Australia: Introducing the New York Convention for International Settlement Agreements

WHO SHOULD READ THIS

  • Senior management, corporate officers and alternative dispute resolution practitioners

THINGS YOU NEED TO KNOW

  • The wording of the draft Convention on the Enforcement of International Settlement Agreements Resulting from Mediation (Singapore Mediation Convention) has been approved by the United Nations Commission on International Trade Law (UNCITRAL) along with a corresponding Model Law. The Singapore Mediation Convention aims to provide a framework for international enforcement of mediated settlements.

WHAT YOU NEED TO DO

  • Review your existing dispute resolution clauses and consider updating them to ensure you are in a position to utilise the Singapore Mediation Convention framework once in force.
  • Get in touch with our team if you need any assistance.

The Singapore Mediation Convention
UNCITRAL has designed the Singapore Mediation Convention which aims to implement an international regime for the enforcement of mediated settlements, akin to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (New York Convention) which has been hailed as one of the most successful UNCITRAL conventions and operates to achieve similar outcomes in relation to enforcement of arbitral agreements and awards in almost 160 countries.

The Singapore Mediation Convention will only apply to the recognition of settlements, reached by mediation, of international commercial disputes.  The Singapore Mediation Convention may be invoked to enforce the settlement agreement reached or as a defence against a claim brought by a party to a settlement agreement in relation to the subject of the settlement agreement.

Currently, where one party fails to comply with a mediated settlement, typically the other party must seek to enforce that settlement by suing for breach of contract, which is a lengthy and costly process and, in the case of international disputes, often in a foreign jurisdiction.

The Singapore Mediation Convention implements a straightforward mechanism which obliges the court in a contracting state to recognise a mediated settlement agreement (with limited exceptions), without the need for a party to sue for breach of contract.

As a defence mechanism, the Singapore Mediation Convention will enable foreign courts to recognise the parties' settlement agreement when one party seeks to invoke it to have a claim brought against it dismissed.

The Singapore Mediation Convention will apply to agreements concluded in writing that relate to international commercial disputes.   Consumer transactions related to personal, family or household purposes are expressly excluded from the scope of the convention, as are disputes related to family, inheritance and employment law.  Also excluded from the scope of the convention are settlements that are approved by a court or concluded in the course of court proceedings and those settlement agreements that are enforceable as an arbitral award (e.g. consent awards).

The party wishing to rely on a settlement agreement for enforcement under the Singapore Mediation Convention must demonstrate that the agreement is signed by the parties, and that the agreement resulted from mediation.  The convention suggests that the mediator's signature could satisfy this requirement.

The limited circumstances in which a settlement agreement may be refused recognition include where a party was under an incapacity, the agreement is not final and binding, the obligations under the agreement have already been performed or where there has been a serious breach by the mediator of the standards applicable to the mediator without which a party would not have entered into the settlement agreement.

This succinct yet important convention is a significant motivation for encouraging use of mediation, at an international level, as a viable alternative to arbitration and litigation.  It is likely that mediation will, as a result of the Singapore Mediation Convention, become more attractive and useful for businesses engaged in cross-border transactions.

Reasons for implementing the Singapore Mediation Convention
While the Singapore Mediation Convention simplifies enforcement of mediated settlements by streamlining the process, its operation will also serve to promote the credibility of mediation as a viable and useful alternative dispute resolution mechanism. Moreover, this convention reflects the increase in the development, and intensity, of trade and investment treaties and, more broadly, the expansion and globalisation of commercial activity.

Progress of the Singapore Mediation Convention
The draft Singapore Mediation Convention is expected to be signed in Singapore in August 2019 and, prior to coming into force, will require ratification by at least three member countries.

Notably, delegates in Asia, Africa, the Middle East and the Americas have evinced support for the Singapore Mediation Convention and a desire to ensure legislation reflects the Singapore Mediation Convention's overarching aims of promoting enforcement of mediated settlements.

Implications
Although the Singapore Mediation Convention is not yet in force, given the existing support it has received, it is highly likely that it will become a viable and effective dispute resolution mechanism available for parties, engaging in international business, to utilise.

Importantly, you should:

  • incorporate dispute resolution clauses into contracts provisions that provide for mediation and enforcement of mediated settlements through the Singapore Mediation Convention regime;
  • note the advantages of engaging in meditation, in particular it is often cheaper and faster than other dispute resolution mechanisms;
  • consider the importance of engaging in conciliatory processes, such as mediation, where the dispute you have is an isolated issue and you are committed to retaining a business relationship with the other side; and
  • be aware of the likelihood that mediation may become a default option for parties in international commercial disputes in a changing alternative dispute resolution landscape.

We will continue to monitor and provide updates on the progression of the Singapore Mediation Convention.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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