Mediation has just become a more valuable international dispute resolution tool for US companies
The Singapore Convention makes mediated settlement agreements enforceable on a global scale, explain Ank Santens and Clemency Wang
The United Nations Convention on International Settlement Agreements Resulting from Mediation, which is known as the Singapore Convention, entered into force on September 12, 2020.
It is the first binding mediation convention with global reach, comprising 55 signatories to date, including the United States, China and India, and eight parties (in order of date of ratification or approval: Singapore, Fiji, Qatar, Saudi Arabia, Belarus, Ecuador, Honduras and Turkey).
Traditionally, settlement agreements reached through mediation were not directly enforceable, and parties were required to resort to either litigation or arbitration to enforce them. The Singapore Convention marks a significant development by providing for the direct, speedy and reliable enforcement of settlement agreements resulting from mediation. This enhances the value of mediation in the international commercial dispute resolution toolbox for US companies.
What does the Singapore Convention do?
The Singapore Convention requires the 'competent authority' of contracting states (usually the courts) to enforce international settlement agreements resulting from mediation, subject to very limited exceptions. This means that when a US-based company enters into a mediated settlement agreement with a foreign company, it can present the agreement to the courts of any contracting state, which must enforce it and treat it as proof that the dispute has been resolved – provided that the agreement meets the prescribed requirements and no grounds for refusal apply.
The Singapore Convention applies to a broad category of mediated settlement agreements and has minimal form requirements. Specifically, the agreement must be in writing, and involve an international commercial dispute. As a result, if a US-based company enters into a written agreement resolving a commercial dispute with an overseas company, that agreement may be enforced through the Singapore Convention. Further, if two US-based companies enter into such an agreement, it can still be enforced if it involves assets outside the US or requires performance outside the US.
The Singapore Convention does not apply to settlement agreements already approved and enforceable under domestic court proceedings, or enforceable under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), such as consent orders and awards. Thus, it complements the New York Convention and court proceedings, rather than overlaps with them.
While the Singapore Convention provides a few grounds upon which a competent authority may refuse to enforce a mediated settlement agreement, these are limited and likely to be construed narrowly.
How can US companies benefit from the Singapore Convention?
Prior to the Singapore Convention, if two parties entered into a mediated settlement agreement and one of the parties breached it, the other party had to enforce it through litigation or arbitration. This could be complicated when the settlement agreement involved cross-border assets, and result in substantial delays and costs. This was in contrast with international arbitral awards, which have long been directly enforceable under the New York Convention.
Over 60 years after the New York Convention entered into force, the Singapore Convention on Mediation now provides for the direct enforcement of mediated settlement agreements. This is a milestone in alternative dispute resolution.
US companies will now be able to include a binding mediation clause as a precursor to arbitration (or litigation) in their international contracts or agree to mediation after a dispute has arisen, confident that the outcome of any future mediation will be directly enforceable in the counterparty’s state or in any third state party to the Singapore Convention. Once the US ratifies the Singapore Convention, US companies also will be able to enforce mediated settlement agreements directly within the US.
As it is not adversarial, mediation can help preserve important business relationships. Opting for mediation also can bring substantial time and cost savings if the mediation results in an agreement or narrows the disputed issues. Finally, parties enjoy greater control in mediation than more formal dispute resolution processes, as mediation is voluntary and no resolution can be imposed.
US companies also will be able to benefit more effectively from the “Med-Arb” model of combining mediation with arbitration, which is especially popular in countries such as China. Protocols, such as the Arb-Med-Arb Protocol offered by the Singapore International Arbitration Centre, the Singapore International Mediation Centre, and the Singapore Chamber of Maritime Arbitration can guide US companies in tailoring their dispute resolution methods.
Mediation has long been endorsed and routinely used in the US for domestic disputes. The Singapore Convention aims to facilitate international trade and to promote the use of mediation for the resolution of cross-border commercial disputes. Already now, US companies enjoy a more effective recourse to international mediation through their ability to enforce the resulting agreements in countries that have ratified the Singapore Convention, and this will increase further once the US ratifies the Convention.
The text of the Singapore Convention can be accessed here.
Ank Santens is a partner and Clemency Wang is an associate in White & Case's international arbitration practice. Based in New York, Santens heads the firm's Americas disputes section. Wang practises out of Singapore
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