With considerable fanfare, on 7 August 2019, the United Nations Convention on International Settlement of Agreements Resulting from Mediation (known as the Singapore Convention) was opened for signature. While 51 states have now 'signed' the Singapore Convention (including some of Australia's top trading partners – China, Republic of Korea, India and the USA) it won't come into effect for 6-months after at least 3 states have ratified the convention. No states have yet ratified the Convention.
When it comes into effect, a settlement agreement achieved via mediation in one acceding country (Party State) can be enforced in another Party State, in much the same way arbitration awards are enforced under the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards (New York Convention).
While Australia has not signed or ratified the Singapore Convention, this article considers its likely future application and relevance to Australian businesses.
What is the Singapore Convention?
Like the New York Convention, the Singapore Convention encourages businesses to resolve cross-border commercial disputes outside of court. It does this in two ways.
First, it facilitates the enforcement of settlement agreements that result from disputes which are international in character and result from a mediation.
Secondly, it requires Party States to recognise mediated settlement agreements as a 'bar' to further duplicate proceedings commenced in other jurisdictions.
For the purposes of the Singapore Convention, "mediation" covers a broad range of informal settlement processes. It is defined as "a process, irrespective of the expression used or the basis upon which the process is carried out, whereby parties attempt to reach an 'amicable settlement' of their dispute with the assistance of a third person or persons ('the mediator') lacking the authority to impose a solution upon the parties to the dispute."1
There is no requirement that the parties enter into a formal (or informal) mediation agreement, nor that the 'mediator' be formally or informally appointed as such, or agree to act as such.
Further, the requirement that the settlement be amicable is a curious one. It is common for both parties to a settlement to feel aggrieved.
A "settlement agreement" must be in writing, in that its content must be recorded in any form. A settlement agreement may consist of more than one document. To enforce a settlement agreement, it must be signed by the parties and evidence must be provided that it resulted from mediation. For example, by having the settlement agreement signed by the mediator.2
Electronic communications can also constitute a written settlement agreement. This is provided that the information contained in the electronic communications is accessible so as to be useable for subsequent reference. The parties or mediator will be taken to have signed the settlement agreement where there is a 'method' of identifying them and their respective intentions in relation to the content of the electronic communication.3
Illustrations of impacts on Australian businesses once the Singapore Convention is in force
The Singapore Convention does not require reciprocity for its operation. Therefore, even if Australia is not a party to the Singapore Convention, when in force, it could still apply to the international commercial mediations and settlement agreements in which Australian businesses participate and enter.
Consider the following hypothetical:
- GrainEx is an Australian company in the business of exporting grain
- SingTrade is a Singapore-based commodity trader
- by email and through the intermediary of a Hong Kong-based broker, BigMan Pty Ltd (represented by Ivan, the broker), GrainEx agrees to sell, and SingTrade agrees to buy, 50,000mt of barley on terms which require delivery to China. The contract is governed by Singapore law and provides for arbitration in Singapore
- a dispute arises when GrainEx ships the barley late and SingTrade only makes part payment for it
- as is common in the grain trade, Ivan becomes involved and corresponds with the parties over email in an attempt to resolve the dispute before the arbitration is commenced
- by email correspondence with Ivan, the parties' representatives email to the effect that they respectively agree that SingTrade will pay a settlement sum of $1 million to GrainEx within 14 days and in full and final settlement of the dispute
- Ivan confirms by return email that dispute has been resolved.
Would the Singapore Convention apply to this settlement agreement?
Prima facie, the Singapore Convention would apply to the above hypothetical settlement agreement because:
- it is international in character – the parties have their businesses in different states
- it was resolved by mediation – the parties attempted to resolve their dispute with the assistance of the broker, Ivan, as a third person who lacked the authority to impose a solution on them to their dispute. Even if Ivan didn't consider himself to be a mediator, for the purposes of the Singapore Convention, he is one
- it is in writing – emails containing the terms of the settlement agreement are accessible for subsequent reference in that they could be read and brought before a competent authority to facilitate the enforcement process
- it meets requirements for reliance – a competent authority, such as a Court, could arguably infer that the signing requirement is satisfied, that the parties intended to be bound by the settlement agreement and that it resulted from mediation on the following grounds:
- the emails identify the parties (GrainEx and SingTrade) and the mediator (Ivan)
- the emails by the parties' representatives indicating their agreement to the terms of the settlement demonstrate an intention to be bound by them
- the email from Ivan and other correspondence involving him demonstrate that the settlement agreement resulted from a mediation
- that the contract for the sale and purchase of the barley and the subsequent mediation was conducted by email suggests that this electronic medium is as reliable as appropriate for a competent authority to conclude that the parties intended to communicate their agreement and intention to be bound by the settlement agreement and that the mediator further participated in it.
