Worldwide: The Singapore Convention Allows For Recognition Of Settlement Agreements Made Outside Of Court Or Arbitral Proceedings

On December 20, 2018, the United Nations General Assembly adopted the United Nations Convention on International Settlement Agreements Resulting from Mediation. This Convention will open for signature on August 7, 2019 in Singapore and will become known as the "Singapore Convention on Mediation": It provides a framework for the recognition of international settlement agreements similar to that provided by the New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"). Specifically, the Singapore Convention applies to settlement agreements reached outside of court and arbitral proceedings, which without the Convention are not directly enforceable in a domestic legal system.

To come within the scope of the Singapore Convention, settlement agreements must also (1) "result[] from mediation," (2) be "concluded by the parties in writing," (3) "resolve a commercial dispute," and (4) be "international." The Singapore Convention defines mediation broadly as "a process, irrespective of the expression used or the basis upon which the process is carried out, whereby the parties attempt to reach an amicable settlement of their dispute with the assistance of a third person or persons . . ." And because the Convention specifically applies to settlement agreements outside of court or arbitral proceedings, the mediator must "lack[] the authority to impose a solution upon the parties to the dispute." 

While the Singapore Convention aims in many respects to do for international settlement agreements what the New York Convention does for international arbitration awards, the two legal instruments differ in important ways. First, the Singapore Convention, similar to the New York Convention, applies to settlement agreements concluded to resolve commercial disputes; however, the Singapore Convention expressly states that it does not apply to settlement agreements resolving consumer, family, inheritance, or employment law disputes. The New York Convention, on the other hand, defines an award as commercial according to the law of the State in which the arbitral award was made. Second, the Singapore Convention applies to disputes that are "international," while there is no like provision in the New York Convention. The New York Convention only requires that an award not be considered domestic in the State where a party seeks enforcement and recognition.

The Singapore Convention defines a dispute as international in two ways. First, a dispute is international if "[a]t least two parties to the settlement agreement have their places of business in different states." A dispute is also international if "[t]he State in which the parties to the settlement agreement have their places of business is different from either:" (1) "[t]he state in which a substantial part of the obligations under the settlement agreement is performed;" or (2) "[t]he state in which the subject matter of the settlement agreement is most closely connected."

The final differences between the New York and Singapore Conventions are the grounds upon which a domestic forum can refuse to enforce an award or settlement agreement. Under the New York Convention, an award may not be recognized and enforced if the parties' agreement to arbitrate is not valid according to the law under which such arbitration was decided; however, if that law does not indicate the agreement's validity, the enforcing jurisdiction will look to the law of the country where the award was made. The Singapore Convention has a similar provision, except if the law under which the settlement agreement was made does not indicate its validity, then the enforcing jurisdiction will decide what law to apply. Both Conventions also provide defenses to recognition and enforcement based on specified deficiencies related to the process of mediation or arbitration, respectively. However, the Singapore Convention, unlike the New York Convention, requires not only unfairness in the process but also that the unfairness had a material effect on the outcome. For example, a party can raise a defense that the mediator failed to disclose circumstances that raise doubts as to his or her impartiality, but this failure to disclose must also have "a material impact or undue influence on a party without which failure that party would not have entered into the settlement agreement." The New York Convention, on the other hand, allows a defense if a party was not given proper notice of appointment of an arbitrator or arbitration proceedings or was unable to present its case but does not require such circumstances to have a material effect on the award.

The Singapore Convention was adopted at the 73rd session of the United Nations General Assembly without a vote. The Singapore Convention will come into force once three member states ratify the 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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