On August 7, 2019, the United Nations Convention on International Settlement Agreements Resulting From Mediation (the Singapore Convention) opened for signature in Singapore. Over 40 states have signed the treaty, including China, India, the United States and other major economies in Asia, Africa and the Middle East. The Singapore Convention will enter into force six months after ratification by at least three member states. The text of the Singapore Convention had been approved by the working group of the United Nations Commission on International Trade Law (UNCITRAL) in June 2018, following over three years of debate among member states and international organizations. It was adopted by the United Nations General Assembly in December 2018.
The Rationale Behind the Singapore Convention
Mediation is increasingly used as a means of settling disputes, both in domestic and international commercial practice. As an alternative dispute resolution mechanism to litigation (or arbitration), it affords significant benefits to disputing parties. In particular, it increases the likelihood that parties will be able to preserve the commercial relationship. Mediation is also generally understood to be more cost-effective than litigation (or arbitration).
One critical problem that parties to mediation have faced, however, is the perceived difficulty of enforcing a settlement agreement. The Singapore Convention aims to remedy this by creating an international regime for enforcing international settlement agreements arising from mediation (similar to how the New York Convention facilitates the international enforcement of arbitration awards).
Key provisions of the Singapore Convention
There are two main prongs to the Singapore Convention:
- Enforceability of settlement agreements. Article 3.1 renders international settlement agreements resulting from mediation enforceable by requiring member states to enforce such agreements in accordance with their own rules of procedure (i.e., in accordance with state enforcement mechanisms).
Recognition of settlement agreements. Article 3.2 provides parties to mediation with the right to invoke settlement agreements to prove that the matter has already been resolved. In other words, it ensures that parties will be able to use the settlement agreement as a defence in local litigation to prevent parties from litigating the matter.
Ancillary to these two key provisions are a number of other important provisions that serve to delineate their scope and operation:
Scope of “settlement agreement.” The Singapore Convention applies only to settlement agreements that
- result from mediation, defined as a process whereby parties attempt to reach an amicable settlement with the assistance of a third person lacking the authority to impose a solution on the parties,
- are international in nature, which means that the parties have their places of business in different states or that the parties’ places of business are different from the state where the settlement is to be performed or with which the settlement agreement is most closely connected,
- resolve a commercial dispute, and
- are recorded in writing in any form, including emails and other electronic communication, so long as it is useable for subsequent reference.
Notably, the Singapore Convention does not apply to settlement agreements entered into during the course of judicial or arbitral proceedings. These are governed instead by the Hague Convention on Choice of Court Agreements and the New York Convention, respectively.
- Proof required for enforcement/recognition. Parties seeking enforcement/recognition of a settlement agreement need to provide the settlement agreement signed by the parties and evidence that the settlement agreement resulted from mediation. The Singapore Convention sets out the types of evidence that would be acceptable: (i) the mediator’s signature on the settlement agreement, (ii) a document signed by the mediator indicating that the mediation was carried out, (iii) an attestation by the institution that administered the mediation or (iv) any other evidence acceptable to the competent authority (i.e., the court from which enforcement/recognition is sought).
- Grounds for refusal. Article 5 sets out a number of exclusive grounds for refusing to enforce or recognize a settlement agreement. These grounds are permissive rather than mandatory, and it is open to courts to enforce or recognize a settlement even in the presence of these grounds. These grounds are set out below:
- There exists incapacity of a party to the settlement agreement.
- The settlement agreement sought to be relied on is (i) null and void, inoperative or incapable of being performed under applicable law, (ii) is not binding or not final or (iii) has been subsequently modified.
- The obligations in the settlement agreement (i) have been performed; or (ii) are not clear or comprehensible.
- Granting enforcement or recognition would be contrary to terms of the settlement agreement.
- There is evidence of a serious breach by the mediator of standards applicable to the mediator or the mediation, without which breach that party would not have entered into the settlement agreement.
- The mediator failed to disclose to the parties circumstances that raise justifiable doubts as to the mediator’s impartiality and independence, and such failure to disclose had a material impact or undue influence on a party, without which failure that party would not have entered into the settlement agreement.
- Granting enforcement or recognition would be contrary to the public policy of the state in which enforcement or recognition is sought.
- The subject matter of the dispute is not capable of settlement by mediation under the law of the state in which enforcement or recognition is sought.
Some of these grounds leave room for interpretation, and it remains to be seen whether a consistent body of law or guidelines will develop around them as the Singapore Convention matures (as has been the experience in the international arbitration arena following the New York Convention).
What lies ahead?
With many important state signers, the Singapore Convention gives teeth to mediation and is likely to make mediation an attractive and viable alternative to litigation or arbitration in cross-border commercial disputes.
As a result, the Singapore Convention is likely to encourage the adoption of multitier dispute resolution agreements, including binding mediation as a step in the process. For example, parties may agree that any dispute first be referred to mediation, and only if the parties remain unable to reach a settlement will they be able to take the matter to arbitration. Such procedures allow parties to combine the benefits of mediation, such as reduced costs and the ability to preserve the commercial relationship, along with the finality and certainty of an adversarial process, should the parties not be able to agree.
In Asia especially, the Singapore Convention will likely have an impact on how international disputes are resolved. Mediation is generally viewed as a means of dispute resolution consistent with Asian business culture, as it preserves the relationship and encourages parties to work toward a mutually beneficial and face-saving outcome. Indeed, various Asian jurisdictions have enacted mediation legislation in recent years, including Hong Kong, Malaysia and Singapore. China, in particular, amended its Civil Procedure Law in 2012 to require parties to go through mediation first where appropriate. More recently, the Rules of Procedure of the China International Commercial Courts (released in December 2018) also require mediation to be included in the procedural timetable unless the parties refuse to mediate. Mediation has been gaining traction in Asia, and when the Singapore Convention comes into force, it is hoped that it will provide parties entering into international settlements with greater certainty and confidence in the mediation process.