On 10 March 2023, my colleague Paul-Raphael Shehadeh authored an article providing an introduction to the Singapore Convention on Mediation (the “Convention”). This article is a follow-up to that, on what is a vogue topic in the international arbitration community.
Mediation is generally regarded as the more amicable, efficient and cost-effective method of resolving disputes. However, in the cross-border context, enforcing settlement agreements resulting from mediation can be complex and expensive, deterring otherwise willing parties from choosing mediation as their dispute resolution mechanism.
To address this issue, in 2018 under resolution 73/198, the United Nations General Assembly adopted the Convention and an accompanying Model Law. The goal of the Convention was to reinforce the position of mediation as a viable dispute resolution in the context of cross-border commercial disputes by providing a uniform and efficient framework for enforcement of international settlement agreements resulting from mediation. In some sense, the Convention can be said to be similar to the New York Convention, albeit operating in the realm of mediation as opposed to arbitration.
The signing ceremony was held in Singapore and forty-six countries, including the world’s two largest economies, the United States and China, signed the Convention on the day it opened for signature. As of today, a total of fifty-five States have signed the Convention and eleven countries have gone on to ratify it.
But how exactly does the Convention work and which parties can avail themselves to it?
How does the Convention work?
The Convention allows any party to a mediated international settlement agreement to apply to the Courts or other competent authority of a State which is a Party to the Convention to enforce the terms of the settlement, regardless of which State the settlement agreement was concluded in.
In other words, the Convention is non-reciprocal in nature, and therefore even international settlement agreements concluded in any non-Party State can be enforced in the courts or any competent authority of any one of the eleven ratifying States.
Before commencing enforcement action under the Convention, parties should take the following steps to ensure that the Convention is properly applicable to their scenario.
A. Ensuring that the Convention is Applicable
Article 1 sets out three requirements that a settlement agreement must meet before a party can rely on the Convention.
First, the mediated settlement agreement must be international in nature. For a settlement agreement to be considered international :
(a) at least two parties to the settlement agreement must have their places of business in different States; or
(b) the State in which parties have their place of business is different from the either the State in which a substantial part of the obligations under the settlement agreement is performed or the State with which the subject matter of the settlement agreement is most closely connected.
To illustrate (b) above, a settlement agreement between two parties for the supply of goods from Hanoi to Ho Chi Minh would be considered international even if both parties had their places of business in Singapore, because the substantial part of the obligations under the settlement agreement would be the transfer of goods in Vietnam and /or because Vietnam is arguably the State with which the subject matter of the settlement agreement is most closely connected.
Second, the subject matter of the underlying dispute that resulted in the settlement agreement must be commercial in nature. In other words, the underlying dispute cannot be related to non-commercial matters, such as family, inheritance or employment law. The dispute also cannot arise from transactions engaged in for purposes other than commercial trade – e.g., for personal, family or household reasons.
Third, the settlement agreement must not be approved by or concluded in a court, or enforceable as a court judgment or an arbitral award.
B. Picking the State of Enforcement
Once it has been determined that the settlement agreement is international, parties then have to choose which ratifying State to commence enforcement action in.
To this end, parties should keep in mind commercial considerations, such as whether the other party has assets in the chosen State, time, related costs and the viability of in bringing the enforcement action in that State. In determining these, it is useful to consider how the ratifying States have implemented the Convention into their national law.
Pertinently, parties should pay heed to:
(a) whether the chosen ratifying State had made any reservations when implementing the Convention as part of its national law;
(b) what the mode and/or forum of enforcement is under the national law of the chosen ratifying State;
(c) what the public policy considerations of the chosen ratifying State are and whether the underlying subject matter of the dispute is capable of settlement by mediation under the laws of the chosen ratifying State.
Under (a), Article 8 of the Convention expressly states that a Party to the Convention may make reservations to the Convention at any time. This would mean that when a State ratifies the Convention, it may alter the impact or scope of certain Articles in the Convention, which may be worth noting when parties are deciding on the State of enforcement.
Under (b), parties should take note of the mode and/or forum of enforcement. For example, Singapore implemented the Convention through its Singapore Convention of Mediation Act 2020 (the “Singapore Convention Act”). Section 4 of the Singapore Convention Act provides the Singapore High Court as the appropriate forum for bringing an enforcement action under the Convention. Accordingly, parties may need to consider the rules and procedure, as well as costs associated with bringing an action in the Singapore High Court.
Under (c), Article 5 Paragraph 2(a) of the Convention allows a ratifying State to refuse enforcement if such enforcement would be contrary to its public policy. Different States have different national laws, and therefore what may constitute “public policy” in one State may not constitute “public policy” in another. Accordingly, it may be pertinent to note what constitutes “public policy” under the laws of a particular ratifying State before considering if that State should be chosen as the forum of enforcement of the settlement agreement under the Convention.
On a related note, given that the wording of Article 5 Paragraph 2(a) is very similar to that of the New York Convention Article 34 Paragraph 2(b)(ii), it seems likely that some guidance as to what “public policy” means can come from how the various courts have interpreted the latter. In that vein, it is very likely that generally, enforcement of settlement agreements that involve insolvency law, illegal contracts and intellectual property rights are likely to be deemed as contrary to public policy.
C. Bringing the Enforcement Action
Once a party has chosen which ratifying State to bring the enforcement claim in, the party then has to comply with the relevant procedural laws of that State in relation to the same. To this end, we highly recommend that parties approach local counsel to guide them through the vagaries of the local procedural and substantive law as necessary in the course of doing so.
Statistics have yet to prove whether the Convention will be as successful as the New York Convention or whether it will greatly increase the widespread adoption of commercial mediation as an alternate dispute resolution process. However, the sheer fact that the Convention has garnered a staggering fifty-five signatories, eleven ratifying States (with more States considering ratification (e.g. the United Kingdom)) is telling. All in all, the Convention remains a welcome addition to the international framework of commercial dispute resolution, offering parties a new mechanism which is simple, effective and most importantly, practical.