International Mediation Update: the Singapore Convention in force on 12 September 2020

International

The United Nations Convention on International Settlement Agreements Resulting from Mediation (known as the “Singapore Convention”) comes into force tomorrow on 12 September 2020. The Singapore Convention is a significant development in international commercial dispute resolution, with the concept of swift and cost-effective enforcement of international mediation settlement agreements at its core. We provide a summary of the Convention below as well as an update on the UK and Singaporean positions.

The Singapore Convention

The Singapore Convention opened for signatures on 7 August 2019 (see our previous Law-Now here). It creates a harmonised framework for the enforcement of international mediation settlement agreements to avoid the need for full court proceedings; an attractive option to commercial parties.

The Convention provides each State shall enforce an international mediation settlement agreement in accordance with its own rules of procedure and under the conditions of the Convention. (“International” being defined as where at least two of the parties have their place of business in different States; or the State of the parties’ place of business is different from the State in which a substantial part of the obligations under the settlement agreement is performed / with which the subject matter is most closely related.) A party can seek relief under the Convention by supplying evidence to the competent authority in the State (i.e. a court) that the settlement agreement resulted from mediation (such as the mediator’s signature on the settlement agreement or other document indicating that the mediation was carried out), after which there are limited grounds on which the court may refuse to grant the relief sought. 

These limited grounds for refusal include that the settlement agreement is “null and void, inoperative or incapable of being performed under the law to which the parties have validly subjected it”; it is not binding; the obligations in it have been performed or they are not clear or comprehensible; there is a serious breach by the mediator of the applicable standards without which a party would not have entered into the settlement agreement etc; or if the court finds granting relief would be contrary to public policy. Arguably these grounds are not as wide as some may like and may not encapsulate all of the defences potentially available to resist enforcement under the applicable law (such as the doctrines of estoppel and rectification under English law). In any case, States have the option to sign up to the Convention whilst excluding settlement agreements to which it (or any governmental agency as specified) is a party, or to apply the Convention only to the extent that parties to the settlement agreement agree or “opt in” such that it applies, which would put the choice in the parties’ hands.

Parallels have been drawn with the 1958 New York Convention, which provides a framework for the recognition and enforcement of foreign arbitral awards that is well used globally. However, unlike the New York Convention, the Singapore Convention does not have a reciprocity obligation, meaning a mediation situated anywhere globally could be recognised and enforced in a ratifying state.

On the first day the Singapore Convention opened for signature (7 August 2019), 46 States signed up including the US and China. This rose to 53 by January 2020.At the time of writing (September 2020), 5 of these signatories have ratified the Convention (Singapore, Qatar and Fiji for whom the Convention comes in to force on 12 September 2020, followed by Saudi Arabia in November 2020 and Belarus in January 2021). Neither the EU nor its member states individually have signed the Convention yet. This may be because the EU is deliberating whether member states are to sign up individually or whether the EU will sign on behalf of all its members as a regional economic integration organisation.

The Singaporean Perspective

Unsurprisingly, Singapore has been one of the strongest proponents of the Convention. The Singapore Convention on Mediation Act 2020 received Presidential assent on 17 February 2020. Singapore, along with Fiji, became the first two countries to deposit their instruments of ratification of the Convention on 25 February 2020.

The Convention is generally viewed as strengthening Singapore's offerings as a leading global dispute resolution hub and as stated by the Singapore Senior Minister of State of Law, Mr Edwin Tong SC during the second reading of the Singapore Convention of Mediation Bill in Parliament, will provide “businesses with a full suite of user-centric options to resolve their cross-border disputes, whether through litigation, arbitration or mediation”.

Mediation as a tool to resolve commercial disputes has often been viewed as being more consistent with Asian sensibilities and culture, and Singapore’s efforts at promoting the certainty of mediated settlements are apparent from the enactment of the Singapore Mediation Act 2017 and the establishment of a complete commercial mediation ecosystem, from the establishment of the Singapore Mediation Centre and the Singapore International Mediation Centre providing mediation services to the setting up of the Singapore International Mediation Institut acting as an independent professional standards body for mediation.

In keeping with the Singapore Government’s support for mediation, the Convention is ratified in Singapore without either of the two reservations allowed under the Convention, meaning that the Convention will apply to settlement agreements that the Singapore Government is a party to; and that it will apply automatically to parties to a settlement agreement wishing to enforce it in the Singapore courts unless the parties had themselves opted out of the Convention.

The UK Approach

The position the UK will take is currently unclear. A closed consultation exercise was carried out by the UK Government in 2019, but the results have not been shared. A brief draft statutory instrument was then published in May 2020 illustrating the Convention’s potential implementation in England and Wales (available here), noting that the Convention should be “read together with any reservations or declarations made by the United Kingdom at the time of the approval”. However a policy statement from the UK Government in June 2020 in relation to a private international law bill and discussions at its second reading on 2 September 2020 (available here and here), confirmed that no formal decision had yet been taken on whether the UK should join the Convention and that further considerations is required, including necessary engagement with the sector.

Implications

The Convention comes into force at a time when there is growing momentum around mediation.The impact of the Covid pandemic on the civil justice system has seen a wide encouragement of parties to look to alternative means of resolving disputes. In April and May 2020 the British Institute of International and Comparative Law issued “Breathing space – a Concept Note on the effect of the pandemic on commercial contracts” and the follow up, Concept Note 2. These noted that the damage which can happen as commercial parties trigger default clauses can be mitigated by agreement, or by mediation “both of which must be encouraged and will have a crucial role”. In May 2020, the Singapore International Mediation Centre launched the SIMC COVID-19 Protocol with the aim of providing “a swift and inexpensive route to resolve commercial disputes during the COVID-19 period” by introducing expedited online mediation procedures that will be organised within ten working days from the parties filing for mediation. In May 2020 the UK Government Cabinet Office published guidance on “Responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency” (see our previous Law-Now here). This stated that “The Government would strongly encourage parties to seek to resolve any emerging contractual issues responsibly – through negotiation, mediation or other alternative or fast-track dispute resolution – before these escalate into formal intractable disputes”.  In the meantime Scotland has been considering the role of mediation in the civil justice for some time, as highlighted by a major report and the Scottish Government’s response (see our previous Law-Nows hereand here)Whilst elsewhere the LCIA has updated its Mediation Rules for the first time in eight years, effective from 1 October 2020. These reflect advancements in technology and aim to make the mediation process more accessible and efficient for its users. This chimes with a significant increase in mediations being carried out online during the pandemic.

The Convention is a genuine step forward for mediation on the international stage. The benefit of the Convention is not only that it provides the machinery necessary to enforce settlement agreements in international mediations (which arguably in practice are not commonly defaulted upon), but that it reassures potential mediation participants that any agreements they reach will be enforceable. This is a critical step in growing and developing mediation globally. After significant initial interest, it remains to be seen how many States will ratify it. Clearly the more that do, the more effective the Convention will be in opening the door for swift enforcement across a number of jurisdictions.

References: United Nations Convention on International Settlement Agreements Resulting from Mediation.