46 States sign the Singapore Convention on Mediation

On 7 August 2019, 46 States signed the UN Convention on International Settlement Agreements Resulting from Mediation, which will, pursuant to a UN resolution, be referred to as the "Singapore Convention on Mediation” (or referred to alternatively in this post as the Convention). Those States include, among others, China, India, Singapore, South Korea and the United States.

As we reported in January, the Singapore Convention on Mediation seeks to provide greater certainty to parties to international transactions who have reached a settlement of their dispute through mediation by allowing a party directly to enforce its rights under a mediated settlement agreement, as it might currently do with respect to an international arbitral award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).

The aim of the Singapore Convention on Mediation

One obstacle to the use of mediation for the resolution of international disputes is the lack of an enforcement mechanism for any resulting settlement agreement. Although parties to mediated settlement agreements typically comply with them voluntarily, if one party does not comply with its obligations, the other party must initiate arbitration or court proceedings for a breach of the settlement agreement (usually, a breach of contract claim) and then seek to enforce the resulting arbitral award or court judgment. In many jurisdictions, this can be a long and costly process.

The Singapore Convention on Mediation seeks to resolve this problem by creating an international framework for the enforcement of mediated settlement agreements that allows a party directly to enforce such an agreement, without having to pursue a new breach of contract claim. It is hoped that removing enforcement obstacles will promote the use of mediation for the resolution of international disputes, particularly in light of mediation’s potential benefits in terms of cost, efficiency, and the preservation of commercial relationships.

In effect, the Singapore Convention on Mediation is intended to do for mediation what the New York Convention does for arbitration. The enforceability of arbitration agreements and awards facilitated by the New York Convention is one of the driving factors that made arbitration a dominant mode of international dispute resolution. The Singapore Convention on Mediation seeks to put mediation on an equal footing with arbitration as a method of resolving international commercial disputes.

The scope and application of the Convention

The Singapore Convention on Mediation applies to written settlement agreements resulting from mediation and concluded to resolve an international commercial dispute.

A dispute is “international” if (a) at least two parties to the settlement agreement have their places of business in different States; or (b) the State in which the parties to the settlement agreement have their places of business is different from either the State in which the agreement will be performed, or to which the subject matter of the agreement is most closely connected. A settlement agreement is “in writing” if its content is recorded in any form, including electronically.

The Singapore Convention on Mediation excludes from its scope mediated settlement agreements seeking to resolve certain categories of disputes where there is a concern that the disputing parties may have unequal bargaining power, such as those relating to consumer or employment matters. It also excludes settlements of disputes concerning family law.

It further excludes from its scope mediated settlement agreements that have been approved by a court or are otherwise enforceable as a court judgment or an arbitral award. The rationale behind this exclusion is to avoid overlap with other enforcement regimes, such as the New York Convention on arbitral awards and the Hague Choice of Court Convention on court judgments.

Under the Singapore Convention on Mediation, a mediated settlement agreement can be used both as a sword and a shield. Contracting States are obliged both to enforce (a) the mediated settlement agreement itself, and (b) the right of a party to invoke the mediated settlement agreement as a defence against a claim.

Finally, Article 5 of the Singapore Convention on Mediation provides that a Contracting State may refuse to recognise and enforce a mediated settlement agreement on certain limited grounds, some of which mirror grounds for refusing enforcement under the New York Convention (such as if the settlement agreement is null and void, inoperative or incapable of being performed, or if enforcement would contradict public policy).

One somewhat controversial ground for non-enforcement is Article 5(1)(e), which permits a court to refuse enforcement where there was a “serious breach by the mediator of standards applicable to the mediator or the mediation” and, without such a breach, a party would not have entered into the settlement agreement. Some practitioners worry this provision may give parties wishing to resist enforcement a chance to re-litigate the mediation, with implications for both the efficiency and confidentiality of the mediation proceedings. It remains to be seen whether this will be the case in practice.

The impact of the Convention

The impact of the Singapore Convention on Mediation on the global mediation landscape will depend on several factors. First, it will depend on how many States sign and ratify the Convention. The success of the New York Convention in popularising international arbitration is due largely to its widespread acceptance (it currently has 160 State parties). So far, the Convention’s prospects are good: 46 States already have signed it (as compared to the 10 States that first signed the New York Convention in June 1958), and those include global economic powerhouses such as China, India, Singapore, South Korea and the United States. States will then need to ratify the Convention according to their respective domestic procedures. The Convention will enter into force six months after the deposit of the third instrument of ratification.

Second, it will depend on how many States adopt a reservation under which the Convention would apply only on an “opt-in” basis, i.e., only if the parties to a settlement agreement affirmatively agree that it applies. If this reservation is widely adopted, it may significantly limit the global application of the Singapore Convention on Mediation. It is unclear at this time how many of the current signatories, if any, have adopted such a reservation.

Third, it will depend on how parties and courts interpret the grounds for refusing enforcement under Article 5. If those grounds are applied strictly and treated as high thresholds for refusing enforcement, the Convention is likely to have a greater impact than if they are applied more liberally.

Fourth, its impact in terms of increasing the usage of mediation will depend on the degree to which enforcement concerns actually posed a material obstacle to mediation in the first place. Those concerns will have been more significant in jurisdictions where traditional enforcement mechanisms are more onerous than in those where the enforcement of settlement agreements has been more straightforward (and thus less of an obstacle to parties considering mediation).

Finally, the impact of the Convention will depend in part on (and contribute to) the success of broader efforts in Singapore and elsewhere to promote mediation. For its part, Singapore has in recent years invested heavily in international mediation, including by further developing the Singapore International Mediation Centre (SIMC) (which offers mediation services), establishing the Singapore International Mediation Institute (which sets professional standards for the sector) and enacting the Mediation Act (which allows parties to record their mediated settlement agreements as Singapore court orders in order to enjoy the benefits of enforcement, and provides legal clarity around certain issues such as confidentiality). Furthermore, in January 2019, SIMC partnered with the China Council for the Promotion of International Trade and China Chamber of International Commerce to establish a mediation centre that will offer mediation services for disputes relating to China’s Belt and Road Initiative (BRI) and create an international BRI mediator panel. Other initiatives to promote mediation are similarly being rolled out across the region. These are likely to have a mutually reinforcing effect with respect to the Singapore Convention on Mediation, and we expect to see an uptick in mediation of international disputes in Asia and beyond.

While its impact on mediation globally remains to be seen, one thing is certain: the Singapore Convention on Mediation—which Singapore played a key role in negotiating and promoting—is sure to further cement Singapore’s status as a key player and innovator in international dispute resolution.