The Singapore Convention: From a Blizzard, a Convention Blooms

When it enters into force on 12 September 2020, the Singapore Convention will provide a long overdue harmonised legal framework for the enforcement of settlement agreements resulting from international commercial mediation.  The Convention is the missing piece in the international enforcement landscape. This article looks at the inception of the Convention and the work leading up to its adoption, as well as key provisions and how they mirror or diverge from the New York Convention.

This article first appeared in “The arbitrator and mediator” March 2020 and has been reproduced with the kind permission of Resolution Institute. Download a PDF from author Donna Ross’ website, here. Donna is an IMI Certified Mediator. Congratulations to the states that have signed and ratified the Convention to date! It comes into force tomorrow.

The Singapore Convention on Mediation[1] (the Convention) adopted in December 2018 is the missing piece on the international dispute resolution scene. Once the Convention enters into force, it will take its rightful place alongside the New York Convention[2] and the Hague Conventions[3]. It establishes a much-needed harmonized legal framework for the enforcement of settlement agreements resulting from international commercial mediation (‘settlement agreements’).[4]  

The Singapore Convention was opened for signature in Singapore on 7 August 2019[5] during the Singapore Convention Signing Ceremony and Conference, which was attended by some 700 government officials, business executives, legal practitioners and academics from 70 countries. It was truly a historic event.[6]46 countries, including the United States and China, the world’s largest economies, as well as major players in Asia, such as India and South Korea, signed the Convention compared to only 10 signatories of the New York Convention when it was opened for signature in 1958, some sixty years ago.[7] Since August, six more countries have signed the Convention and three, including Singapore, have ratified it. With these three ratifications, the Convention will enter into force on 12 September 2020.[8] Unfortunately, Australia is not amongst the signatories.

Where there is trade and commerce, disputes will inevitably arise. As Singapore’s Prime Minister Lee Hsien Loong aptly observed in his opening remarks, disputes “disrupt normal business operations. They damage reputations, hurt share prices and make it harder for companies to raise capital. They also dampen the confidence and morale of employees, shareholders and other stakeholders. A robust framework to manage such conflicts can prevent such disputes from escalating unnecessarily or causing unintended consequences.”[9] This sentiment was shared by all present.

Thus far, there has been no international mechanism for the enforcement of mediated settlement agreements for international parties[10] akin to the New York Convention.[11] Although widely used globally for domestic disputes, mediation is less established as a mode of dispute resolution internationally, due primarily to the lack of certainty, finality and enforceability.[12]

The Preamble of the Convention references the significant benefit of mediation as an alternative to litigation and the fact that its use is increasing.[13]  Commercial mediation is set to increase exponentially in Asia, given the volume of economic activity and the massive infrastructure and related projects of the Belt and Road Initiative. Trade initiatives such as the ASEAN Economic Community and the Comprehensive and Progressive Agreement for Trans- Pacific Partnership to name just two will contribute to the increased need for non-determinative dispute resolution. Mediation centres and institutes throughout Asia are poised to provide mediation.[14]

In his speech at the Singapore Convention Signing Ceremony and Conference, PM Lee shared his view that by using mediation, “businesses will benefit from greater flexibility, efficiency and lower costs, while states can enhance access to justice by facilitating the enforcement of mediated agreements”.[15]

The enforcement of international settlement agreements under the Singapore Convention will facilitate international trade by bringing certainty and stability to the international business community, enabling mediation to take its rightful place as a full-fledged mode of dispute resolution.

The Current Enforcement Landscape

The main issue with the enforcement of settlement agreements today is that it is country dependent. Some countries and institutions have adopted mechanisms for enforcing settlement agreements, such as in the form of an agreed or consent award, whereas in others they are assimilated to contracts.

Parties’ compliance with settlement agreements is generally greater than with court decisions,[16] since the parties craft their own solution and chose the process. This is also true for compliance with arbitral awards due to party autonomy, but at the end of the day, the key factors are finality and enforceability.

A number of institutions and arbitration laws do provide for a settlement agreement reached in a mediation to be memorialized as a consent award that would have the same enforceability as an award made following arbitral proceedings. Examples of this can be found in Korea, Sweden and in some U.S. states, including California.[17] However, consent or agreed awards handed down by an arbitral tribunal are not necessarily enforceable under the New York Convention.

