Is a new era on the horizon for commercial mediation?

Dec 2020

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Could a new era be on the horizon for commercial mediation in a post COVID-19 world? This question is posed following the entering into force on 12 September 2020 of the United Nations Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention) .

Why is the Singapore Convention an important development?

In August last year, 46 States gathered in Singapore to sign the Singapore Convention. The Singapore Convention is intended to facilitate the enforcement of international settlement agreements arising from mediation.

Currently, parties who enter into a settlement agreement following a mediation can generally only enforce the settlement as a contract. This involves first obtaining a court judgment for breach of the settlement agreement and then enforcing the judgment. Or if arbitration has been provided for in the settlement agreement, waiting for an arbitral award and then enforcing the award. Both options can be time consuming and costly.  Also, when enforcing a judgment, the enforcement process is more complex for cross-border settlement agreements.

The Singapore Convention is intended to make it easier for parties to enforce international mediated settlement agreements, by allowing the enforcing party to go directly to the court in a State where enforcement is sought – instead of first obtaining a court judgment for breach of the settlement agreement or an arbitral award.

The Singapore Convention has the potential to provide an enforcement framework for international mediated settlement agreements that is just as effective and successful as the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) for the enforcement of international arbitral awards.

How does the Singapore Convention work?

The Singapore Convention only applies to international settlement agreements arising from mediations to resolve commercial disputes. It does not apply to settlement agreements that:

  • have been approved or have been concluded in the course of court proceedings;
  • are enforceable as a judgment in the State of that court; or
  • have been recorded and are enforceable as an arbitral award.

The enforcement procedure requires the party seeking enforcement to provide a copy of the signed settlement agreement and evidence that the settlement agreement resulted from mediation, to the relevant authority in the State where enforcement is sought.

A State party to the Singapore Convention must then enforce the settlement agreement in accordance with the State’s procedural rules and the requirements set out in the Singapore Convention.

The relevant State authority may only refuse to enforce the settlement agreement in limited circumstances. Some of these circumstances are similar to those contained in the New York Convention, for example, where a party to the settlement agreement was under some incapacity or where granting relief would be contrary to the public policy of that State. However, there are also circumstances more specific to the mediation context, for example, where there is a serious breach by the mediator of standards applicable to the mediator or the mediation.

One significant difference between the Singapore Convention and the New York Convention is that parties can expressly opt-out of the Singapore Convention by stipulating this in their settlement agreement. What this means is the Singapore Convention will automatically apply to all parties unless they expressly opt-out. The one exception to this rule is a State can make a declaration that the Singapore Convention will only apply to the extent that the parties have agreed it will apply. There are no provisions as to how or when parties are to evidence their agreement to be subjected to the Singapore Agreement. One way to minimise any risk to enforcement in a State that has made such a declaration is to ensure that there is a provision in the settlement agreement that expressly records the parties’ consent to have the agreement governed by the Singapore Convention.

Will the Singapore Convention encourage more parties to opt for cross-border commercial mediation?

The success of the Singapore Convention will in large part depend on the extent to which it is accepted and ratified by States. To date 53 States have signed the Singapore Convention, including the US, Singapore, China, India, Malaysia, the Philippines and South Korea. But only six States have ratified the Singapore Convention (Singapore, Belarus, Ecuador, Qatar, Saudi Arabia, and Fiji). To assist States in ratifying and implementing the Singapore Convention, the United Nations General Assembly adopted the corresponding UNCITRAL Model Law in 2018 (the Model Law).  The Model Law will assist signatory States by providing the legal framework and procedures for implementing the Singapore Convention into domestic law.

However, it is worth reflecting on the fact that when the New York Convention was first launched in 1958 it only had 10 signatories but has gone on to be a very effective framework for the enforcement of international arbitral awards. In the case of the Singapore Convention it is already off to a better start and the right conditions currently exist for it to mirror the success of the New York Convention. We have seen mediation rising in popularity as a way to resolve cross-border commercial disputes, partially due to its ability to allow parties to resolve disputes without the need to terminate their commercial relationships. This growth in popularity has occurred despite of the lack of an effective means to enforce settlement agreements, which has now been addressed by the Singapore Convention.

Further, three of the world’s largest economies have signed up to the Singapore Convention (the US, China and India), indicating that cross-border mediation can become mainstream and support international trade and commerce. Despite the downward revisions for global growth due to COVID-19, Asia remains one of the fastest growing regions and is likely to play a key role in the success of the Singapore Convention post COVID-19. The three largest economies in Asia and five ASEAN economies have signed up to the Singapore Convention. These States accounted for approximately two-thirds of global growth in 2019. The Singapore Convention has the potential to make mediation a time and cost-efficient process for parties involved in cross-border disputes and could result in one less barrier to international trade and commerce.

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