Analysis and Explanation of the Scope of Singapore Mediation Convention

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3 years ago

“An ounce of mediation is worth a pound of arbitration and a ton of litigation.”

— Joseph Grynbaum[1]

Introduction

Mediation is considered a cost-effective, time saving and a less antagonistic way of resolving the discords between the parties. It encourages the parties to find the common grounds for reaching a mutual agreement. In commercial disputes, it is considered to be an effective way to resolve the disagreements between the parties as it maintains the confidentiality between the mediator and the two parties. Further, the foremost reason for parties opting for mediation settlement as opposed to litigation or arbitration is that it offers a common platform for the parties to resolve the disputes cordially in front of the facilitator i.e. the mediator and reach a cordial settlement by mutual agreement without risking to spoil the business relationship between the parties involved. This form of dispute resolution is popular and common in almost all the countries but at international level the parties tend to wither away with mediation because of lack of uniform framework for the execution of the mediated settlement unlike the New York Convention as available for arbitration.

To do away with this absence, the United Nations General Assembly in December 2018 adopted the UN Convention on International Settlement Agreements Resulting from Mediation known as the “Singapore Mediation Convention” which was declared open for signature in the year 2019.

The Singapore Mediation Convention (hereinafter “the Convention”) came into effect on 12-9-2020 with presently 53 signatories to the Convention including the major economical nations like China, United States as well as India. The Convention aims to ease the cross-border dispute resolution mechanism via effective mediation. It hones at creating a treaty-based regime in the international frontier for enforcing the agreements resulting from mediation in the international disputes.

The authors via the present article have analysed the scope of the provisions involved in the Convention and has tried to interpret the provisions of the Convention with the help of Travaux Préparatoires Reports, discussions of the Working Groups while drafting the Convention and the authors’ own understanding of the provisions while referring to the online sources and reports available on record. Further, the article provides for the major concerns that ought to be addressed while enforcing the cross-border mediated settlements and lastly, the authors give an overall insight on the Convention as per their own understanding and suggest the way forward.

Key Features

Promotes credibility in resolution of cross-border disputes.— The enforcement of the mediated settlement agreements (MSAs) are generally done by recording it in the form of court order or consent awards for execution of the settlement thus involving more costs, delay as well as loss of confidentiality, which is one of the core of mediation process. However, with this Convention in place, the parties can directly enforce the mediated settlements and place such settlements at par with the arbitral awards or judgments thereby proving mediation to be a credible source for resolution of commercial disputes internationally.
The Convention will facilitate international trade and commerce which shall further lead to economic development and would help in the growth of the regions to which the parties to the Convention belong.
It provides for an additional dispute resolution mechanism in cases of cross-border disputes and will strengthen the dispute resolution system internationally.
Uniform framework for enforcing the international settlement agreements.— The Convention provides for a uniform and harmonious dispute resolution mechanism of mediation by way of which the signatory countries while adopting this framework can build up harmonious economic relations regardless of the differences in the social, economic and legal systems in their domestic country.[2]
It will help in saving cost, time and reaching a mutually acceptable solution which is the key feature of dispute resolution via mediation.
It will help in eliminating one of the barriers to the foreign investment i.e. the perceived risk of the commercial disputes being brought forth before the municipal courts and the judgment thereafter to be enforced in an ordinary manner via contract law provisions or other laws as applicable, which is indeed costly, time consuming and posses a high degree of uncertainty.

Analysis of the important provisions

Applicability and scope of the Convention – Article 1

International settlement agreements.—The Convention shall be applicable to only those international settlement agreements that arise out of mediation for settling a commercial dispute covered under the Convention[3].
Commercial dispute.— It is applicable in cases of settlement of international agreements that results from mediation and are concluded between the parties for amicably resolving the commercial dispute.
In writing.— As per Article 1 which talks about the scope of the Convention, the applicability of the Convention shall extend to those agreements which results in mediation and are concluded in writing by the parties for opting to resolve the commercial dispute by way of a settlement agreement.
Place of business.—At the time of the conclusion of the settlement agreement it should be international in the sense that:

(i) The place of business of at least two parties to the settlement agreement should be in different States; or
(ii) The State in which the place of business of the parties to the settlement agreement persists should be different from either the State where the substantial part of obligations as per the settlement agreement are performed, or the State where the subject-matter is most closely associated with the settlement agreement.

