A new treaty to encourage cross-border mediation

The United Nations Convention on International Settlement Agreements Resulting from Mediation was signed by 46 States yesterday at an official signing ceremony in Singapore.  To be known as the “Singapore Mediation Convention“, the Convention is intended to facilitate the enforcement of settlement agreements that have been entered into with the assistance of mediation.

Current state of affairs

At the moment, if two parties enter into a settlement agreement following a mediation and one of the parties does not comply with its obligations under the settlement agreement, the other party must enforce the settlement agreement through the dispute resolution clause (if any) in the settlement agreement.  For example, the parties may have agreed that disputes are to be resolved through court proceedings in a specified jurisdiction or to arbitration proceedings. The party seeking enforcement would then need to commence court proceedings or arbitration.

Enforcement of the settlement agreement through the agreed dispute resolution process is straightforward when all of the parties and the enforcement process are in the same jurisdiction.  For example, the settlement agreement may be enforced by the courts in that jurisdiction and the judgment may be executed (if required) against assets located in the same jurisdiction.

However, the enforcement process is more complex for cross-border settlement agreements.  The parties may agree to court proceedings in one jurisdiction but the court’s judgment must be enforced in another jurisdiction where, for example, the assets are located – if such enforcement is permitted.  If the parties have agreed to arbitration, then an arbitral award must be first issued before it can be enforced in the courts where the assets are located (pursuant to the New York Convention).

Both of these processes may involve substantial time and costs thereby delaying the ultimate remedy to the party seeking enforcement.  These potential enforcement issues may discourage parties from agreeing to attend a mediation in the first place.

Key benefit of the Singapore Mediation Convention

The Singapore Mediation Convention provides a process for the direct enforcement of cross-border settlement agreement between parties resulting from mediation. The Convention provides that a settlement agreement may be enforced directly by the courts of a State. This allows the party seeking enforcement to apply directly to the courts of the State where the assets are located such that execution may also be sought if the enforcement process is successful. This prevents potential multiple proceedings.

The Convention will only apply where the settlement agreement:

  • is in writing;
  • results from a mediation;
  • is an agreement between two or more parties who have their place of business in different States; and
  • the place of business of each of the parties to the agreement is in a State that has acceded to or ratified the Convention.

The Convention does not apply to settlement agreements:

  • relating to consumer transactions nor to family, inheritance or employment law;
  • that have been approved by a court or concluded in the course of proceedings before a court and that are enforceable as a judgment in the State of that court; or
  • that have been recorded and are enforceable as an arbitral award.

Simplified enforcement procedure

The enforcement procedure involves the party seeking enforcement to provide to the relevant authority in the State where enforcement is sought:

  • a copy of the signed settlement agreement; and
  • evidence that the settlement agreement resulted from mediation (e.g. the mediator’s signature on the settlement agreement or a document signed by the mediator confirming that there was a mediation).

The relevant authority is to “act expeditiously” in considering an enforcement application.

The relevant authority may refuse to enforce the settlement agreement in limited circumstances, these including:

  • where a party to the settlement agreement was under some incapacity;
  • the settlement agreement is null and void, inoperative or incapable of being performed;
  • the settlement agreement is not binding or is not final, according to its terms;
  • the settlement agreement has been subsequently modified;
  • the obligations under the settlement agreement have not been performed or are not clear and 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 the mediator or the mediation without which breach that party would not have entered into the settlement agreement;
  • there was a failure by the mediator to disclose to the parties circumstances that raise justifiable doubts as to the mediator’s impartiality or independence and such failure had a material impact or undue influence on a party without which failure that party would not have entered into the settlement agreement;
  • granting relief would be contrary to the public policy of that State;
  • the subject matter of the dispute is not capable of settlement by mediation under the law of that State.

It is anticipated that, as with the exceptions to enforcement of an arbitral award under the New York Convention, it may be difficult to demonstrate enforcement of a settlement agreement should be refused.

What it means for you?

During the official signing ceremony, 46 States signed the Singapore Mediation Convention, including the US, Singapore, China, India, Malaysia, the Philippines and South Korea. Notably, the UK, the European Union and Australia have not yet signed the Convention. The Convention will enter into force 6 months after 3 States have acceded or ratified the Convention.

The success of the Convention (when entered into force) will in large part depend on the extent to which it is accepted and ratified by States. Nonetheless, the Convention  is likely to encourage parties involved in cross-border projects and transactions to consider mediation as a time and cost efficient process as part of their dispute resolution toolkit.