The Convention aims to provide a global mechanism for enforcement of settlement agreements resulting from mediated settlements of cross-border commercial disputes. The text of the Convention can be found here.
To date, the Convention is in force in ten jurisdictions (namely in the following states that have ratified the Convention: (1) Ecuador; (2) Fiji; (3) Georgia; (4) Honduras; (5) Kazakhstan; (6) Qatar; (7) Saudi Arabia; (8) Singapore; (9) Turkey, and (10) Belarus has approved the Convention). The UK will become the eleventh State to ratify the Convention shortly.
What is the Singapore Mediation Convention?
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 alternative dispute resolution (ADR) processes as part of their case management powers.
The Convention provides 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 which meets the criteria summarised below directly against assets without recourse to fresh litigation regardless of where the mediation took place. The UK’s decision to ratify the Convention means that parties will soon be able to enforce any mediated settlement arising from a cross-border dispute in the UK.
Further, more than 50 states have already signed up to the Convention but have not yet ratified it (including large economies such as Brazil, China, India, South Korea and the USA). 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. Therefore, the number of jurisdictions where enforcement of mediated settlement agreements under the Convention could be possible may soon significantly increase. A full list of signatories can be found here.
How does the Convention work?
Parties who have mediated and reached a settlement sometimes face the issue of a party refusing to honour the terms of the settlement. 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 typically use mediation (especially in jurisdictions where mediation is not commonly used) in order to promote the use of mediation around the world.
Once the Convention comes into force in a particular signatory state, the Courts of that state will be required to 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
- 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
- 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
- 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 (which for example Saudi Arabia and Belarus have made reservations for)
- 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 further 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.
For more information about the Singapore Mediation Convention, please contact the authors of this article.
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