United Nations: UN Convention on International Settlement Agreements Resulting from Mediation Enters into Force

United Nations: UN Convention on International Settlement Agreements Resulting from Mediation Enters into Force

(Oct. 13, 2020) Last month the United Nations Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention on Mediation) entered into force. The Singapore Convention on Mediation was adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 2018, but came into force in September 2020, six months after six countries ratified the Convention. At the signing ceremony in August 2019, representatives from 46 countries signed the Convention, and the Singaporean Prime Minister noted that the Convention was the “missing piece in the international dispute resolution enforcement framework.”

The United States first initiated the proposal to develop an enforceable multilateral convention to codify international commercial settlement agreements through mediation in 2014. Prior to the entry into force of the Singapore Convention on Mediation, the only multilateral legal instruments for resolving international commercial disputes were the various instruments on international litigation under the Hague Convention for Private International Law, and the New York Convention, which provided for arbitration on such disputes.

The Singapore Convention includes similar wording to the New York Convention regarding enforcement, including that each state party “shall enforce a settlement agreement in accordance with its rules of procedure, and under the conditions laid down in this Convention.” (Singapore Convention art. 3(1).) It has been noted that this new provision on enforcement expands the potential impact of the Singapore Convention beyond the limited effect that the 2008 European Union Directive on Mediation has had on enforcing mediated settlements in the EU. Specifically, article 6 of the EU Directive requires Member States to consent to the written agreement resulting from mediation for it to be made enforceable. In addition, under the EU Directive, the content of a mediation settlement agreement must not be contrary to the law of the Member State and the law of that State must provide for the enforceability of the settlement.

In addition, article 5 of the Singapore Convention includes defenses to enforcement similar to the defenses in article V of the New York Convention, including the defenses of (i) incapacity to enter into an arbitration agreement, and (ii) when the subject matter of the dispute is not capable of settlement by arbitration (mediation) under the law of the country where recognition or enforcement is sought. In addition, the Singapore Convention also includes a provision mirroring the New York Convention defense to enforcement: (iii) the “public policy” defense.

As the International Mediation Institute and UNCITRAL note, mediation as a means to settle international disputes, as opposed to litigation or arbitration, has been on the rise. The perceived benefits of mediation are that it is faster, less expensive and also more likely to preserve commercial relationships than either international arbitration or litigation. The international enforcement of these mediated settlements is now simplified with the Singapore Convention on Mediation, which is especially important during times of uncertainty in international business, such as the COVID-19 pandemic. Several other major factors have influenced the rise in the use of mediation in international dispute settlement, including China’s Belt and Road Initiative, a multi-trillion US dollar infrastructure development strategy across Asia and Europe, as well as the increase in trade and investment related to the Trans-Pacific Partnership.

However, going forward it is unclear how courts will interpret the Singapore Convention and how commonly it will be invoked in practice. As one commentator notes, a 2016 survey commissioned by the Singapore Academy of Law of 500 legal professionals around the region reported a clear preference for international commercial arbitration, with 71% preferring to use arbitration, 24% preferring litigation, and a mere 5% preferring mediation. The survey respondents emphasized enforceability, confidentiality, and fairness as leading factors for choosing arbitration over mediation.

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