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60 years of Enforceable Arbitration, it’s now time for Mediation

On 16 July 2018, the United Nations Commission on International Trade Law (“UNCITRAL”) held a celebratory event in New York, marking the 60th anniversary of the adoption of the Convention on Recognition and Enforcement of Foreign Arbitral Award, better known as the New York Convention. Up till the time when this article is written, there are already 159 States which have ratified the New York Convention.

The New York Convention is one of the key instruments in international arbitration. It applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration. In essence, courts of those States which adhere to the New York Convention are required to give effect to an agreement in a matter covered by an arbitration agreement, and to recognize and enforce awards made in other States, subject to certain limited exceptions. Such an arrangement has greatly facilitated international commerce.

Aside from arbitration, which is a confidential and (often) costly alternative to civil litigation before a court, there are other means of Alternative Dispute Resolution (“ADR”), including negotiation; adjudication; expert determination; conciliation and mediation. Given the increasing costs and time involved in international arbitration, greater attention has been paid to mediation. The major downside however, is that when parties do manage to come to a compromise and a mediated agreement is reached, there is currently no comprehensive legal framework for the enforcement of such settlement agreements. These agreements are often only as good as a private contract, and the parties are forced to attempt to enforce the agreements as an ordinary breach of contract claim in their domestic courts. In so doing, the full benefit of mediation would be offset.

In light of this, since 2014 the UNCITRAL has been working on a mediation convention that is similar to the New York Convention. In June 2018, the UNCITRAL finalised the draft Convention on International Settlement Agreements Resulting from Mediation (“Singapore Convention” or the “Convention”) and adopted the Model Law on International Commercial Mediation and International Settlement Agreements resulting from Mediation (“Mediation Model Law”), which amended the previous UNCITRAL Model Law on International Commercial Conciliation of 2002. It is expected that the Singapore Convention will be adopted by the United Nations General Assembly later this year, after which a signing ceremony will be held in Singapore on 1 August 2019. The Singapore Convention will come into force 6 months after being ratified by 3 signatories.

The Singapore Convention aims to facilitate international mediation by requiring each signatory to enforce international settlement agreements resulting from mediation through simplified procedure. The Mediation Model Law, on the other hand, implements the Singapore Convention and also aim to streamline the procedures for international commercial mediation.

Generally, the Singapore Convention applies to “settlement agreements” which resulted from:

(i)  Mediation –  which means a process where the parties attempt to reach amicable settlement of the dispute with the assistance of a third person/persons lacking the authority to impose a solution upon the parties to the dispute; and

(ii)  Concluded in writing by parties – which includes settlement agreement reached through electronic communication which satisfies the conditions laid down under the Convention; and

(iii)  Which resolve a commercial dispute – while there is no specific definition provided under the Convention, it is generally intended that the term “commercial” should be given a wide interpretation to cover wide range of relationship which is of a commercial nature; and

(iv)  Are “international” at the time of its conclusion – which, in the context of the Convention, generally means that the States or the place of business of the parties to the settlement agreement are different

The Singapore Convention does not apply to settlement agreements that are:

  1. a)  Concluded to resolve a dispute arising from transactions engaged in by one of the parties (a consumer) for personal, family or household purposes;
  2. b)  Related to family, inheritance or employment law;
  3. c)  Approved by or concluded in the course of proceedings before a court, and enforceable as a judgment in the State of that court; or
  4. d)  Recorded and enforceable as an arbitral award.

A party applying for relief to enforce the settlement agreement under the Singapore Convention is required to submit to the competent authority a copy of the signed settlement agreement (or agreement concluded through electronic communication which satisfies the conditions laid down under the Convention), and evidence to prove that the agreement resulted from mediation. The Convention also sets out a number of grounds to which the relief may be refused, including where the agreement is null and void or incapable of being performed under the governing law of the agreement; where the obligations under the agreement has already been performed; where there has been serious breach by the mediator of the standards applicable to the mediation or failure by the mediator to disclose circumstances which may affect his/her impartiality or independence; and public policy ground.

In addition, the Singapore Convention also has provision which allows a signatory to make reservations to the effect that the Singapore Convention will not apply to:

  1. a)  Settlement agreements to which the State itself or any of its government agencies is a party; and/or
  2. b)  Parties who have not consented to the application of the Singapore Convention.

The Singapore Convention (and the corresponding amendments to the Mediation Model Law) represents a significant milestone in international legislative framework for mediation and demonstrate UNCITRAL’s commitment in promoting and elevating the status and use of mediation in resolving international commercial disputes. It is hoped that the Singapore Convention will be as successful as its much older brother the New York Convention, making mediation a more attractive option for parties involved in international dispute resolution.

Article authors:

Simon Cheng, Managing Associate, Hong Kong
Vincent Yeung, Legal Officer, Hong Kong