The above hypothetical does not provide details of any grounds for a competent authority to refuse enforcement of the settlement agreement pursuant to article 5 of the Singapore Convention. For example, there are no apparent signs that the settlement agreement is unenforceable because its enforcement would be contrary to public policy, would be null and void, would lack finality, or would involve a mediator that failed to disclose circumstances that would raise doubts over her impartiality and that materially impact on a party's decision to enter the settlement agreement.
How could the settlement agreement be enforced in Singapore under the Singapore Convention?
The usual process for GrainEx to enforce its rights and entitlements under the mediated settlement agreement, as it currently stands in the absence of the Singapore Convention, would be for it to commence proceedings against SingTrade (perhaps by way of arbitration under the underlying contract) seeking to enforce the settlement agreement.
The current process can be protracted and costly where a 'liable' party resists enforcement, particularly in a cross-border context. For example, enforcing parties may bear significant costs preparing evidence to demonstrate the existence and contents of the settlement agreement, making witnesses available, translating proceedings and in some circumstances engaging experts to authenticate email correspondence constituting the settlement agreement. All of this in circumstances, where there is no guarantee that a court will uphold the terms of the settlement agreement as understood by the enforcing party.
The Singapore Convention seeks to expedite the process of enforcement and cut down parties' respective costs. That Australia has not signed, and may not sign, the Singapore Convention would not preclude an Australian party, such as GrainEx, from seeking to enforce a settlement agreement under the Singapore Convention if it were to take force.
In the hypothetical settlement agreement, GrainEx could enforce the settlement agreement by applying to Singapore's competent authority and establishing the above listed criteria for an enforceable settlement agreement.
Scant guidance is given by the Singapore Convention on the procedural requirements for applications to enforce settlement agreements which provides scope for party states to establish their own procedures with which an applicant must comply.
For an Australian business to enforce a settlement agreement in Singapore, we expect that it would need to comply with domestic legislation passed to address procedural requirements for enforcement and recognition of mediated settlement agreements under the Singapore Convention – but there currently is none. If Singapore's procedural requirements for enforcement applications were modelled on procedures to enforce international arbitral awards under the International Arbitration Act Cap 143.A (IAA) and Rules of Court Cap 322, O.69A (ROC), that procedure could roughly involve the following steps:
- GrainEx would make an ex parte application for leave to enforce the settlement agreement with a supporting affidavit
- if orders for leave were made, GrainEx would serve the orders on SingTrade
- SingTrade would have a limited period in which it could apply to the Court to set aside its orders and to avoid enforcement of the settlement agreement on any of the grounds enumerated under article 5 of the Singapore Convention
- the Court could make a decision as to whether to uphold the settlement agreement or dismiss the application for recognition and enforcement.
How could the settlement agreement be enforced in Australia?
If the Singapore Convention were in force, the options for foreign businesses seeking to enforce mediated settlement agreements in states that were not party to it would be less clear.
Consider the alternative hypothetical:
- a dispute between GrainEx and SingTrade arises over the delivery of defective barley
- following an exchange of emails again involving Ivan, he emails GrainEx and SingTrade to confirm that there has been an agreement for, among other things, GrainEx to pay SingTrade $2 million
- SingTrade confirms the terms of the settlement agreement, including terms for the settlement amount
- GrainEx confirms the terms of the settlement agreement but in doing so misreads the settlement sum thinking that it has agreed to pay SingTrade $200,000.
- GrainEx subsequently disputes the terms of the settlement agreement and refuses to pay SingTrade the settlement amount of $2 million.
SingTrade could go the 'traditional route' and sue GrainEx in Australia on the settlement agreement. As discussed above, where GrainEx disputes the operation and terms of the settlement agreement, this process could be costly, drawn-out and does not guarantee that the terms of the settlement agreement would be upheld.
A further option, which has not been widely considered, is whether SingTrade could rely on the Singapore Convention to seek orders for judgment to be entered on the terms of the settlement agreement in Singapore and subsequently seek registration of that judgment in Australia by way of the Foreign Judgments Act 1991 (Cth) (FJA).
