On 7 August 2019, the formal signing ceremony for the United Nations Convention on International Settlement Agreements Resulting from Mediation took place in Singapore. This new Convention will be known as the Singapore Convention on Mediation and represents a helpful step in fostering international commerce. This client alert provides a brief overview of the Convention.
Asia has witnessed a significant rise in the importance and popularity of mediation, with Singapore positioned as a key dispute resolution hub for the region. For those less familiar, mediation is a process whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third-party facilitator, known as a mediator. The process offers parties the opportunity to address their grievances confidentially, at an early stage, without jeopardising valuable commercial relationships. However, unlike an arbitral tribunal or a judge at court, mediators lack the legal authority to impose a binding decision on the parties; they simply facilitate discussion.
In mediation, if a party fails to perform its obligations under the contractually binding mediated settlement agreement then, in the same manner as any other contract, arbitral or court proceedings would commence, and any subsequent arbitral award or court judgment may need to be recognised and enforced in another jurisdiction. Such proceedings are generally lengthy in nature and require additional manpower from all parties.
Efforts to streamline this process are under way, and Singapore hosted the formal signing ceremony for the United Nations Convention on International Settlement Agreements Resulting from Mediation (to be known as the Singapore Convention on Mediation) on 7 August 2019 amidst much fanfare and excitement. The Convention marks three years of negotiations among 85 intended future member states, as well as select NGOs and IGOs, and represents Singapore’s commitment to fostering international commerce. It seeks to replicate the success of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) by creating an efficient and uniform framework for the cross-border enforcement of mediated settlement agreements in respect of commercial disputes. Like the New York Convention, the Convention sets out an exhaustive set of grounds on which a court may refuse to grant relief to a person seeking to rely on and enforce a mediated settlement agreement, namely, grounds relating to the parties, the settlement agreement, the mediation procedure and public policy.
The Convention excludes settlement agreements which are enforceable as arbitral awards or court judgments (in circumstances where the parties to the mediation have agreed to have the terms of their mediated settlement agreement issued as an arbitral award or court judgment), but complements the existing international framework for cross-border enforcement by affording mediated settlement agreements the same level of enforceability as arbitral awards or court judgments. This is particularly significant since many contracts contain multi-tiered dispute resolution clauses which stipulate various steps, including negotiation and mediation, which must be taken before parties can commence arbitration or litigation. By allowing the cross-border enforceability of mediated settlement agreements, the Convention incentivises parties to agree a mediated settlement at an early stage and therefore avoid taking up time, incurring costs, and causing animosity and uncertainty, all of which inevitably feature in arbitration or litigation – particularly so where the settlement terms involve obligations of a long term nature.
Singapore has led the way as one of the first signatories of the Convention, with 45 other signatories to date, including the US, China, India, South Korea, Malaysia, Brunei, Laos and the Philippines. This is a very encouraging start and is perhaps an indication that the Convention may one day be as influential as the New York Convention. The Convention will come into force six months after it has been ratified by at least three member states. To facilitate this, the text of a model law has been agreed, together with the terms of the Convention. Singapore will undoubtedly be proud of this milestone as it looks to usher in a new era in mediation.