– Jotsaroop Singh*
The United Nations Convention on International Settlement Agreements Resulting from Mediation or the Singapore Convention on Mediation is a landmark convention in the international sphere designed to increase the enforceability of mediation settlement agreements worldwide, a problem faced by such agreements due to the absence of a standardised convention. The Article explores if it has heralded in a new era for commercial mediation, or if is it made out to be more than it is
Mediation focuses on reaching a mutually agreed upon solution by involving a neutral third party to help move along the conversation, in a non-adversarial and confidential environment. Mediation is a form of dispute resolution which has developed in many societies and civilisations across the world in an independent manner. In India, disputes have historically been resolved with the village Panchayat acting as the Mediators. While Mediation has historically found use in personal disputes involving familial matters such as Divorce, Alimony, Medical Care, etc. Recently, commercial mediation has developed into a fully-fledged subfield of Mediation, which involves the resolution of commercial disputes through Mediation.
The proliferation of Commercial Mediation in the international arena could be reasonably construed as the main reason for the development of the Singapore Convention on Mediation (hereinafter the Convention). The convention allows for the enforcement of settlement agreements reached upon by parties belonging to different states. The convention has applications in various areas, but this article will focus on 2 of them primarily: Increasing Confidence in Mediation and disputes arising from China’s Belt and Road Initiative (BRI).
Confidence in Enforcement of Settlement Agreements
While conventional wisdom might dictate that an international convention for settlement agreements must be essential for the growth of Mediation as a global dispute resolution method, by allowing for international enforcement of settlement agreements directly, rather than through proving the breach of contract and then subsequently enforcing the judgement, data collected from mediators worldwide might agree to the contrary of this sentiment.
Mediation is, by its very nature, a process that essentially allows for parties to have the maximum possible control over a process and allows them to mutually reach upon a solution and as a result, there are very rare instances of settlement agreements not being enforced. Indeed, at the Global Pound Conference Series events organised across the world in 2016-17 as a forum for discussion on Alternative Dispute Resolution, as per the report on the series by the International Mediation Institute, the same query was asked of various experienced delegates across the world and there was nary an instance when such an issue occurred.
But, simultaneously, a high number of delegates, especially in Asian and African jurisdictions, expressed interest in an international convention or agreements for enforcement. One could infer that this means that while Mediation is relatively successful as a dispute resolution mechanism, the presence of the convention will help bolster the image of the process as being even safer by ensuring enforcement of agreements, thus bolstering confidence in the mechanism, as the New York Convention did and does for Arbitral Awards.
Mediation and BRI Disputes
The BRI is a comprehensive economic endeavour which involves contractors, builders, companies, and governments across the world from more than 70 countries in a comprehensive project. This can give rise to complex disputes which tend to cross borders and require efficient resolution. Currently, most of these disputes are issue that may arise in the future, but we are already seeing instances where Chinese investors may feel that the dispute resolution was not in their favour as it occurred in the courts of the investee country. One example may be of a Kenyan court blocking construction on a railway project in June 2019. Thus, considering the issues of bias and equity at hand, and taking into account chinese preferences for preservation of the commercial relationship by using less adversarial methods and consensus building methods first, these disputes would be ideal for resolution through a combination of Mediation and Arbitration.
In accordance with this, an international panel of mediators was instituted in January 2019 by the Singapore International Mediation Centre and the China Council for the Promotion of International Trade for resolution of BRI disputes. Other international institutions are also developing protocols designed specifically for resolution of BRI disputes, such as the ICC, which published its recommendation of a tiered approach of Mediation and Arbitration for BRI contracts.
The comprehensive use of Mediation as part of the resolution of BRI disputes will undoubtedly increase the use of Mediation across jurisdictions and might also lead to the adoption of the convention worldwide. But the convention has some shortcomings which could limit its use and applicability.
Exclusion of Agreements
As per Article 1 (3) of the Convention,
“This Convention does not apply to:
(a) Settlement agreements:
(i) That have been approved by a court or concluded in the course of proceedings before a court; and
(ii) That are enforceable as a judgment in the State of that court;
(b) Settlement agreements that have been recorded and are enforceable as an arbitral award.”
