, but we must understand that such conflicts are more likely to be labor conflicts and we should separate them, therefore, this method of alternative dispute resolution should be understood more as an opportunity to protect the civil rights of employees within the organization than as a way to solve problems affecting the activities of the corporation.

At the end of the list of methods indicated by J. R. Miller is the item "any combination of the above", but it is worth paying attention to one of the types of such combination, which is sometimes distinguished as an independent alternative method of dispute resolution, namely Med-Arb (short for Mediation-Arbitration). This is a type of ADR in which the arbitrator acts as an intermediary, but he must enforce a binding judgment if mediation is ineffective ^[18]. Med-Arb is a combination of mediation and arbitration, which gives the parties the advantages of both methods. This method is quite often used in the USA, including in commercial and corporate disputes ^[19].

 Hiroko Kimoto argues that in Japan, in addition to litigation, there are such dispute resolution methods as mediation and arbitration. At the same time, the author in one of his works points out that alternative resolution methods are not very often resorted to in the land of the rising sun and confirms this with statistical data ^[14]. Perhaps this is due to the fact that in this country, in principle, they do not like to bring matters to conflict?

Until 1853, Japan, one of the countries of the Far East, had no ties with Western countries, but had fairly strong trade ties with China. In Japanese society, there are many historically established rules that originate from etiquette rather than morality. These rules regulate the behavior of people in all situations in which they interact with each other in life. These rules of conduct, similar to Chinese etiquette, are called giri (). Mothers, sons, married couples, brothers, owners, creditors, debtors, etc. — all have their own weights. Giri prevails over the law and, to some extent, moral order, since their non-observance will be criticized by society, which is shameful and indecent for the Japanese. For a respectable Japanese, the law is an undesirable and even despicable thing that should be avoided as much as possible. To put it briefly, the Japanese do not like laws. The Japanese love the personal, the concrete, the unique, and their soft feelings are offended by the rigor and rationality of legal and judicial procedures ^[20].

Based on the fact that the Japanese mentality extends to all spheres of life, we can safely say that this approach also applies to corporate conflicts. All issues are either avoided by following certain ethical standards, or resolved through negotiations and other means that cannot be traced. But there are still appeals to the court, this is most likely due to the fact that it is impossible to resolve everything "peacefully". However, it is worth understanding that the culture of Japan also began to be strongly influenced by the United States, since it occupied its territory after World War II. In the future, such interaction led to multiple ties between the countries, including trade, investment, and corporate ones. Based on this, international arbitration and mediation have become more common in Japan to consolidate ways to resolve conflicts in the legal environment. By the 1990s, Japan saw the growing use of the med-arb method for international commercial dispute resolution, in which conciliation/mediation is used during arbitration rather than before or instead of it. The rules of Japanese International Commercial Arbitration allow the application of the med-arb procedure, which is often successful. The new law on arbitration in Japan, which entered into force in 2004, allows one or more arbitrators to try to settle a dispute if the disputing parties provide their written consent to this, thereby effectively allowing arbitrators to use the med-arb method ^[21].

One of the largest countries in the Asia–Pacific region and one of the most developed economic powers in the world is the People's Republic of China. The legal system of the People's Republic of China was deeply influenced by competing currents in philosophy: the philosophy of Confucianism and the Legist school of thought. Chinese dispute resolution methods still reflect the Confucian tradition, which emphasizes hierarchy, social harmony, and maintaining relationships through compromise. Litigation is a last resort that is used when different parties cannot agree. Going to court is an undesirable trait. Thus, historically, mediation or conciliation has been preferred over judicial methods in dispute resolution. In the domestic context, dispute mediation and court mediation during court proceedings have long been used in the PRC, and although the number of court proceedings has increased in the current era of economic reforms, the government continues to support alternative dispute resolution methods ^[22].