For example, in the US and the UK[18] amongst other countries, settlement agreements are contracts and may need to be litigated in which case they may be open to standard contract defences. In such countries if an arbitral tribunal is constituted for the sole purpose of recoding a settlement or a mediator changes hats to become the arbitrator, the award is not enforceable as there can be no dispute once a matter has settled. A consent award made post-settlement may not be considered a valid award.

Conversely, if the parties settle after the commencement of the arbitral proceedings, the award is enforceable. Major arbitral institutions such as ICC, ICSID, LCIA and CIETAC provide for this in their rules. Likewise, Article 30 of the UNCITRAL Model Law on International Commercial Arbitration provides for their recognition.

The Convention “severs the conceptual link to arbitration and establishes a mediated settlement as an international instrument in its own right”.[19]In a welcome change, parties will no longer have to jump through the extra hoops and incur the extra costs of converting a settlement agreement into a pseudo arbitral award. 

Views on a Harmonised Framework from the International Community and Potential Users

For businesses and investors, the ability to resolve disputes reliably and effectively is a necessity when concluding cross-border deals.

Based on a number of surveys conducted over the past decade, executives, in-house counsel and external counsel alike cite lack of enforceability as the key barrier to using mediation for international disputes.

According to a survey conducted by CPR in 2011, comprising in-house counsel and external counsel from the Asia-Pacific region, 72% indicated that their company or firm generally had a positive attitude to mediation (compared to 69% for arbitration) and 78% indicated that their company or clients had used mediation to resolve disputes in the last three years.[20]

Likewise, in the 2014 IMI survey, respondents would be “much more likely” to mediate a dispute with a party from a State that had ratified a convention for the enforcement of settlement agreements, which would provide greater certainty in their business dealings.[21]

A study published by the Singapore Academy of Law in 2016 showed that 71% of public and private sector practitioners and in-house counsel in the region preferred arbitration, 24% litigation and only 5% mediation. Enforceability, confidentiality and fairness were the key factors given for choosing arbitration.[22]

Later surveys and studies also showed that the two main areas for improvement were the creation international mechanism to promote the recognition and enforcement of settlements, including those reached in mediation and protocols for implementing non-adjudicative processes before adjudicative processes.[23]

There is also a general perception that enforcement is significantly more difficult for international mediated settlement agreements compared to their domestic counterparts.[24]

Cost and efficiency are also of primary importance. Parties are reluctant to settle in mediation for a lesser amount than the original claim, only to have to incur further procedural costs in litigation or arbitration to enforce a settlement agreement in the event of non-performance. This is precisely what mediation is designed to avoid in the first place.  In fact, some delegates participating in Working Group II reported cases of cross-border litigation resulted from a party’s failure to comply with a settlement.[25]

In this respect, a Supreme Court Justice in New Jersey, put it very wisely when he opined that “One of the main purposes of mediation is the expeditious resolution of disputes. Mediation will not always be successful, but it should not spawn more litigation… Instead of litigating the dispute that was sent to mediation, the mediation became the dispute.”[26]

The Singapore Convention will enable businesses avoid such superfluous litigation or arbitration.

Initiatives in Australasia Prior to the US Proposal

Starting in 2012, Professor Chang-fa Lo and Professor Winnie Ma presented the iMSA Project on cross-border enforcement of settlement agreements at several conferences[27] and even drafted a “Convention on Cross-Border Enforcement of International Mediated Settlement Agreements,” published in November 2014 in the Contemporary Asia Arbitration Journal.[28]

The authors of the iMSA Project also participated in another similar international collaborative endeavor to explore global enforcement of settlement agreements initiated by Laurence Boulle and Bobette Wolski the “MSA Project.[29]

In July 2014 at the 47th session of UNCITRAL’s Working Group II in New York, the United States made a proposal to begin work on a mediation convention.[30]

The resulting treaty was called the Singapore Convention, since Singapore hosted the signing ceremony.[31] However, as noted by Tim Schnabel, the U.S. proposer of the Convention, the choice of the title and location of the signing ceremony reflected the delegates’ appreciation for the Singaporean chair, Natalie Morris-Sharma,[32] who led the negotiations to a successful outcome through a blizzard in New York that shut down the United Nations headquarters for a day.