This provision intends to prevent overlapping of jurisdictions with the New York and Hague Convention on Choice of Court Agreements by explicitly excluding arbitral awards from its ambit.
In case of court orders, the interpretation becomes a bit more ambiguous. It is not clear whether this includes a situation where, although the settlement agreement is not immediately enforceable per se, there is a right for the parties to apply to a court for an order that it be enforceable; for example, the right that currently exists in EU Member State courts in the case of EU cross-border mediated settlements, pursuant to the Mediation Directive.
Additionally, the Mediation Directive will hold precedence over the Convention in case of a conflicting rule, as per Article 12 (4) of the Convention, thus severely limiting the scope of the convention as an application in EU states can only be made with the consent of both parties as per the Mediation Directive. While the EU is currently considering whether to sign the convention as a “regional economic integration organisation” under Article 12 of the Convention or as independent states, this point is a pertinent one to consider as with regards to the application of the Convention in EU states, which shall be hindered nonetheless by the application of the Mediation Directive.
As per Article 5 (1) (d), the competent body may refuse to grant relief if ”Granting relief would be contrary to the terms of the settlement agreement.” This Article essentially allows agreements to opt out of the convention by allowing for a refusal to grant relief as per the convention. This view is supported by the travauxpréparatoires, parties would be allowed to “contract out” of enforcement of their settlement agreement under the Convention by so providing in their settlement agreement.While courts may undertake a very strict interpretation of the clause, a very well-constructed clause in settlement agreements shall allow parties to easily avail this defence.
As per Article 8 (1), “A Party to the Convention may declare that:
(a) It shall not apply this Convention to settlement agreements to which it is a party, or to which any governmental agencies or any person acting on behalf of a governmental agency is a party, to the extent specified in the declaration;
(b) It shall apply this Convention only to the extent that the parties to the settlement agreement have agreed to the application of the Convention.”
The first provision shall be tricky in large international infrastructure contract disputes, such as those pertaining to the BRI. These contracts tend to usually involve at least one government entity, and in case of BRI contracts, may involve more. Such a declaration by any of the governments involved would automatically disqualify the settlement from being enforced under the Convention, which could potentially reduce confidence in mediated settlements.
The second provision is the one that faces the most challenge, as the provision will only allow enforcement of a settlement agreement under the Convention if the parties to the agreement allow so, essentially creating the requirement of an exclusive jurisdiction clause in the agreements in order to ensure enforcement in specific jurisdictions. This provision, while intended to protect the voluntary nature of Mediation by allowing parties to choose to enforce under the Convention, creates an unnecessary hindrance for the parties involved because such a declaration in any of the member states will create the need for an exclusive jurisdiction clause, which may lead to disagreements and hinder the process. Ultimately, this provision creates more issues than it solves by creating a patchwork of jurisdictions where the convention has opt-in jurisdictions and where it is automatic.
The Convention presents some ambiguities and shortcomings in the text which may cause issues down the road. The application of the Convention will be restricted in the EU due to the text itself restricting application, while BRI cases might face roadblocks in jurisdictions which exclude Government entities from the application of the Convention. The reality for these 2 scenarios, however is that until the relevant jurisdictions ratify the Convention, which is currently in its infancy anyway, we can only discuss in theoretical terms any such outcomes.
But, an important point to consider is the voluntary nature of Mediation. Mediation, as a process, is specifically geared towards allowing the parties to themselves arrive at a solution. This voluntary approach has ensured that historically, mediation agreements have rarely, if ever, required enforcement through a court order.
This essentially allows to understand the core intent of the Convention, which is essential to bolster the image of Mediation, as a standalone dispute resolution method or along with other methods such as Arbitration, as a highly viable and successful method of Dispute Resolution which allows the parties to arrive at an amicable solution.
The Singapore Convention has often been compared to the New York Convention in its unprecedented value to a field of ADR, but we must also acknowledge that the New York Convention is for Arbitration, a much more adversarial approach than Mediation, which, as illustrated, has more satisfied customers than not.
The Singapore Convention could exist merely to reassure mediating parties of recourse, and even that would be a fulfilment of its core purpose.