The Singapore Convention

The “Convention on International Settlement Agreements Resulting from Mediation” (“the Singapore Convention or the Convention [1] ”) was signed on August 7, 2019 in Singapore by 46 states including the US, China, India, Laos, Malaysia, Philippines, Republic of Korea, Sri Lanka, Brunei and Singapore.

The Convention seeks to streamline the enforcement of international settlement agreements, as the “New York Convention” has done for arbitral awards. The Convention was negotiated and agreed under the auspices of the United Nations Commission on International Trade Law (“UNCITRAL”).

Why it matters

As we know, mediation is a process wherein the parties meet with a mutually selected impartial and neutral third-party mediator who assists them in the negotiation of their differences and in finding a resolution to the dispute. If the parties reach an agreement at the end of the mediation process, this is regularly recorded in a written settlement agreement (“Agreement”). Mediation is known as a cost-effective private and flexible process that can lead to a win-win solution to the parties especially when it is intended to preserve the commercial-relationship of the parties. It is an established less formal method of dispute resolution especially used in the commercial sector. 

However, one of the main disadvantages of the mediation process has been so far the absence of international regulations regarding the direct enforcement of the resulting Agreement. If one party refused to comply with the Agreement, the other party had to sue regularly under the Agreement in order to enforce its claims.

The fact that it is often necessary to take legal action in order to enforce the Agreement takes away the main advantages of mediation as to why mediation was chosen in the first place.

The Convention could help to significantly mitigate this disadvantage in the future.

In accordance with the Convention, the signatory states will now recognize and enforce the terms of international mediated Agreements without requiring the non-breaching party to sue under the Agreement. This is a further step towards establishing mediation as a reliable instrument for settling commercial disputes and is likely to lead to increased use of mediation proceedings.

Of course, to enforce an Agreement, it must first be ensured that it is valid. Which brings us to the next question:

What conditions must be fulfilled for an Agreement to be valid under the Convention?

(Article 4 of the Convention)

The Convention applies to an Agreement resulting from mediation and concluded in writing by parties to resolve a commercial dispute which, at the time of its conclusion, is international. “International” means according to Article 1 of the Convention that at least two or more parties to the Agreement have their place in business in different countries or the country with a close connection to the performance of the Agreement is different to the place of business of the parties.

For the Agreement to be enforceable, only the following two conditions must be met:

1. An Agreement signed by the parties
2. Evidence that the Agreement resulted from mediation

In addition to that, the competent authority may require any necessary document in order to verify that the requirements of the Convention have been complied with.

In which cases do the Convention States have reason to refuse to grant relief?

Article 5 of the Convention states cases in which the Convention States are allowed to refuse to grant relief: First of all, the party against whom the relief is sought has to request that the relief is refused. In addition to that this party must prove to the competent authority at least one of the following scenarios:

1. A party to the Agreement was under some incapacity;
2. The settlement agreement sought to be relied upon: 
   1. Is null and void
   2. Is not binding, or is not final, according to its terms; or 
   3. Has been subsequently modified; 
3. The obligations in the settlement agreement: 
   1. Have been performed;
   2. Are not clear or comprehensible;
4. Granting relief would be contrary to the terms of the settlement agreement; 
5. There was a serious breach by the mediator of standards applicable to the mediator or the mediation without which breach that party would not have entered into the settlement agreement; 
6. There was a failure by the mediator to disclose to the parties circumstances that raise justifiable doubts as to the mediator’s impartiality or independence and such failure to disclose had a material impact or undue influence on a party without which failure that party would not have entered into the settlement agreement.

Furthermore, the competent authority of the Party to the Convention where relief is sought under Article 4 may also refuse to grant relief if it finds that: 

1. Granting relief would be contrary to the public policy of that Party; 
2. The subject matter of the dispute is not capable of settlement by mediation under the law of that Party.

When and how does the Convention apply?

According to Article 14, the Convention shall enter into force six months after the third signatory state has formally ratified it.

It is to be expected that the signatory states will need some time to establish enforcement mechanisms to enable the Singapore Convention to enter into force.

Conclusion

It can be assumed that the convention will enormously increase the enforceability of settlement agreements. Therefore, it is likely that mediation is about to increase in the future and parties should consider it as a method of dispute resolution alongside arbitration and litigation. This is especially true if a party has an interest to maintain business relations with the other party wherever possible.