The United Nations Convention on International Settlement Agreements resulting from Mediation, also known as the ‘Singapore Convention’, opened for signature in Singapore on 7 August 2019. The Convention seeks to facilitate international trade by furthering the promotion of mediation as a fast and cost-efficient way of resolving international disputes.
At its opening, the Singapore Convention was signed by 46 countries, including three of the world’s largest economies - China, India and the United States of America. This far surpasses the 10 countries who had initially signed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘New York Convention’) when it opened for signature in New York in 1958.
The European Union is yet to sign the Singapore Convention as it is undecided if it has the competence to sign the Singapore Convention or, alternatively, whether each member state should sign the Convention individually. It is currently unknown whether the United Kingdom will enter into the Singapore Convention once it has left the European Union on 31 January 2020.
Following the cultural tradition in Asia, mediation has been gaining popularity in the Western world for many years as an alternative mechanism to resolve commercial disputes. However, it has had limited scope in cross-border disputes because a settlement reached by mediation can only be enforced in the same way as any other contract – through commencing a claim for failure to fulfil it and trying to enforce any award or judgment obtained. In an international context, this can prove to be difficult, lengthy and costly. As such, there has been limited incentive to use mediation in international disputes as the New York Convention already provides a ready framework for enforcing arbitration awards in over 150 countries.
The Singapore Convention is therefore a significant addition to the international dispute enforcement framework as it is effectively the mediation version of the New York Convention and, as such, will give teeth to mediated agreements in their own right across borders when ratified.
This article looks at the key provisions of the Singapore Convention and examines the potential impact that the Convention may have on trade and dispute resolution in China.
The Singapore Convention: when will it apply?
The Singapore Convention is a relatively brief document and resembles the New York Convention in both structure and content.
Scope of application: inclusions and exclusions
The Singapore Convention applies to settlement agreements resulting from mediation to resolve commercial disputes which are international in nature, in that:
- at least two parties to the agreement have their place of business in different contracting states or
- the state in which the settlement agreement is to be performed, or the state with which the agreement is most closely connected, is different to the parties’ place of business.
It follows that certain categories of settlement agreements are excluded from the broad scope of the Singapore Convention. These are agreements which:
- result from transactions engaged in by a party for personal, family or household purposes
- relate to family, inheritance or employment law
- have been approved by a court and are enforceable as a judgment
- have been recorded and are enforceable as an arbitral award.
The term ‘mediation’ has a broad definition in the Convention and is described as a process whereby ‘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’. There is neither a requirement that the mediator be accredited by a recognised institution nor that the mediation be administered or adjudicated by or at a dispute resolution institution. At first glance this would seem to open every mediated agreement up for enforcement.
Requirements for reliance on a settlement agreement
A party seeking relief under the Convention must submit the following:
- the signed settlement agreement
- evidence that the settlement agreement was achieved through mediation.
The non-exhaustive list of the types of evidence that would be acceptable includes:
- a mediator’s signature on the settlement agreement
- an attestation by the institution which administered the mediation
- a document signed by the mediator stating that the mediation took place.
Grounds for refusing to grant relief
The Singapore Convention sets out an exhaustive list of the grounds upon which a court may refuse to grant relief under the Convention. These grounds are discretionary rather than mandatory and it is open to the courts to enforce an agreement even if one of these grounds exists. Relief may therefore be refused if:
- a party to the agreement was under some incapacity
- granting relief would be contrary to public policy
- there was a serious breach by the mediator of standards applicable to the mediator
- there was a failure by the mediator to disclose circumstances that raise justifiable doubts as to the mediator’s impartiality
- the settlement agreement is null and void, inoperative or incapable of being performed under the law
- the settlement agreement is not binding or final
- the subject matter of the dispute is not capable of settlement by mediation under the law where the relief is sought.
The potential impact on trade and dispute resolution in China
In his opening speech at the Opening Ceremony of The Belt and Road Forum for International Cooperation on 14 May 2017, Chinese President Xi Jinping spoke of the need for an ‘equitable and transparent system of international trade’ and the global promotion of ‘mediation in the spirit of justice’. The People’s Republic of China has followed through with these ideals by showing their support towards and participation in the drafting of the Singapore Convention.
China’s Belt and Road Initiative (BRI) is a multi-billion-dollar programme through which China aims to finance infrastructure projects along a transcontinental passage connecting Asia, Europe and Africa in order to revive the ancient Silk Road trade route. While presenting a huge trading opportunity, the BRI also raises the potential for wide-scale international commercial disputes.
At present, despite China’s historic use of mediation - owing to cultural factors as well as its socialist approach to seek to resolve conflicts - regulatory rules on mediation in China are relatively unsophisticated, with the exception of Hong Kong (SAR) which has been investing in mediation infrastructure, institutions and regulation for some time.
With the introduction of the Singapore Convention, it is expected that commercial mediation in China will gain international and professional strength, particularly in the context of the BRI. It is also expected that China’s mediation practices will become more sophisticated over time with the use of formal mediators and the adoption of similar procedural rules.
This bodes well because non-Chinese parties have typically been hesitant to sign up to contracts that require them to litigate or arbitrate in China. However, the benefit of mediation is that the time, costs and friction associated with traditional litigation and arbitration are usually much reduced and, as such, it is anticipated that the Singapore Convention will improve the business environment of China.
The Singapore Convention provides for the enforcement of mediated settlement agreements across contracting states. However, it will first need to be ratified by three countries before it can come into force. Given the potential economic and trade advantages that the Convention affords China, it begs the question - will 2020 be the Year of the Ratification?
This article has been co-written with Justine Porter, a trainee solicitor in the commercial dispute resolution team.