Mediation is increasingly used as an alternative way to resolve disputes. Particularly where parties attempt to resolve disputes quickly and cost effectively, in an amicable forum which fosters and maintains commercial relationships. Courts will also sometimes direct parties to explore ADR processes as part of their case management powers.
Despite this, many will not have heard of the ‘United Nations Convention on International Settlement Agreements Resulting from Mediation’ which was unveiled in 2019 (more commonly known as the ‘Singapore Convention on Mediation’ or the “Convention”). No doubt this will soon change. The Convention has the potential to give another weapon in the arsenal to parties involved in cross-border disputes who want to resolve disputes by mediation, but also have the ability to enforce any mediated settlement directly against assets without recourse to fresh litigation.
What is the Singapore Convention?
The Singapore Convention was unveiled in Singapore in August 2019. To date, over 50 States have signed up to the Convention. The text of the Convention states that it will formally come into force six months after three signatory states have ratified it into local law. Qatar ratified the Convention into local legislation on 12 March 2020 following similar steps taken by Singapore and Fiji on 25 February 2020. Accordingly, the Convention comes into force on 12 September 2020 meaning that it will then be possible to enforce settlement agreements resulting from mediation (regardless of where the mediation took place) in those jurisdictions.
It is likely that other signatories to the Convention will follow suit in the following months increasing the number of jurisdictions in which it is possible to enforce mediated settlement agreements. Whilst the UK and the EU are not currently signatories to the Convention, large economies such as China and the US have signed up to the Convention although they have not yet formally ratified the Convention into their respective local laws.
That means in practice that even if a mediated settlement agreement is entered into in the UK or wider EU, it would be possible to enforce the settlement agreement in a State which has ratified the Convention even though the UK and EU has not signed up to the Convention. Reports suggest the EU is still considering whether to sign up as a regional economic block or whether each Member State will need to sign up individually.
The Convention is designed to allow for the enforcement of settlement agreements procured through mediation much like the New York Convention 1958 does for Arbitration Awards.
In practice, enforcing settlement agreements, especially those entered into following mediation, is rarely a problem. However, issues do sometimes arise where a party refuses to honour their obligations. That issue can be exacerbated if the aggrieved party is then required to enforce their rights in a particular jurisdiction where the parties have agreed to litigate matters arising from the settlement agreement (or in Arbitration) and then take steps in another jurisdiction to enforce against assets to satisfy any judgment or Award. That process can often be lengthy and costly.
The Convention is designed to cut through this by allowing enforcement directly in a jurisdiction where the assets are based. The existence of the Convention is also designed to alleviate fears of those who do not commonly use Mediation (especially in jurisdictions where Mediation is not commonly used) in order to promote the use of Mediation around the World.
How does it work?
Once the Convention comes into force in a particular signatory State, the Courts of that State will be required enforce any mediated settlement agreements in their jurisdiction without allowing parties to re-litigate their dispute provided the settlement agreement satisfies the following, namely the settlement agreement:
- is “international” which means that either:
- at least two parties to the settlement agreement have their places of business in different States; or
- the State in which the parties to the settlement agreement have their places of business is different from either: (i) The State in which a substantial part of the obligations under the settlement agreement is performed; or (ii) the State with which the subject matter of the settlement agreement is most closely connected.
- is made in writing and arises from a Mediation process. The Convention defines Mediation widely as a “process, irrespective of the expression used or the basis upon which the process is carried out, 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”.
- does not fall into an excluded exception such as being an agreement:
- relating to consumers, families, inheritance or employment;
- which has been approved by the Court, is enforceable as a judgment or is otherwise enforceable as an Arbitration Award.
If the above is satisfied, there are limited exceptions where the Court of a Convention State will be entitled to refuse enforcement. The only limited exceptions are where it can be established that:
- a party to the settlement agreement was under some incapacity;
- the settlement agreement:
- is null and void, inoperative or incapable of being performed under the applicable law to the agreement;
- is not binding or final; or
- has been modified;
- the obligations under the settlement agreement have already been performed or are not clear or comprehensible;
- granting relief would be contrary to the terms of the settlement agreement;
- there was a serious breach by the mediator of standards applicable to them or the mediation which without such breach would not have resulted in the party entering into the settlement agreement;
- the mediator failed to disclose circumstances that may raise justifiable doubts as to the their impartiality or independence which had a material impact or undue influence which without such failure to disclose would not have resulted in the party entering into the settlement agreement; or
- granting relief would be contrary to public policy or the subject matter of the dispute is not capable of settlement by mediation under the law of that State.
The Convention provides that a State ratifying the Convention has the option to declare that the Convention:
- does not apply to settlement agreements it or its governmental agencies have entered into;
- shall apply only to the extent that the parties to the settlement agreement have agreed to the application of the Convention.
It is yet to be seen whether States will ratify these further exceptions in practice.
What does it mean for you
The Singapore Convention is in its early infancy. It is yet to be seen whether it will be widely adopted in practice. But the signs are encouraging. The success of the New York Convention 1958 which allows for enforcement of Arbitration Awards overseas suggests it could be added as another weapon to the arsenal for parties involved in cross-border disputes. Used appropriately, it could allow parties to have the ability on one hand to take advantage of the benefits of Mediation (i.e. to try and resolve their disputes in an amicable cost effective manner) whilst having the bite of an agreement to directly enforce against assets on the other if a settlement is reached. It could allow parties to have their cake and eat it.
For now, parties which are negotiating a settlement agreement following a mediation should consider whether they want to expressly state whether the Convention applies to it.
For more information about Mediation, how it works in practice and what benefits can be derived from it, please see here.