Singapore Convention on Mediation: Better Enforcing Cross-Border Mediation Agreements

800px-Aerial_view_of_the_Civic_District,_Singapore_-_20110224
Image by William Cho, 2011 (Wikimedia Commons)

By Jing Zhi Wong

Enforcing mediation agreements overseas can often be difficult. The proposed Singapore Convention seeks to simplify the process.

 

Arbitration, Mediation and ADR

In commercial law, alternative dispute resolution (ADR) methods like arbitration and mediation are becoming increasingly popular in resolving cross-border commercial disputes.

Arbitration is the most formal form of ADR. It is a court-like process. It involves an arbitrator making a binding award (judgment-like order) according to arbitration rules set out in the New York Convention and Model Law. One key significance of arbitration is that the New York Convention enables an arbitration award issued in one contracting state to be freely enforced in any other contracting state.[1] One does not have to go through a complicated legal process to enforce an arbitration award overseas.

Mediation is a less formal form of ADR. It is cost-effective, flexible and efficient. It is particularly attractive for businesses who wish to preserve existing relationships and leave open the possibility of working together in future. Disputes are resolved through open communication facilitated by a mediator (and sometimes legal representation).  Successful mediation usually results in a contractual agreement to settle.

 

The Problem with enforcing Cross-Border Mediation Settlement Agreements

Under the current framework, mediation agreements do not enjoy the same treatment as arbitration awards – there is no universal cross-border enforceability mechanism. Mediation agreements are treated as ordinary contracts. Enforcing them, should one party later renege on his obligations, often require a plaintiff to follow a complicated legal process.

Where the parties all belong to the same state, enforcement of the settlement agreement is simple. A party (plaintiff) simply brings an action in a local court against the other party (respondent) for breach of contract, and obtains a local court order to enforce that agreement.

But where the parties belong to different states/countries, or where assets are located in different states/countries, enforcing the mediation agreement becomes exponentially complex:

There are two main hurdles:

One, the mediation agreement usually contains a jurisdiction clause (or an implied one), where the parties agree to be bound by the laws where the contract was made – the lex loci contractus. From this two difficulties often arise. First, a contract entered into in country A may not be enforceable country B. The courts of country B may not be competent to hear disputes arising out of a contract made in country A – forum non competens. Second, one country’s court may dismiss a case when the judge determines that the case is better adjudicated in another country’s Court – forum non conveniens.

Two, which follows, a plaintiff would have to obtain a judgment from a court in the jurisdiction where the contract was made, and attempt to enforce that judgment in the other country. This is, however, complex and tricky. Where overseas country has statutory provisions regarding the enforcement of foreign judgments, this task may be simpler. Otherwise, the plaintiff will have to commence fresh parallel proceedings in the overseas country, either: [2]

  1. Suing for the debt arising from the judgment obtained in the country where the contract was made, or
  2. Bringing a separate action on the original cause of action for which judgment was obtained in country A, and rely on country A’s judgment as creating an estoppel which prevents the respondent from raising any defence.

Ultimately, the plaintiff has to do twice the amount of work, if not more, to enforce a mediation agreement overseas.

 

The Proposed Singapore Convention

The recent 51st session of the United Nations Commission on International Trade Law (UNCITRAL) held on 25 June 2018 saw the proposal of a draft model law on the cross border enforcement of international settlement agreements resulting from mediation – the proposed Singapore Convention. The proposed model law seeks to extend the principles of cross-border enforceability enjoyed by arbitration awards (New York Convention) to international settlement agreements arising from mediation.

 

What may we expect?

The proposed Singapore Convention, like the New York Convention, will provide the framework for cross-border mediation settlement agreements entered into in one country to be enforced freely in any signatory state.[3] This may negate the forum non competens/forum non conveniens limitations. Parties will likely be able to enforce settlements without having to go through complicated legal processes to enforce contracts made overseas, saving both time and costs.

With the Convention expected to come into force sometime after August 2019, simpler procedures to enforce cross-border mediation agreements could increase confidence for small and medium enterprises to engage in overseas trade. Businesses will be able to rely on cheaper dispute resolution methods when needed, especially where arbitration is not cost effective in resolving lower value cross-border disputes. Companies will be able to rely on less adversarial dispute resolution methods while seeking to preserve existing relationships. Businesses will also be able to better enforce breaches of mediation agreements with fewer barriers to justice.

 


Jing Zhi (Benjamin) Wong is Vice-President of the UWA International Law Club, and first year JD student at the University of Western Australia. 


[1] Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 10 June 1958 (entered into force 7 June 1959) Art 3-5.

[2] Beverly Newbold and Tamlyn Mills, ‘Chapter 3: Australia’ in Sam Friend, Suzie Levy and Alan Falach (eds), The International Comparative Legal Guide to Enforcement of Foreign Judgements 2016 (Global Legal Group, 2016) 12-3.

[3] Settlement of commercial disputes – International Commercial Mediation: draft model law on international commercial mediation and international settlement agreements resulting from mediation, note by the secretary, UNCITRAL 51st session, 2 March 2018, A/CN.9/943, Art 15-19.

See also, Singapore Parliamentary Debates, Official Report (6 August 2018)<https://sprs.parl.gov.sg/search/fullreport?sittingdate=6-8-2018> at 56 – 57 (accessed 16 November 2018) (K Shanmugam, Minister for Law).

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