Exclusions

The Convention is not applicable to those international agreements that are enforced in lieu of the judgment passed by the court or by way of an arbitral award.[4]
The Convention is also not applicable in cases of family matters, international settlement agreements entered into for other household/domestic purposes, inheritance or employment law.[5]

Therefore, it can be said that the Convention places reliance on the subject-matter of the agreement rather than the subject-matter of the dispute. Additionally, this provision deviates from the normal understanding of the agreements wherein the place of signing of the agreement was given some reliance while determining the jurisdiction of the competent authority as according to this article, the place of dispute shall be taken as a basis for determination of the jurisdiction of the competent authority and not the place of signing of the mediation agreement.

Further analysing the article, it can be seen that the article does not specifically state if the mediation agreement should be pre-existing thereby leaving the room for the parties to enter into mediation agreement at any point of time, the agreement so entered would be considered valid as per the Convention[6].

Requirement for Reliance on Settlement – Article 4

Article 4 of the Convention provides for the production of the evidence of the settlement agreement which resulted in mediation as a proof to the competent authority which shall check the authenticity of the evidence. While verifying the authenticity of the documents produced as evidence, the competent authority may call upon the parties relying on the settlement agreement to provide for further documents necessary to substantiate the authenticity of the documents in compliance with the provisions of the Convention.

This provision was added so as to ensure that the Convention is not used for illegitimate purposes such as money-laundering.[7] Therefore, apart from the signatures of the parties in the settlement agreement the makers of the legislation acted cautiously and added a further requirement for furnishing the proof of evidence.

The evidence can comprise of any of the following:

Signature of the mediator on the settlement agreement.
Signature of mediator on a separate document expressly indicating that the mediation had taken place.
Attestation by the administering institution.
Any other valid proof as acceptable to the competent authority.[8]

Refusal to Grant Relief – Article 5

In order to leave no room for ambiguity, Article 5 of the Convention lists down the basic formalities like the signing of the agreement by the parties, evidence of the settlement agreement resulting due to mediation and others that ought to be fulfilled by the parties for getting a relief through the settlement agreement.

Further, the courts of a party to the Convention have the power of refusal in granting relief to the parties as provided under Article 5[9] including of cases wherein:

The party/parties to the settlement agreement are under incapacity.
If the relief prayed for is in contradiction to the public policy of the contracting party;
If the settlement agreement is null, void, inoperative, incapable of being performed under law to which it is subjected;
There is a serious breach on the part of the conciliator as to the standard applicable, having known of that, the parties would not have entered into an agreement.

Further, Article 5(1)(d)[10] also gives an option to the parties to opt out of the Convention by stating it expressly in the terms of the international agreement against any form of relief to be granted.

This provision makes sure that the defences are preserved for protecting the parties for non-compliance of the settlement agreement due to genuine reasons as listed in this article. The other argument in this regard is that this provision can also be misused in a way wherein either party provides for defences which are not foolproof or are taken as a gauze to avoid compliance to the Convention procedures and delay the mediation process. If the later argument becomes true, then the basic feature of mediation being an expeditious and cost-friendly approach is eliminated as this would lead to delay and extra costs of conducting meetings for mediation that could be eliminated.

Reservation –Article 8

Article 8 provides for the reservation clause wherein it gives the freedom to the party to reserve the application of the Convention to which it or any government agency is a party. This clause has been exercised by Iran by making a reservation.

This article further limits the scope of this Convention by stating that the reservation can be made any time by the party and are to be applied only to the extent that the parties have agreed to and additionally gives freedom to the party/parties to withdraw the reservation made at any time.

From the analysis of this article, it can be understood that even though the article expressly omits to provide for authorising reservation by private personals, the parties in the MSAs can agree upon exclusion of the Convention which would be considered as a defence based upon the compliance with the settlement terms.[11] Nextly, even though this provision seems to take away the rights of the party/parties to make an informed choice/self-determination by allowing the States to opt out of the Convention automatically by making a declaration[12], in essence, it would not really affect the private parties who can still opt in to the Convention in lieu of entering into private settlement for mediation. Therefore, this provision is more feasible as it helps the parties in complying with the articles of the Convention provided that both the parties are willing to opt in or opt out or else it might create an imbalance/disharmony in situations where the other party cannot enforce the agreement because of the other party making the reservation in its country[13].

