Over the past few decades, alternative dispute resolution ("ADR") has become the preferred method of conflict management in the commercial world. Contemporary trends in dispute resolution aim at consolidating ADR in this position by finding an appropriate way to enforce settlement agreements resulting from mediation/conciliation or in the course of judicial or arbitral proceedings. A topic at the heart of this discussion is whether a legal framework for enforcement of international settlement agreements harmonised at the international level should be established.
The door to establish an enforcement mechanism for settlement agreements reached through international commercial conciliation is not only open, but in fact the United Nations Commission on International Trade Law (UNCITRAL) Working Group II (Dispute Settlement) has already taken the first steps through it. In July 2014, the UNCITRAL agreed that Working Group II would put the issue of enforcement of settlement agreements resulting from international commercial conciliation on its agenda. Since then, it has been gathering twice a year to draw up the provisions of the legal framework for such an instrument. Of course, Rome wasn't built in a day, and neither will this legal framework for enforcement of settlement agreements.
At the Vienna Arbitration Days this past February, Natalie Yu-Lin Morris-Sharma, Chairperson of Working Group II shared her insights on the development of a conciliation convention and/or model provisions as a legal framework for the enforcement of settlement agreements. The aim of these tools is to bolster the general application of mediation and to provide for a proper enforcement regime of settlement agreements resulting from it. In fact, an effective enforcement mechanism would allay one of the parties' biggest fears about tedious settlement negotiations: the prospect of a costly case and lengthy litigation or arbitration if one party fails to abide by the settlement terms. Moreover, according to Ms Morris-Sharma, the scope of application of the conciliation convention would not be confined to settlement agreements with mere monetary implications (ie settlement payments), but would also apply to other forms of settlement agreed between the parties (eg return of goods exchanged under the preceding contract).
It was also explored in Vienna whether with the prospect of enforcing settlement agreements resulting from mediation or ADR in general, consent awards might become obsolete. Having an enforcement regime for settlement agreements at one's disposal would mean that a settlement agreement does not necessarily have to be in the form of a consent award to be enforceable. Accordingly, there might be no demand to "shape" settlement agreements as consent awards. Given this, the new legal framework could further strengthen the importance of ADR in international dispute settlement.
In the course of its latest session held in New York from 6–10 February 2017, Working Group II presented its "compromised proposal" with "a uniform text on enforcement of international commercial settlement agreements resulting from conciliation", and resumed its deliberations on the preparation of an instrument for enforcing international settlement agreements resulting from conciliation (the "instrument"). In this context, Working Group II also touched upon settlement agreements concluded in the course of judicial or arbitral proceedings.
Working Group II reiterated its common understanding that settlement agreements resulting from judicial or arbitral proceedings but not recorded as judicial decisions or arbitral awards (consent awards) should certainly fall within the scope of the instrument. The same holds true for settlement agreements reached with the mere involvement of a judge or an arbitrator in the conciliation process.
It was also proposed and examined whether to exclude settlement agreements approved by a court, or which have been concluded before a court in the course of proceedings, and which are enforceable in the same manner as a judgment, or recorded as an arbitral award. In this way, possible gaps or overlaps with existing and future conventions such as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) could be avoided.
In this regard, Working Group II also expressed a need to clarify in the instrument that settlement agreements concluded before a court in the course of proceedings but not recorded as judgments would fall under the scope of the instrument to the extent that they were not enforceable in the same manner as a judgment.
From the above it is clear that (i) mediated settlement agreements resulting from freestanding mediations, (ii) settlement agreements resulting from judicial or arbitral proceedings but not recorded as judgments or arbitral awards, and (iii) settlement agreements reached with the involvement of a judge or an arbitrator would be within the scope of a conciliation convention.
Apparently, only settlement agreements reached with third-party assistance should be subject to a convention on the enforcement of settlement agreements resulting from international commercial disputes. But why should only these settlement agreements be privileged and benefit from an internationally available enforcement process? In fact, both mediated settlement agreements and those resulting from unassisted (private settlement) negotiation are subject to the rules of contract law. Accordingly, some jurisdictions understandably object to the different treatment of these settlement agreements for the purpose of enforcement. Perhaps there is still room for discussion about the inclusion of settlement agreements resulting from unassisted negotiations, ie negotiations that have been conducted exclusively between the parties involved.
With its "compromise proposal" Working Group II has created a sound basis for an effective enforcement regime for settlement agreements. Although many details still require further consideration by the working group members, considerable progress has already been made. It is only a matter of time before settlement agreements resulting from international commercial conciliation are enforceable under a uniform regime. Irrespective of whether this will come in the form of a convention or supplementary model law provisions, it will further bolster mediation and ADR in general and thus lead to a global trend in dispute resolution.