It has always been a mystery to us why cross border commercial disputes are rarely settled using mediation. The answer usually given is that if parties reach a mediated settlement there is still a problem enforcing that deal across international borders. That is because the settlement deal is still just a contract that will require a court in another country to enforce. It's a bit like trying to take intricately carved wooden objects through Customs into a foreign country. You might get them in but the lining up in the Customs queue and red tape barely make it worthwhile.

The good news is that we're well underway to having a global regime which allows easy enforcement of these agreements across the world.

The current system works (or doesn't) like this:

You are a company based in Australia, contracting with a German company for the wholesale of authentic German pretzels. The pretzels are delivered and are not quite up to scratch. You get into a contractual dispute.

Good news! It resolves quickly through mediation and you end up with a settlement agreement where the German company agrees to pay you money. But they don't pay up. You now want to enforce the agreement against the company, in Germany.

Currently, it isn't so simple. You are subject to the individual laws of each state, and will likely need to commence court proceedings for breach of contract. The defendant can raise a defence, the parties put on evidence, and the matter goes to hearing with all the cost and time involved with commercial litigation.

What the future looks like

The Singapore Convention on Mediation is in the works. It will permit settlement deeds or arrangements arising from international mediation (but not for consumer, personal or family disputes), to be enforced in any signatory state. Ideally it will mirror the highly effective enforcement regime for international arbitration awards – as well as overcoming some of the recent problems of arbitrators becoming mediators [see our earlier update here]. If an agreement meets the criteria, it is enforceable. No need to go into a fully-fledged breach of contract claim.

With the Convention expected to come into force sometime after August 2019 the future is looking bright for the international enforcement of settlement agreements resulting from mediation.

So start looking forward to sailing through the "Nothing to Declare" queue.

We do not disclaim anything about this article. We're quite proud of it really.