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17 September 2020

The Singapore Convention on Mediation promises 'flexible and affordable' dispute resolution

A welcome addition to the cross-border dispute resolution landscape has gone live, report Kent Phillips and Zachary Tan

Singapore skyline

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More than a year after the official opening ceremony for its signature, on 7 August 2019, which hosted 46 signatories, the Singapore Convention on Mediation entered into force on 12 September 2020.

To date six countries have ratified the convention – Ecuador (the most recent), Singapore, Fiji, Saudi Arabia, Qatar and Belarus – more than twice the minimum number required for it to enter into force, while 53 countries have now signed it.

Signatories include the US, China and India – three of the world’s largest economies – among other major economic players, although the European Union and the United Kingdom have yet to sign.

More countries are anticipated to both sign and ratify the convention once it starts gaining traction in practice; much like the New York Convention did for arbitration.

The Singapore Convention pioneered the direct enforcement of mediated settlement agreements concluded in writing in signatory states. At least two parties to a settlement agreement must have their places of business in different states for a dispute to be considered international in nature.

Business-to-business

The convention only applies to commercial mediated settlement agreements and does not apply to settlement agreements that relate to family, inheritance or employment law, in line with its focus on business-to-business disputes.

In their commentary, legal academics Professor Nadja Alexander and Shouyu Chong described the convention as a game changer which "has the capacity to enhance the attractiveness of mediation within regional initiatives, such as the Belt and Road Initiative", a major infrastructure project led by China.

The convention, they added, "offers a risk management mechanism accessible in terms of its flexibility and affordability to cross-border business players".

The lack of a mechanism to effectively enforce such settlements has traditionally limited the use of mediation for cross-border disputes, making the convention a significant step taken by the international community to promote the use of mediation alongside otherwise predominant forms of dispute resolution, such litigation and arbitration.

The recent International Dispute Resolution Survey 2020 conducted by the Singapore Management University’s Singapore International Dispute Resolution Academy (SIDRA) found that users of international commercial mediation did not rank enforceability highly on their list of reasons to mediate, reflecting the fact that sophisticated users were conscious of the current lack of an internationally recognised enforcement regime.

Indeed, more than 80% of respondents cited impartiality, speed and confidentiality as crucial reasons to use mediation.

International

The convention therefore fills this gap by providing an international framework for the direct enforcement of mediated settlement agreements in signatory states without the need for parties to initiate fresh proceedings, which they would otherwise have to do in accordance with dispute resolution clauses set out in those settlement agreements.

In light of the disruptions caused by the global pandemic, the entry into force of the convention has come online at a right time, especially for parties affected by disruptions to global supply chains.

From an enforcement perspective, the convention allows parties to sidestep the complexities and uncertainties regarding choice of law and enforcement issues caused by uncoordinated contracts at different levels of the supply chain.

It also provides a more timely and cost-effective alternative for clients to litigation in unfamiliar jurisdictions or arbitration proceedings heard by a particular institution with otherwise exclusive jurisdiction.

Additionally, mediation, which by its nature is less adversarial than arbitration and litigation, has the key benefit of allowing parties to preserve their commercial relationships.

Flexibility

Mediation also provides parties with the flexibility to carry out discussions in any format (virtually, in writing or in person), making it easier for businesses to participate in virtual mediation sessions without having to incur the costs and time associated with travelling to physical venues.

This may entice some parties towards using mediation as a standalone mechanism to resolve their disputes. That said, mediators would need to be comfortable with managing mediation online as well as be adroit in managing the virtual platform. Third party service providers may be the answer to the latter issue.

Whether the convention will gain global traction remains to be seen. Used properly, mediation can effectively complement arbitration but it is unlikely to displace the latter as the dispute resolution method of choice for international disputes.

The Singapore Convention would also not be the elixir to solve practical issues of enforcement. However, it is definitely a welcome addition to today's changing dispute resolution landscape.

Kent Phillips is a Singapore-based partner and Zachary Tan is a London associate at Hogan Lovells

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