46 countries sign the Singapore Convention on mediated settlements today

After extensive discussions between member states, the United Nations Convention on International Settlement Agreements Resulting from Mediation, also known as the Singapore Convention, was signed today. A total of 46 countries signed the Convention, including the world's two largest economies, the US and China, and several of the largest economies in Asia. This is the highest number of first-day signatories of a UN trade convention to date. A full list of signatories can be found at the foot of this blog post. It is understood that further states are planning to sign the Convention in the near future.

With this Convention, the role of mediation in cross-border disputes is strengthened. The status of mediation is elevated and enforcement is simplified. The occasion is a momentous one in recent legal history. We discuss its impact below.

Mediation and enforcement

Mediation is an informal and confidential process, where a neutral mediator helps parties to bridge their differences and repair working relationships. It is usually quick and inexpensive and has a high success rate.  The goal is that the parties reach a settlement at (or soon after) the mediation, thereby avoiding costly litigation or arbitration. The parties should record any settlement in a binding settlement agreement. Should a party refuse to honour the terms of the settlement agreement, the counterparty(ies) may sue on the settlement agreement as a contract for breach of contract.

In practice, enforcement is not normally an issue as the parties reach a negotiated settlement voluntarily. However, if problems do arise, enforcement can become a procedural headache, particularly in cross-border situations, where a party may have to go to court in the counterparty's jurisdiction and start proceedings to enforce the settlement. The mediated settlement agreement can become another step on an ultimately longer dispute resolution journey.

Where litigation or arbitration is already on foot, mediated settlements may be recorded as part of those proceedings and potentially be enforced as a judgment or arbitral award. Arb-med-arb clauses have even evolved (for example, Singapore's SIMC/SIAC Protocol), to aid enforcement of mediated settlements. These require arbitration to be started before the parties go to mediation and, if the parties settle at mediation, the settlement is enforceable under the New York Convention 1958 as a consent award.

Looking at the overall dispute resolution framework, the Hague Convention on Choice of Court Agreements and the new Hague Judgments Convention are designed to assist enforcement of court judgments internationally (though with limited uptake to date). The New York Convention has hugely benefited international arbitration, with enforcement regarded as arbitration's trump card. In many ways, the Singapore Convention is the missing piece in the enforcement jigsaw.

The impact of the Singapore convention

The Singapore Convention applies to settlement agreements resulting from mediations resolving cross-border commercial disputes. It provides a standardised framework for enforcement within signatory states, much like the New York Convention for arbitral awards.

The Singapore Convention seeks to give mediated settlement agreements bite by recognising the enforceability of the agreements, if they meet the following criteria:

1. The settlement agreement is “international” – meaning either: (i) at least two or more parties to the agreement have their place in business in different countries or (ii) the country with close connection to the performance of the settlement agreement is different to the place of business of the parties;

2. The agreement is signed by the parties and “resulted from mediation”. Mediation is defined broadly as “a process, irrespective of the expression used or the basis upon which the process was carried out, whereby the parties attempt to reach an amicable settlement of their dispute with the assistance of a third person or persons (the “mediator”) lacking the authority to impose a solution upon the parties to the dispute”;

3. The agreement does not fall within the excluded category of settlement agreements. The excluded category includes settlement agreements relating to family, inheritance or employment law and consumer disputes.

4. None of the listed grounds to refuse enforcement applies.

If a settlement agreement meets these criteria, each signatory state to the Convention (and its courts) should recognise and enforce the agreement in accordance with its own rules, without substantive review or fresh litigation. This should aid enforcement against assets located in the signatory state and the discharge of other remedies like specific performance or injunctions. Also, if a dispute arises in a signatory state and a party claims it was already resolved by the agreement, the party can invoke the settlement agreement to prove that the matter has already been resolved on those terms.

The Convention therefore provides greater certainty to parties in international transactions who have reached a settlement of their dispute through mediation.

Conclusion

The Singapore Convention is an answer to a number of themes we observed at the Global Pound Conference series. That series sought the views of thousands of dispute resolution stakeholders across the globe on various issues, including which developments would most improve commercial dispute resolution. Nearly two thirds of respondents in Asia nominated legislation to aid enforcement of settlement agreements, including those reached through mediation. In other regions, this was seen as less pressing than other factors but still received substantial support. (see below)

The Singapore Convention will formally come into effect following ratification by at least three signatory states. Its full impact, and in particular whether it will be as significant as the New York Convention, remains to be seen. Meaningful engagement by signatory states through their domestic institutions, practitioners and businesses is required. In addition, engagement with states that have not yet signed it will also be important. Nevertheless, today is an important step forward in building an international framework supportive of mediation.

For commentary on some of the Convention's more interesting features, please see Jan O'Neill (Professional Support Lawyer, London)'s article published on the Practical Law Dispute Resolution Blog here.

You can find our guidance on multi-tiered dispute resolution clauses, dispute avoidance and improving conflict management here.

Signatories as at 7 August 2019: Afghanistan, Belarus, Belize, Brunei, Chile, China, Colombia, Republic of the Congo, Democratic Republic of the Congo, Kingdom of Eswatini, Fiji, Georgia, Grenada, Haiti, Honduras, India, Iran, Israel, Jamaica, Jordan, Kazakhstan, Laos, Malaysia, Maldives, Mauritius, Montenegro, Nigeria, North Macedonia, Palau, Paraguay, Philippines, Qatar, South Korea, Samoa, Saudi Arabia, Serbia, Sierra Leone, Singapore, Sri Lanka, Timor Leste, Turkey, Uganda, Ukraine, the US, Uruguay and Venezuela. 

For more information, please contact the authors.