JORGE ARTURO GONZÁLEZ | LEGAL JARGON WRITER
On 12 September 2020, history was made when the Singapore Mediation Convention entered into force. To this date, five States (Singapore, Fiji, Qatar, Saudi Arabia, Belarus and Ecuador) have ratified the Convention, whereas a total of 53 States have signed it, pending ratification. US, China and India are among those States that signed the Convention but are pending ratification.
Mediation is an alternative dispute resolution (“ADR”) mechanism, where the parties appoint an independent and impartial third party to assist them in reaching a settlement. As the third party, the mediator eases communication and tries to facilitate an agreement between the parties, but cannot issue a binding award.
Scope and purpose
The Singapore Mediation Convention is the first of its kind. This instrument makes settlements resulting from mediation internationally enforceable. Although mediation has always been a very popular ADR mechanism in domestic legal systems, there is currently an enforcement deficit internationally.
The problem arises when, after successfully settling a dispute through mediation, a party fails to hold its end of the bargain. Unlike in arbitration, where international awards are almost universally enforceable, there are currently no international mechanisms to enforce a settlement resulting from cross-border mediation.
The Singapore Mediation Convention aims to change this situation, by enabling parties to seek relief before State courts, which will be bound to enforce international settlement agreements under the Convention (article 3). At the same time, the grounds for refusing to grant relief that a State court can invoke are restrictive (article 5). By creating this system, the Convention has the potential to catapult mediation into widespread international use, providing an additional option for companies seeking to settle disputes arising from international business transactions.
Nonetheless, the scope of the Convention is limited, as it applies exclusively to commercial mediation, excluding consumer, employment, family and inheritance law matters (article 1). You can access the full text of the Convention on the official website: https://www.singaporeconvention.org/
Importance for companies
The potential for the Convention is enormous. If it were to be adopted globally, companies should seriously consider mediation as an optimal mechanism to settle international disputes, if they do not already. With regards to both arbitration and litigation, mediation is more cost-efficient and less adversarial. Furthermore, if the Convention is successful, arbitration and mediation will be on a level playing field with regards to ease of enforceability.
For now, however, the practical impact of the Convention is still limited. This is because the realization of the Convention’s potential depends upon its political success. The Singapore Convention is, in this regard, compared to the 1958 New York Convention, which is largely considered to be the foundation instrument for international arbitration (and it precisely makes arbitration awards internationally enforceable). The success of the New York Convention stems from the fact that it has been adopted by 165 Contracting States.
That 53 States have at least signed the Singapore Convention is a positive sign. Nonetheless, a less positive indication is that neither the European Union nor its Member States have done so, amidst criticism that the Convention is actually unnecessary and that in practice there is rarely a need for enforcement of settlement agreements.
Meanwhile, the UK has not signed either. On 28 February 2020, the government issued a policy statement on this possibility, announcing that it had “not taken a formal decision yet”. However, adopting the Singapore Convention could be an important step to safeguard the status of the UK as a dispute resolution forum, in light of Brexit.
Importance for commercial lawyers
Irrespective of the adoption of the Singapore Convention within the UK, it can still be a useful instrument for commercial lawyers. The Convention does not follow a rule of reciprocity, so a settlement agreement resulting from mediation will be enforceable in any Contracting State, as long as the settlement is international (meaning, for example, that at least two parties to it have their places of business in different States). Therefore, a UK-based company could enforce a cross-border settlement agreement in any jurisdiction where the Convention has been adopted.
It is possible that the rise of mediation will impact dispute resolution practices within law firms in Europe, as they could be interested in pursuing new business opportunities. In the coming years, the CJEU Achmea judgement and the termination of intra-EU investment treaties will continue to heavily impact the international arbitration landscape within Europe. Perhaps it will be the “big crunch” of arbitration that will boost the “big bang” of mediation…
Note: the title from this post is taken from the following article: Sihombing, Sala. UNCITRAL Convention, Mediation’s Big Bang: Can Mediation Challenge Arbitration’s Dominance? Australasian Dispute Resolution Journal, Vol. 30 (2019).
Jorge Arturo González
Jorge is a Law student from Universidad de Costa Rica. During his studies, he completed an exchange program in Utrecht University (Netherlands), participated in international moot competitions, and interned in corporate law firms, a startup incubator and the Costa Rican Congress. He is interested in tech law, international business law and dispute resolution.
Feel free to connect @ https://www.linkedin.com/in/jorgegonzalez12/
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