Singapore Convention: Creating Grounds for International Commercial Mediation

Beginning August 2019, the world community was looking at Singapore in wake of an important Convention on mediation being signed in the name of the country. Why are the countries around the world talking so much about this Convention? Noting that mediation is increasingly used in an international and domestic commercial practice as an alternative to the litigation, the Singapore Convention inaugurated the new window for mediation in cross border commercial disputes. United Nations (UN) Convention on International Settlement Agreements resulting from Mediation to be popularly known as The Singapore Convention is an important development in the domain of the International law.

DEMAND FOR THE CONVENTION

The need for such a Convention stems from a wider concern over enforcing settlements that have been reached through mediation. Aside from cases where a mediated settlement occurs in the context of a pending arbitration (and can, therefore, be converted into an arbitral award), parties can generally only enforce it in the same way as any other contract. In an international context, obtaining a court judgment and enforcing it in a foreign jurisdiction can be very difficult and time-consuming.

While simplifying the enforcement processes for mediation, the Convention will also add credibility to mediation as an international dispute resolution process – especially for cross border disputes. This development is a response to a demand for more choice of alternative dispute resolution methods on a global level.

CASES WHERE CONVENTION DOES NOT APPLY

This Convention is recognizing the value for international trade and mediation as a method for settling commercial disputes. The Convention, however, does not apply to the settlement agreements:

(a) Concluded to resolve a dispute arising from transactions engaged in by one of the parties (a consumer) for personal, family or household purposes;

(b) Relating to family, inheritance or employment law.

(c) Settlement agreements:

(i) That has been approved by a court or concluded in the course of proceedings before a court; and

(ii) That is enforceable as a judgment in the State of that court;

(d) Settlement agreements that have been recorded and are enforceable as an arbitral award.

APPLICABILITY OF THE CONVENTION

This Convention applies to an agreement to be known as the Settlement Agreement resulting from mediation and concluded in writing by the parties to resolve a commercial dispute.  A settlement agreement is “in writing” if it’s content is recorded in any form. The requirement that a settlement agreement is in writing is met by electronic communication if the information contained therein is accessible so as to be useable for subsequent reference.

This Convention applies to parties, which, at the time of the dispute, is international in that:

(a) At least two parties to the settlement agreement have their places of business in different States; or

(b) The State in which the parties to the settlement agreement have their places of business is different from either:

(i) The State in which a substantial part of the obligations under the settlement agreement is performed; or

(ii) The State with which the subject matter of the settlement agreement is most closely connected.

PLACE OF BUSINESS

(a) Place which has Closest relationship with the dispute: If a party has more than one place of business, the relevant place of business is that which has the closest relationship to the dispute resolved by the settlement agreement, having regard to the circumstances known to, or contemplated by, the parties at the time of the conclusion of the settlement agreement;

(b) If a party does not have a place of business: The reference is to be made to the party’s habitual residence.

INGREDIENTS FOR ENFORCEMENT OF SETTLEMENT AGREEMENT

A party relying on a settlement agreement under this Convention shall supply to the competent authority of the Party to the Convention where relief is sought:

(a) The settlement agreement signed by the parties;

(b) Evidence that the settlement agreement resulted from mediation, such as:

(i) The mediator’s signature on the settlement agreement;

(ii) A document signed by the mediator indicating that the mediation was carried out;

(iii) An attestation by the institution that administered the mediation; or

(iv)In the absence of (i), (ii) or (iii), any other evidence acceptable to the competent authority.

The requirement that a settlement agreement shall be signed by the parties or, where applicable, the mediator is met in relation to an electronic communication if:

(a) A method is used to identify the parties or the mediator and to indicate the parties’ or mediator’s intention in respect of the information contained in the electronic communication; and

(b) The method used is either:

(i) As reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in the light of all the circumstances, including any relevant agreement; or

(ii) Proven in fact to have fulfilled the functions described in subparagraph (a) above, by itself or together with further evidence.

PRESENT SIGNATORIES

WAY FORWARD

International communities have welcomed the convention as an important development towards multilateralism. It is the first UN treaty to be named after Singapore. It will give businesses more confidence to opt for mediation to resolve their disputes. The Singapore Convention for Mediation is what the 1958 New York Convention is currently for the arbitration. The Convention signing ceremony was held in Shangri La Hotel at Singapore on August 6-7, 2019. Ministers and senior officials from 70 countries attended the signing ceremony and conference. 46 countries signed the Convention and India was one of them providing an enabling environment to resolve the cross border commercial dispute by mediation. The United States and China were among the important signatories of the treaty.  Singapore was the first to sign. The UN Secretary-General, Stephan Mathias declared the treaty open for signatures. At the 51st session of UNCITRAL on 25 June 2018, the final draft for a Convention on the Enforcement of Mediation Settlements and the corresponding Model Law were approved.

There are three important aspects that follow from this Convention- adoption by countries, adoption by businesses and a strong pool of mediation institutions and practitioners.  States that have signed and ratified the treaty will have to ensure that their courts enforce international commercial settlement agreements.

Today, cross border commercial mediation is a necessity. Preventive diplomacy and mediation are two sides of the same coin. Currently, before the Convention was signed, mediated settlement agreements – which are the result of mediation negotiations between at least two commercial parties in a dispute-cannot be enforced across country borders. The courts of signatory countries are now expected to handle applications – either to enforce such settlement agreements or to allow a party to invoke the agreement to prove that the matter has already been resolved.

After three years of vigorous debate with participation by 85 member states and 35 IGOs/NGOs, the UNCITRAL Working Group II has created an instrument which aims to implement an international regime for the enforcement of the mediated settlements – similar to the  (New York Convention).

Singapore was recommended to host the signing by the UN Commission on International Trade Law (UNCITRAL). During the ceremony, Singapore also signed a Memorandum of Understanding with the UN for the building of a UNCITRAL Academy here, which will organise future instalments of the Singapore Convention Conference, among other things. The next such conference has been planned for September 1, 2020, next year. Mr Shanmugam and UN Assistant Secretary-General for Legal Affairs Stephen Mathias jointly named an orchid “Aranda Singapore Convention on Mediation” to mark the historic signing of the convention.

This Convention is a huge step in encouraging the use of mediation on an international level, presenting it as a viable alternative to arbitration and litigation for certain disputes.  In order for the Convention to come into force, it must be ratified by at least three member states. 

Wider use of mediation at an international level could make it easier to navigate the differences between jurisdictions as well as providing an alternative to adversarial dispute resolution methods. This Convention was open for signatures in Singapore on August 7, 2019, and thereafter in New York at United Nation headquarters.