This column has previously discussed issues concerning mediation, including the different conceptions of mediation (see China Business Law Journal volume 2 issue 9: Mediation or conciliation?) and the issues that arise when mediation occurs during the course of judicial proceedings (see China Business Law Journal volume 9 issue 8: Judicial mediation). The column below discusses a new convention that was signed in Singapore on 7 August 2019 – the United Nations Convention on International Settlement Agreements Resulting from Mediation (also known as the Singapore Convention on Mediation) – and explores its potential impact.
Background to the convention
In some circumstances, a mediation takes place during the course of formal court proceedings and the settlement agreement that follows the mediation is recognized by the court and given the same effect as a court judgment. A similar situation can arise in respect of mediation that takes place during the course of arbitration proceedings, where the settlement agreement is recognized by the arbitration tribunal and is given the same effect as an arbitral award. In these circumstances, the agreement can be enforced in the same way as a court judgment or an arbitral award.
In other circumstances, the mediation occurs outside a formal court or arbitration process. Under these circumstances, any settlement agreement that follows a mediation is treated in the same way as any other contract. In other words, if one of the parties breaches the terms of the settlement agreement, the other party must take enforcement action in accordance with the mechanism provided by the settlement agreement itself – either court proceedings or arbitration – and it then must seek to have the judgment or arbitral award recognized and enforced. This may prove challenging in cross-border disputes, and may involve considerable cost for the party that is seeking to enforce the terms of the settlement agreement.
The Singapore Convention on Mediation is designed to overcome this weakness by providing a basis on which cross-border settlement agreements that result from mediation can be directly enforced in the courts of a state that is a member of the Convention. When incorporating the Convention into domestic law, countries may adopt or adapt the United Nations Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation 2018 (which amends the UNCITRAL Model Law on International Commercial Conciliation 2002).
The Convention recognizes two general principles in article 3 (see Citation 1).
引文一 Citation 1
- Each Party to the Convention shall enforce a settlement agreement in accordance with its rules of procedure and under the conditions laid down in this Convention.
- If a dispute arises concerning a matter that a party claims was already resolved by a settlement agreement, a party to the Convention shall allow the party to invoke the settlement agreement in accordance with its rules of procedure and under the conditions laid down in this Convention, in order to prove that the matter has already been resolved.
On this basis, the Convention is described as operating as both a sword and a shield; namely, it can be used to enable a party to enforce the settlement agreement against the other party if it breaches the settlement agreement (the sword), and can also be used to enable a party to prevent the other party from taking legal action in respect of a matter that has already been resolved by the settlement agreement (the shield).
An outline of key provisions of the Convention is set out below.
Scope of application
Under article 1, the Convention applies to “an agreement resulting from mediation and concluded in writing by parties to resolve a commercial dispute … which, at the time of its conclusion, is international” due to certain reasons. It does not apply to non-commercial disputes such as consumer disputes, inheritance disputes or family disputes.
Further, under article 1(3), the Convention does not apply to:
(a) Settlement agreements:
(i) That have been approved by a court or concluded in the course of proceedings before a court; and
(ii) That are enforceable as a judgment in the state of that court;
(b) Settlement agreements that have been recorded and are enforceable as an arbitral award
The primary reason why the Convention does not apply to settlement agreements that are enforceable as a judgment or an arbitral award is that there are other international instruments that deal with this situation, including the Hague Choice of Court Convention, which applies in respect of court judgments (see China Business Law Journal volume 9 issue 3: Choice of court), and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which applies in respect of arbitral awards.
Procedures to enforce the settlement agreement
Under article 4 of the Convention, various requirements must be met before a party to a settlement agreement can seek enforcement of the agreement. For example, it must provide the settlement agreement that is signed by the parties. In addition, it must provide evidence that the settlement agreement resulted from mediation. Such evidence may consist of the mediator’s signature on the settlement agreement, or a document signed by the mediator indicating that the mediation was carried out.
The requirement to provide evidence that the settlement agreement resulted from mediation has generated some queries and concerns, particularly if it consists of documents signed by the mediator, as mediators are often reluctant to sign any documents in respect of the mediation, or to acknowledge that the mediation took place as a result of concerns relating to professional responsibility and confidentiality. As a result, parties to settlement agreements should document the agreement as comprehensively as possible so that there is evidence that the mediation took place, and it is unnecessary to provide a document signed by the mediator.
Grounds for refusing to enforce the settlement agreement
Similar to the New York Convention, the Singapore Convention on Mediation sets out a number of grounds on which a court or other competent authority may refuse to grant relief. This includes the situation where a party to the settlement agreement was under some incapacity, and where there was a serious breach by the mediator of standards to the mediator. Another ground for refusing to enforce the settlement agreement is where granting relief would be contrary to public policy of the relevant party to the convention (namely, the member state).
It remains to be seen whether the above-mentioned grounds may be unreasonably argued by one of the parties to challenge or delay enforcement, and whether this may undermine the efficiency and cost-effectiveness of enforcing the settlement agreement under the Convention. Concerns in this regard are reinforced by the fact that, unlike a judgment or an arbitral award, the settlement agreement is not accompanied by any reasons for the settlement, and it is difficult to determine whether or not there was a serious breach of standards by the mediator.
Signatories to the Convention and its future success
To date, 47 countries have signed the Convention, including the US, Singapore, China, India, Malaysia, the Philippines and South Korea. Notable exceptions in the region are Australia and Japan.
Time will tell whether the Convention will be a success. If the Convention follows the experience of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, its success will be guaranteed.
A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at www.vantageasia.com.