Other important provisions

Article 3 of the Convention provides for the right to invoke the Convention agreement and the general compliance and obligations that are necessary for enforcing the settlement. However, it does not list down the detailed lists of the obligations that ought to be complied by. Thus, it can be inferred that Article 3 providing for the General Provisions is very primary/basic in nature and leaves enough scope for the States to provide for detailed lists of rules, obligations and compliances in their domestic laws that the party(ies) is bound to follow while invoking the provisions of the Convention.

Article 7 of the Convention is an enabling provision which preserves the right of the parties to not to be deprived of any rights that they may have to avail in order to reach the settlement agreement in the manner and extend as allowed by law or the treaties of the parties to the Convention where such MSA is sought to be relied upon. As per the understanding of this provision the States would not be allowed to apply for settlement agreements excluded under Article 1(2) and Article 1(3) as those settlement agreements would fall outside the ambit of the Convention. However, it provides the States with the flexibility to enact domestic laws which could include in its ambit such settlement agreement[14].

Article 12 provides for the participation in the Convention by the Regional Economic Integration Organisations (RIOs) constituted by the sovereign States having the competence over matters governed by the Convention. The RIOs are eligible to sign, approve, ratify and accede to the Convention in which case they shall have the rights and obligations as that of a party to the Convention.

Article 13 acts like an extension to the reservation clause under Article 8. It states that in cases wherein the parties to the Convention has more than one territorial units and the laws in relation to the territorial units are different in each/any territorial unit, in that case, the party has an option to opt in or opt out of the Convention. That is to say, that the party may declare the applicability of the Convention to all or any one or more of its territorial units at the time of signing, ratification, acceptance or accession.

Article 16 of the Convention provides for denunciation of the Convention by a Party to the Convention. It states that the denunciation is to be done by way of a formal notification which shall be addressed to the depository which shall take effect 12 months after the receipt of the notification by the depository.

Further, the Convention delivers a flexible approach of allowing the defending States to use the MSAs as shield by allowing the parties to claim the benefit of the already settled dispute. During the deliberations in the negotiation groups relating to such recognition, there were some nations like European Union (EU) which were reluctant in including recognition as well as enforcement. But on the other hand, it was vehemently argued by some States that it should offer a sword as well as shield to its members. The argument was based on the fact that reorganisation is a crucial prerequisite of enforcement and the defending State should get an equal right as of the complainant, to rely on the settlement agreement.[15]

Major concerns

The major concerns that arise out of the Convention are:

There is no straitjacket formula or standards listed for the qualifications of the mediator. Regulation of such practice cannot be left to the domestic laws as this would create disharmony among the municipal and international laws.
The Convention stresses upon the confidentiality involved in acting through mediation but the cumbersome formalities and compliances provided under Article 1 does not seem to favour the same.
The provision to opt out of the Convention by expressly providing in the terms of the settlement agreement tends to limit the applicability and purpose of the Convention of submitting to the provisions of the Convention and facilitating cross-border international dispute settlement.
The Convention is silent on the form of the enforcement of the MSA. It does not mention whether the enforcement of the MSAs would be done by providing relief in the form of damages, specific performance or any other remedy as required and sought for as applicable as per the legislations of the nation where the enforcement is applied for. This acts as a concern because the laws of the domestic countries differ in their provisions with regard to the provision of relief and hence, the uniformity to be achieved via this Convention will fall apart.

Author’s comment

After analysing the scope of the Convention, the author is of the opinion that the Convention is definitely a way forward for implementing the international framework for using mediation as a dispute settlement mechanism. Further, as more and more States ratify the Convention, it will lead to further promotion and facilitation of international trade and commerce involving less risk and simplified and standardised procedures for enforcing the mediated settlements.

However, it can also be interpreted that the Convention gives much freedom to the States for enforcing the MSAs. For instance, in States where mediation is not highly recognised as a means of settlement mechanism or the States which are unfamiliar with the process of mediation, it would pose a lot of difficulty for the enforcement of the MSA. Thus, the gap in domestic legislation can become a driving factor for non-enforcement of MSA. In absence of such competent framework, the parties are again restricted to litigation or choosing other dispute resolution mechanisms like arbitration or hybrid mechanisms such as the mixture of arbitration and mediation as practiced in Iran.

Conclusion and suggestions

At the end, it can be concluded that the Convention acts as a step forward towards engaging the parties to use mediation mechanism as a widely used phenomenon for the settlement of the MSAs at the international frontier. It would also benefit India in reaching its goal of ease of doing business as the countries ratifying such Convention will have an easy and less antagonistic way of resolving any disputes amicably through mediation and enforce the same by way of this Convention.