Studying the scientific works on ADR in the PRC, one can see that in the PRC, as in Japan, only mediation (mediation) and arbitration are distinguished. There are various types of mediation in China: mediation by people's mediation committees, specialized mediation such as labor mediation, informal and formal commercial mediation (the latter is carried out by professional third-party mediation organizations), judicial mediation and mediation in arbitration ^[23].

Of the above types, it is worth considering at least two that raise questions: mediation by people's mediation committees and formal commercial mediation. People's mediation committees mean organizations that are created by the will of the people. In addition, mediation committees can be set up in large workplaces such as government agencies, businesses, schools and mines. Each mediation committee should consist of three to nine members, who are elected by voters within the committee's jurisdiction. A candidate for mediator can be an adult citizen who is "impartial to people, has a close connection with the masses and has basic knowledge in the field of law and politics." Mediation may be initiated at the request of the disputing parties or on the mediator's own initiative. During mediation, committee members should investigate the facts, distinguish right from wrong, talk patiently with the disputing parties, convince them and, finally, try to reach an agreement ^[24]. Although a general obligation is assumed to comply with a dispute settlement agreement reached during mediation, the execution of the agreement is not as binding as a court or arbitration decision. It is unlikely that this method of dispute resolution is applicable to corporate disputes, rather for minor civil and family conflicts, but this method is a distinctive feature of ADR in China.

Formal commercial mediation is understood to be the same mediation as in ordinary mediation, only the mediator is not an individual, but an entire organization that deals with reconciliation at a professional level. One of these is the Beijing Reconciliation Center, established in 1987. The center has its own conciliation board of the Beijing Conciliation Center of the Chinese Council for the Promotion of International Trade (China Chamber of International Trade). In cases where mediation is successful, a settlement agreement or reconciliation agreement is drawn up, which is signed by the parties and can be witnessed by the conciliators. Such agreements are not subject to enforcement, except as private law agreements between the parties ^[25]. This method is quite often used in China, if it does not concern foreign investments as part of corporate relations. In this case, arbitration is more often used. The use of entire organizations for reconciliation in corporate dispute resolution is seen as an effective addition to the system of alternative dispute resolution methods in the Russian Federation. These organizations could select mediators for a particular dispute who are most competent in the type of dispute with which the parties came, and in the area in which this dispute arose, which would lead to the most effective mediation and dispute resolution in the future.

Corporate conflict is a complex concept and requires understanding of many important aspects, such as: the concept of corporate relations, the range of participants in a corporate conflict, as well as what the consequences of such a conflict may be. At the same time, evaluating the different definitions of this concept, the definition of corporate conflict as a confrontation of the goals, interests and rights of participants in corporate relations within an organization, as well as disagreement between such participants and other interested parties, which is directly related to the activities of the corporation, seems to be the most successful.

Corporate conflicts need to be resolved, but litigation is not always suitable for resolving such conflicts, as it is often time- and money-consuming. Alternative dispute resolution methods come to the rescue. In the Asia-Pacific countries, such methods may have their own characteristics, for example, mini-trial (abbreviated trial) in the United States, which is very similar to judicial reconciliation in the Russian Federation, or formal commercial mediation in China, which can be used in the Russian Federation as one of the additional ADR methods. It is also possible to use such a combined ADR method as Med-Arb in the Russian Federation. This method is seen as a more effective method of resolving complex disputes, in which the dispute can be resolved even before the decision is made by the arbitrators.

At the same time, it should be understood that the Russian Federation will not be able to achieve such a level of application of alternative dispute resolution methods as China and Japan, because in these countries the priority of alternative methods is due to centuries-old traditions and mentality. This suggests that for the application of alternative dispute resolution methods, not only legislative regulation is important, but also the attitude of society.

The conducted research can help entrepreneurs understand the possibilities of out-of-court dispute resolution when doing business in the countries of the Asia-Pacific Region, and can also contribute to the scientific community to evaluate special types of alternative dispute resolution methods and consider the possibility of applying these methods in practice in the Russian Federation.