We are soon to have a new international regime for the enforcement of mediated settlement agreements, which it is hoped will achieve for mediation what the New York Convention has for international arbitration.
The UN Convention on International Settlement Agreements Resulting from Mediation was finally approved in June 2018 by UNCITRAL (the United Nations Commission on International Trade Law). To be known as the Singapore Convention, it is the culmination of nearly four years of negotiations within a UNCITRAL working group, involving representatives from over 85 States and 35 NGOs. It is accompanied by a corresponding Model Law (which replaces the existing Model Law on Conciliation).
The Convention will oblige contracting States (except in specified limited circumstances) to recognise international settlement agreements resulting from mediation in commercial disputes, either to enforce the agreement or allow it to be invoked as a defence to a claim (that is, either as a sword or a shield). This will avoid the need for a party to commence proceedings for breach of contract in the appropriate national court and then try to enforce the resulting judgment internationally where required (or to have the agreement recorded as an arbitral award and enforce it as such).
The Convention is expected to be open for signature from 1 August 2019 and will come into force upon ratification by at least three contracting States.
Do we need it?
This development may come as something of a surprise to those experienced in commercial mediation. In practice, parties failing to honour the agreement they have struck at mediation is quite a rare occurrence. Indeed, at several of the recent Global Pound Conference Series (GPC) events around the world, enquiries as to whether the vastly experienced delegates had encountered a single such instance were met with silence. Having gone through the mediation process and reached a solution by negotiation (rather than having it imposed by a court or arbitral tribunal), commercial parties do tend to stick to their bargain.
It was therefore a notable feature of the data collected from the GPC Series that delegates were nevertheless broadly supportive of legislation to facilitate the enforcement of mediated settlements (with remarkably strong support for this in the Asia-Pacific region).
In all likelihood, the explanation lies in the fact that, while enforceability is not actually a substantial problem in jurisdictions where mediation is well-established, globally there still remains much variability in understanding, experience and willingness to use mediation. Perhaps the real value of the Convention therefore lies in its potential to provide reassurance and confidence in the mediation process. The mere existence of a widely applicable international enforcement regime, akin to the New York Convention, has the potential to boost the credibility and status of mediation as a reliable option for commercial parties in international disputes.
If that is where the Convention’s real value lies, the features of the regime that will have the most impact on how successful it is may be those concerning its scope of operation and whether it will in fact be perceived as widely applicable.
Is its scope too limited?
Exclusion of agreements enforceable as arbitral awards or court orders
The Convention expressly excludes from its operation settlement agreements that have been recorded and are enforceable as arbitral awards, as well as agreements that have been approved by a court or concluded in the course of court proceedings and “are enforceable as a judgment in the State of that court”.
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. If such settlements were to be excluded from the Convention’s scope, it would unnecessarily limit its application, particularly given that such applications under the Mediation Directive can only be made where all the parties consent, which obviously does not assist enforcement once breach has already occurred.
The decision to exclude such agreements from the Convention’s scope was intended to avoid overlap with other international regimes, such as the New York Convention and the Hague Choice of Court Convention. It is not immediately apparent why an overlap between such regimes, potentially giving parties multiple options for enforcement, would necessarily be problematic. (Indeed, the Hague Convention itself allows parties to take advantage of any more favourable enforcement regime available under another treaty.) In any case, the limited ratification of the Hague Convention to date does cause one to question whether it was appropriate to narrow the scope of the Singapore Convention so as to operate around it.
Further, given that the Hague Convention only applies where there was an exclusive jurisdiction clause, there is clearly scope for a settlement agreement to fall through the gaps and not benefit from any international regime if it is enforceable as an order of a court (so the Singapore Convention won’t apply) and also does not emanate from an exclusive jurisdiction clause (thereby also failing to engage the Hague Convention).
Party discretion whether to apply the Convention
Perhaps the feature of the Convention that presents the greatest challenge to it achieving a wide application globally is a reservation provision, allowing States that ratify the Convention to elect to apply it only on an ‘opt-in’ basis, i.e. only insofar as the parties to a settlement agreement have specifically agreed that the Convention will apply. This reservation was apparently a compromise between working party members who wanted the opt-in approach to apply in all cases and those who objected to it applying at all.
On a practical level, it is not clear at what stage the opt-in from the parties would need to be exercised. Presumably this would need to be at least within the settlement agreement itself (or preferably earlier, such as in the mediation agreement) if it was to provide certainty to the parties as to their likely enforcement options before they commit themselves.
The fact that the Convention may operate on an opt-in basis in some States but not others has the potential to result in an imbalance between parties if an agreement was enforceable against one party because its home jurisdiction (or wherever its relevant assets were) did not apply the opt-in, but unenforceable against the other because its home jurisdiction did. In cases where there is an imbalance of power between the parties, the stronger party could potentially exercise its bargaining power to compel its opponent to agree to opt-in or the contrary, depending on which scenario would be most beneficial to it in terms of pursuing or resisting enforcement in specific jurisdictions. Neither of those outcomes is conducive to encouraging wider usage of international mediation.
However, the more fundamental objection to the opt-in is its potential to limit the overall extent to which the Convention will apply globally. Giving parties (in some States) the discretion whether to apply it seems to risk it being applied in a patchy fashion, contrary to the basic objective of establishing a comprehensive regime under which mediated settlements are widely enforceable. There must be some doubt whether the New York Convention would have achieved what it has for the status of international arbitration if it only applied where parties had specifically opted in to the regime.
The arguments put forward in the working group in support of the opt-in reservation were less than convincing. It was suggested that such an option was necessary in the interests of party autonomy and to avoid undermining the amicable and voluntary nature of mediation. That arguably conflates the mediation process (which is of course voluntary, both as to whether to participate and whether to agree any particular settlement) with the resulting settlement agreement. Once parties agree and sign formal settlement terms, it is difficult to see how holding them to their agreement could in any way undermine the voluntary nature of mediation (any more than holding parties to, say, their construction contract undermines the voluntary nature of their negotiations to enter into such a contract).
However, while the opt-in reservation has the potential to restrict the new regime’s scope in practical terms, it remains to be seen whether this will in fact limit its success in promoting the status of mediation. Much will depend on how many States ratify the Convention and what proportion of those exercise the reservation. Indeed, if the existence of the opt-in option results in a greater number of States ratifying the Convention than would have been the case without it, that may well outweigh any downsides in terms of patchiness in its practical operation. Ultimately, if the key to increasing the global usage of international mediation is changing perceptions and creating greater confidence in the process, then simply the existence of an international enforcement regime that is widely ratified (even if not comprehensively applicable) may be sufficient to achieve this.