However, considering the above concerns as well as the uncertainties involved in the language of the Convention, it is empirical that the domestic laws should make procedural laws clarifying the uncertainty as regards to such provisions. For instance, in cases of the uncertainty as regards to the “enforcement of the mediated settlement” provided under Article 3(1) and the “applicability of the standards” under Article 5(1)(e) the municipal legislation can clearly define as to what all relief would be available to the party/parties seeking enforcement under the Convention.

To solve Concern No. 4 as listed above with regard to the form of relief while enforcing the MSA and to make it harmonious for all the parties entering into MSAs as per the Convention it is imperative that an explanation be provided under General Principles provided under to Article 3 providing for the list of specific cases/instances wherein damages should be provided and when the relief for specific performance should be preferred. Thus, the authors are of the opinion that once the clarity is provided in these aspects, those days are not far away when international mediation will start supplementing international arbitration and the mediation clause is considered as the most viable mechanism for the resolution of cross-border commercial disputes.

* 5th year Law students, Symbiosis Law School, Pune.

[1] Principal Mediator and Engineer, Mediation Resolution Int’l, LLC, d/b/a Power Generation Consultants.

[2] United Nations Convention on International Settlement Agreements Resulting from Mediation, United Nations General Assembly Resolution A/73/198, Preamble (2018).

[3] United Nations Convention on International Settlement Agreements Resulting from Mediation, United Nations General Assembly Resolution A/73/198, Art. 1 (2018).

[4] United Nations Convention on International Settlement Agreements Resulting from Mediation, United Nations General Assembly Resolution A/73/198, Art. 3 (2018).

[5] United Nations Convention on International Settlement Agreements Resulting from Mediation, United Nations General Assembly Resolution A/73/198, Art. 1(2) (2018).

[6] Note by Secretariat, UN Commission on International Trade Law, Report of the UN Commission on International Trade Law, Fifty-first session (25-6-2018 to 13-6-2018), UN Doc. A/ 73/17, at III C.2, available at <https://undocs.org/en/A/CN.9/942>, last seen on 27-1-2021.

[7] United Nations Commission on International Trade Law, Note by the Secretariat, Settlement of Commercial Disputes, International Commercial Mediation: Draft Convention on International Settlement Agreements Resulting from Mediation, UN Doc. A/CN.9/942, at II.B(1) (2-3-2018).

[8] United Nations Convention on International Settlement Agreements Resulting from Mediation, United Nations General Assembly Resolution A/73/198, Arts. 4(1)(a) and (b) (2018).

[9] United Nations Convention on International Settlement Agreements Resulting from Mediation, United Nations General Assembly Resolution A/73/198, Art. 5 (2018).

[10] United Nations Convention on International Settlement Agreements Resulting from Mediation, United Nations General Assembly Resolution A/73/198, Art. 5(1)(d) (2018).

[11] Report of Working Group II (Dispute Settlement) on the Work of its Sixty-sixth Session (New York, February 6-2-2017 to10-2- 2017), UN Doc. A/CN.9/901 (16-2-2017), Para 78 ; UN Doc. A/CN.9/934, United Nations Commission on International Trade Law; Report of Working Group II (Dispute Settlement) on the Work of its Sixty-eighth Session (New York, 5-2-2018 to 9 -2-2018); Report of the UN Commission on International Trade Law, Fifty-first Session (25-6-2018 to13-7- 2018), UN Doc. A/ 73/17, at III C.2 , ¶37-40, ¶68.

[12] United Nations Convention on International Settlement Agreements Resulting from Mediation, United Nations General Assembly Resolution A/73/198, Art. 8(1)(b) (2018).

[13] UN Commission on International Trade Law, Report of the UN Commission on International Trade Law, Fifty-first Session (25-6-2018 to13-7-2018), UN Doc. A/ 73/17, at III C.2 , ¶40.

[14] United Nation Commission on International Trade Law, Report of the UN Commission on International Trade Law, Fifty-fifth Session (3-7-2017 to 21-7-2017), UN Doc. A/73/17, at III B.1, ¶ 19.

[15] Ming Liao, Singapore Convention Series: Refusal Grounds in the UN Convention On International Settlement Agreements Resulting from Mediation, Kluwer Mediation Blog (12-4-2020), available at <http://mediationblog.kluwerarbitration.com/2020/04/12/singapore-convention-series-refusal-grounds-in-the-un-convention-on-international-settlement-agreements-resulting-from-mediation/>, last seen on 27-1-2021.