The Making of the Singapore Convention: The Blizzard that Was a Blessing in Disguise

When a breakthrough in the negotiations was imminent in February 2017, a snowstorm caused the closure of the UN.[33] A nearby law firm offered its premises and all interested delegations were able to convene informally. It transpired that those who were the furthest apart on the issues were present. The delegations worked out the details of a “compromise proposal”, which became known as the five-issue package.[34] The five issues were seen as interconnected, and it was the balance between the different concerns and interests that paved the way for a harmonised framework for the enforcement of mediated settlement agreements.[35]

The package was later presented to the formal meeting and agreed as a draft and Working Group II continued its work until the final text was adopted in December 2018.

Before addressing the five issues in the package, is worthwhile to look at some of the more general aspects of the Convention.

What is covered under the Convention and what is excluded?

First of all, mediation is defined in Article 2 as a process in which the parties attempt to settle their dispute with the assistance of a third person who lacks the authority to impose a solution (‘the mediator’).[36]

The settlement agreement must result from a commercial and international mediation,[37] and not be subject to a specific exclusion. The approach adopted is similar to that in the CISG,[38] where commerciality is defined by exclusions in the Convention, rather than inclusions, which are listed non-exhaustively in the Model Law.[39]

Thus, the Convention does not apply to settlement agreements relating to transactions of a personal, family or household nature or to family, inheritance or employment law. Also excluded from the scope of the Convention are settlement agreements that are enforceable as court judgments or arbitral awards.[40] This important ground will be addressed with the five-issue package.

Investor-state disputes may also fall under the Convention,[41] unless a state has made a declaration pursuant to Article 8.1(a) specifying that settlement agreements involving said state or its government instrumentalities are excluded from enforcement.

What’s in a Name? Mediation Prevails over Conciliation

Some say that the terms mediation and conciliation are interchangeable. This is neither entirely true nor completely false.

In certain legal cultures and particularly civil law jurisdictions,[42] conciliation can denote mediation without private sessions or even a more formal, quasi-adjudicative or compulsory process where the conciliator is expected to issue written recommendations for settlement as part of the remit or in some cases make a determination. This is the case under certain statutory frameworks in Australia.[43]

Although UNCITRAL has historically preferred to use the term conciliation in past texts,[44] which was also the designation was used during the negotiations,[45] in a welcome change, mediation was the term chosen for both instruments. This better corresponds to commercial and institutional practice and will avoid any confusion with hybrid non-facilitative processes.[46]

General Principles and Formal Requirements of Which Parties and Mediators Must Be Aware

First, the Convention will apply even if parties did not have a prior agreement to mediate in their contract or otherwise.[47]

Second, choice of law and forum clauses should be carefully crafted, taking into account the location of the parties and assets in the event that enforcement is required for non-compliance. If the choice of law is invalid or inexistent, rules of procedure based on the principles of the private international law of the enforcing state will apply.[48] This is important as one of the grounds for refusing enforcement under Article 5 is if the agreement is void “under the law to which the parties have validly subjected it” or “under the law deemed applicable by the competent authority.”[49]  Under the Convention, the competent authority may also be an arbitral tribunal if the settlement agreement provides that any future disputes will be resolved by arbitration.[50]

Mediation being essentially the parties’ process, there is no limitation on what a hypothetical resolution may encompass, including non-monetary obligations or transfers of property. When such property is in the form of shares or real property, then the parties will have to comply with any transfer requirements and formalities of the authorities at the location of the property.[51]

Another ground for refusal is when granting relief would be contrary to the terms of the settlement agreement. One example of this is if the parties exclude the application of the Convention by ‘opting-out’.[52] 

As with the enforcement of an award under the New York Convention, certain formalities must be met for a settlement agreement to be enforced under the Singapore Convention.  The key difference is that the form requirements set out in Article 4 apply to the settlement agreement or the end result, not the decision to resolve a dispute by mediation prior to its occurrence.[53] One of the requirements is that it must be signed by the parties. In this regard, Article 4.2 reflects modern practice by allowing the ‘signature’ to be in an electronic format.[54] This also supports the growing practice of ODR or on-line dispute resolution.

Article 1.1 of the Convention stipulates that it applies to agreements ‘resulting from mediation’. Determining what evidence could prove that the settlement agreement resulted from mediation was more problematic. Fortunately, a compromise was found offering a palette of alternative options in Article 4.1(b) to establish such proof.[55] They are: (i) the mediator’s signature on the settlement agreement; (ii) a document signed by the mediator indicating that the mediation was carried out; (iii) an attestation by the institution that administere