The feasibility of this option would turn on, among other things:
- whether there the foreign signatory state (here Singapore) were to have some domestic legislative mechanism for orders to be made to enforce settlement agreements under the Singapore Convention (for example, sections 18 and 19 of the IAA)
- if so, whether a judgment on the terms of a mediated settlement agreement would constitute a registrable "foreign judgment" under the FJA.
The novelty of the Singapore Convention as the first major instrument by which cross-border mediated settlement agreements may be recognised and enforced means that the answer to the second point above, as to whether judgments on their terms are registrable, is at large.
It is evident that the terms of the FJA did not contemplate the registration of judgments resulting from out-of-court mediated settlement agreements of the kind under the Singapore Convention. By contrast, the FJA deems that certain arbitral awards "in proceedings on an arbitration conducted in, and under the law applying in, a country, being an award that has become enforceable in a court of that country in the same manner as a judgment or order given by that court" are "foreign judgments".
Merely because the FJA was not drafted with the Singapore Convention in mind does not close the door on the prospects of enforcing mediated settlement agreements under it. "Foreign judgments" for the purposes of the FJA also include "a final or interlocutory judgment or order given or made by a court in civil proceedings."5
"The term 'proceeding' is apt to refer to any application to a court in its civil jurisdiction for its intervention or action, that is, some method permitted by law for moving a court to do some act according to law."6
Parties, such as SingTrade, could apply to a foreign court to take action, according to law, for orders or a judgment on the terms of their mediated settlement agreement. That any orders made by that foreign court could be characterised as an "order given or made by a court given or made by a court in civil proceedings" suggests that mediated settlement agreements recognised by foreign courts could constitute a "foreign judgment" for the purpose of the FJA. This arguably leaves a small window for parties which are in Party States to use the Singapore Convention to seek subsequent enforcement under the FJA of their mediated settlement agreements against Australian businesses.
States other than Singapore that are party to the Singapore Convention with which Australia also has reciprocal arrangements under the FJA include Republic of Korea, Sri Lanka and Israel.
What if GrainEx wanted to resist the enforcement of the settlement agreement? What could it do?
Options to resist enforcement of mediated settlement agreements will depend on laws of the state in which enforcement is sought and where an application for registration of any foreign judgment is made (if any such application is made).
If GrainEx sought to resist enforcement of the settlement agreement in Singapore, a Party State, then it is likely that domestic procedures there would provide GrainEx the opportunity to apply to set aside a mediated settlement agreement on the grounds set out in article 5 of the Singapore Convention. For example, GrainEx could seek to set aside the settlement agreement on the basis that it would be contrary to public policy or that it is not binding or final according to its terms.
If GrainEx sought to resist registration and subsequent enforcement of the settlement agreement in Australia, then the legislative instrument in which registration is sought will usually provide grounds to set aside a registered judgment. For example, section 7 of the FJA outlines that grounds for setting a registered judgment includes that enforcement would be contrary to public policy, or that the judgment was registered in contravention of the FJA (which could include if the registered judgment was not in fact a foreign judgment for the purposes of the FJA). If enforcement were sought under the FJA, the Australian party could also argue, as a preliminary issue, that a mediated settlement agreement and any judgment recognising the mediated settlement agreement is not a foreign judgment contemplated by the terms of the FJA.
Despite the rush of parties to sign the Singapore Convention and its apparently plain terms, it is clear that there is more than meets the eye when it comes to the status of the convention and the recognition and enforcement of mediated settlement agreements thereunder.
If Party States start to incorporate the Singapore Convention into their domestic laws and it takes force, Australian businesses should be mindful that if they deal with parties which have their place of business in such Party States, there is the potential that any settlement agreements reached between them could be subject to peremptory enforcement measures.
1 article 2(3)
2 article 4(1)(b)(i)
3 article 2(2)
4 United Nations Commission on International Trade Law, A/CN.9/896 - Report of Working Group II (Dispute Settlement) on the work of its sixty-fifth session, Vienna, 12-23 September 2016, paragraph 34 - 36.
5 section 3
6 Firebird Global Master Fund II Ltd v Republic of Nauru (2015) 326 ALR 396 at ; Cheney v Spooner (1929) 41 CLR 532 at 536 – 537
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