Malcolm Taylor discusses the enforcement of international mediation settlement agreements.

Enforcement of International Mediation Settlement Agreements

Originally published on the 36 Art Group News Section.

Mediation

Mediation can be one of the most effective “alternative” means of dispute resolution. The parties to the dispute are encouraged to fashion a settlement with the assistance of a neutral third party mediator, who has no authority to impose terms, but can assist the parties themselves in agreeing a mutually acceptable resolution.  Mediation can offer a speedy, flexible, informal, cost effective and private mechanism for dispute resolution outside the formal court or arbitral processes.

Mediation is increasingly gaining traction in the domestic arena, but has not seen parallel growth internationally.  One of the reasons for this might be a perceived difficulty in enforcing a mediated settlement agreement in differing jurisdictions and thus casting doubt as to the overall effectiveness and certainty offered by the mediation process as a whole.  In fact, there is little evidence to support this and in reality parties who have themselves reached a negotiated and mediated settlement are more likely than not to abide by it.  True or otherwise, there has, until recently, been no regime for the enforcement of mediated settlements equivalent to the existing positon for arbitral awards, which are covered by the (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958).  That regime has undoubtedly helped encourage the rapid growth of international arbitrations.   This situation may soon change.

A New Regime

In August 2019, The United Nations Convention on International Settlement Agreements Resulting from Mediation was signed by 46 states (and will come into force 6 months after ratification by 3 states). This is to be known as the “Singapore Mediation Convention” and is intended to facilitate the direct enforcement of mediated international settlement agreements.

At present, following a mediated settlement of an international/cross border dispute and where one party refuses to comply with its terms, the other party would have to claim a breach of that agreement and seek to enforce the same either through the dispute resolution mechanism within the settlement agreement itself (if any) and/or through court or arbitration proceedings in the appropriate jurisdiction(s) (including where the defaulting party is resident and/or where assets that can be seized are located).  Were the Singapore Mediation Convention to apply, it would provide a process for the direct enforcement of the mediated settlement agreement through the courts of the relevant State, thus obviating the potential of multiple proceedings in differing jurisdictions.

The Singapore Mediation Convention

The Singapore Mediation Convention (the “Convention”), not unlike the New York Convention, is a relatively short document that sets out the scope and application of the enforcement regime.

Application (Article 1)

Specifically, the Convention applies only to “…agreement[s] resulting from mediation and concluded in writing by parties to resolve a commercial dispute…”  The “international” aspect is that the Convention only applies to settlement agreements of disputes where:

“(a) At least two parties to the settlement agreement have their places of business in different States;  or

 (b) The State in which the parties to the settlement agreement have their place of business is different from either:

        (i)    The State in which a substantial part of the obligations under the settlement agreement is performed or:

       (ii) The State with which the subject matter of the settlement agreement is most closely connected.”

Only mediated settlements of commercial disputes are covered and specifically excluded from the regime are settlements of disputes arising from consumer transactions or relating to personal, family or household issues.  Also excluded are disputes involving family, inheritance or employment law.  Equally, the Convention does not apply where the settlement agreement (i) has been approved by a court or concluded in proceedings before a court which are enforceable as a judgement in the State of that court or (ii) has been recorded (and enforceable) as an arbitral award.

Requirement for reliance (Article 4)

The Convention will only apply where the settlement agreement:

• is in writing;
• has been signed by the parties;
• has resulted from a mediation (and this can be evidenced, for example, by the mediator’s signature on the settlement agreement, a document signed by the mediator indicating that the mediation was carried out, an attestation by the institute that administered the mediation or other evidence acceptable to the competent authority).

Grounds for refusing to grant relief (Article 5)

The relevant authority of a State may refuse to grant relief and enforce the settlement agreement where:

• a party to the settlement agreement was under some incapacity;
• the settlement agreement was null and void, inoperative or incapable of being performed under its applicable law;
• the settlement agreement was not binding or final in accordance with its terms or has been subsequently modified;
• the obligations in the settlement agreement have been performed or are not clear or comprehensible;
• granting relief would be contrary to the terms of the settlement agreement; (See (d) below.)
• there was a serious breach by the mediator of standards applicable to the mediator or the mediation, without which breach a party would not have entered into the settlement agreement;
• the mediator failed to disclose circumstances that raise justifiable doubts as to the mediator’s impartiality or independence and that failure had a material impact or undue influence on a party which would not otherwise have entered into the settlement agreement;
• granting relief would be contrary to the public policy of that State;
• The subject matter of the dispute is not capable of settlement by mediation under the law of that State.

Opt in / Opt out (Articles 5 and 8)

As noted above, Article 5 provides that relief (enforcement) may be refused in circumstances where “…granting relief would be contrary to the terms of the settlement agreement.” (Article 5.1 (d)). Thus, parties who are aware of the Convention can, effectively, “opt out” of its scope by including express provisions to that effect in the settlement agreement.

Conversely, Article 8 of the Convention allows a participating State to make a “reservation” to the effect that it will only apply the Convention where the parties to the settlement agreement have positively agreed to such application.  In circumstances where a State has expressed and implemented this form of reservation, parties to a settlement agreement would expressly need to “opt in” to the Convention to enable them to seek enforcement through that State.

As the Convention regime develops care will be needed, therefore, to consider whether a settlement agreement should expressly exclude its application, or if the contrary view is taken, to ensure it can be enforced by States which require an “opt in”.

Enforcement

Where all the requirements are satisfied such that the Convention applies, a settlement agreement should then be enforceable easily, directly and in an expedited manner by a Convention State, including against assets located in that State.

Going Forward

If one of the reasons for the slow uptake of the mediation process for disputes relating to international contracts has been the concern (actual or perceived) about enforcement, the new Convention might begin to ameliorate that to an extent and encourage parties to adopt this process of dispute resolution.  This would mirror the manner in which the New York Convention has facilitated the growth of arbitrations.  (When the New York Convention was initiated in 1958 there were only 10- signatories – there are currently over 160.  The Singapore Mediation Convention was launched with 46 signatories, amongst them some of the major trading nations in the world including the USA, China and India – although not the UK, EU or Australia.)

Mediation institutions will no doubt become increasingly involved in the development of rules and guidelines to accompany the development of the Convention regime.

As a result of all these actual or potential developments, parties involved in international and cross border transactions may increasingly look to include mediation as part of their dispute resolution process.