Another brick in the wall: Singapore Convention builds enforcement options for international commercial disputes
When it comes to legal proceedings to resolve disputes, there are two concerns uppermost in the minds of parties: costs, and enforceability of the outcome.
There is great comfort to be taken from the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) and Regulation (EU) No 1215/2012 of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) (the “Recast Brussels Convention”), aimed at making the process of enforcing arbitration awards and European judgments more straightforward, so preventing international parties from retreating behind their borders and otherwise potentially time consuming and difficult local processes.
In terms of costs, a key role in the way procedural rules are designed and how judges, tribunals and the lawyers representing the parties conduct themselves, is about keeping the parties focussed on opportunities to settle and resolve their differences. The earlier a case settles, the less the overall cost to the parties will be.
Yet, there has been a strange lacuna when it comes to international commercial disputes: there has been no regime equivalent to the New York or Recast Brussels Conventions so far as the enforcement of settlement agreements. Until now, that is.
On 7 August 2019, the United Nations Convention on Settlement Agreements Resulting from Mediation (the “Singapore Convention”) was signed by 46 nations in Singapore.
The purpose of the Singapore Convention
The Singapore Convention applies to settlements in international commercial disputes that result from mediation and is intended to make it more straightforward to enforce such settlements in the states where parties are located.
To be able to rely upon the Singapore Convention, once ratified by a signatory nation, the following requirements must apply:
- The dispute must have been commercial;
- There must be different states involved: either by virtue of places of business of the parties or between the location of the parties and the substantial obligations under the settlement or the place where the subject matter of the settlement is most closely connected;
- The settlement agreement must be in writing, which amounts to any recorded form; and
- The settlement must have resulted from mediation, i.e. a process involving the assistance of a third person without authority to impose a solution.
If these requirements are satisfied then the settlement may be enforced in the state of a party in accordance with that state’s rules of procedure and in accordance with the conditions of the Singapore Convention.
There are, however, a number of grounds on which the competent authority in a state being asked to enforce a settlement may refuse to do so, as follows:
- A party was under some incapacity;
- The settlement is not binding, null and void, inoperative or incapable of being performed under the law it is subject to;
- Where the obligations have been performed or are not clear;
- Relief would be contrary to the settlement;
- There was a serious breach by the mediator of the standards the mediator was subject to; and
- Relief would be contrary to public policy or the subject matter of the dispute was not capable of settlement by mediation under the law of the relevant state where enforcement is sought.
Under Article 8 of the Singapore Convention, it is open to a ratifying nation to make a declaration that the Singapore Convention will not apply to settlement agreements unless the parties to the dispute have specifically agreed that the Singapore Convention will apply, i.e. the parties will have to ‘opt in’. If states apply this reservation, it increases the risk of the Singapore Convention not applying in disputes as one side could simply choose not to opt in.
It will only apply to settlements concluded after the Singapore Convention is ratified and enters into force in a relevant state. So, notwithstanding that the Singapore Convention is here and has been signed by 46 nations, it will be some time yet before any settlements will come into existence and in respect of which the parties can avail themselves of the Singapore Convention.
Of the 46 initial signatories, China, India, Iran, Nigeria, Qatar, Korea, Saudi Arabia, Singapore, Turkey and the USA are notable participants. The United Kingdom is missing and there is currently no information available regarding the UK’s plans in respect of signing. It may be the UK is somewhat distracted by other international treaty issues at present!
It also remains to be seen what, if any, impact this has on the conduct of mediators. It may lead to the development of clearer standards and may also assist in the harmonisation of the approaches to mediation in different jurisdictions, such as the current dichotomy between places where mediators encourage settlement via diplomacy and emphasis on weak points in cases, versus mediators who will give opinions on the merits and likely outcome of a dispute. But the dark side of this may be an increase in the challenges to the way mediators have conducted themselves in the interests of seeking to avoid enforcement, which would not be a welcome development in the general sphere of dispute resolution.
The Singapore Convention, albeit not yet in force, is undoubtedly a good thing, notwithstanding some possible limitations. It raises the status of mediation and should provide greater comfort to parties to commercial disputes about the enforcement of the outcome of their dispute, adding mediated settlements to the position that arbitration awards and European judgments hold. Of course, balanced against that it also needs to be remembered that parties who are not keen on subjecting any settlement to more straightforward enforcement can stymie that by simply refusing to mediate. That may be a short-sighted tactic if the matter cannot be settled by other means and the result is an enforceable judgment or award, but it does highlight that there are still gaps in the enforcement wall that need filling.
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