The 2020 European financial services outlook
For all financial services practitioners, 2020 will be a year of dynamic developments.
The United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention) opened for signature in Singapore on August 7, 2019, and will come into force six months after being ratified by at least three State Parties. So far, 46 States have signed, including China, India and the US. The Singapore Convention responds to the demand from a growing body of mediation users for an enforcement mechanism applicable to mediated settlement agreements in cross-border disputes.
Currently, in the absence of an international regime, mediated settlement agreements are generally only enforceable as any other contract. The exception is where mediation is undertaken within arbitration or litigation proceedings and the settlement agreement is recorded within, and is therefore enforceable as, an arbitral award or court judgment. (See our prior article The Med-Arb Q&A in issue 6 of the International Arbitration Report). However, that requires parties to participate in formal dispute resolution processes in parallel to mediation, which some argue undermines the consensual nature of mediation and adds additional layers of time and cost. The Singapore Convention and corresponding Model Law is intended to provide a solution – a legal framework within which settlement agreements resulting from the mediation of international commercial disputes may be enforced. In this respect, it purports to play a role similar to that of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (New York Convention), and the influence of the New York Convention is apparent in the structure and language throughout the Singapore Convention.
The Singapore Convention applies only to mediated settlements of international commercial disputes, namely where at least two parties to the settlement agreement have their places of business in different States; or the State in which the parties have their places of business is different from either the State in which a substantial part of the obligations under the settlement agreement is performed or the State with which the subject matter of the settlement agreement is most closely connected.
Certain types of settlement agreements are excluded from the scope of the Singapore Convention, namely settlement agreements that have been approved by a court or concluded in court proceedings, and that are enforceable as a judgment in the State of such a court, or those that have been recorded and are enforceable as part of an arbitral award. Settlement agreements pertaining to certain subject matters are also excluded, namely family, inheritance or employment law, and disputes arising from transactions engaged in by a consumer for personal, family or household purposes.
State Parties to the Singapore Convention are required to enforce applicable settlement agreements in accordance with their national rules of procedure and the conditions set out in the Convention. In addition, if a dispute arises concerning a matter alleged to have already been resolved by a settlement agreement, State Parties must allow the parties to invoke the settlement agreement to prove the matter has already been resolved – i.e. allowing parties to invoke a settlement agreement as a defence against a claim. Again, this must be done in accordance with national rules of procedure and the conditions in the Convention. A party seeking relief must produce the signed settlement agreement along with evidence that the agreement resulted from mediation. Such evidence may take the form of a mediator’s signature on the settlement agreement, a separate signed confirmation document from the mediator, an attestation by the institution administering the mediation, or any other evidence acceptable to the State’s competent authority. Requests for relief must be handled “expeditiously” by the State’s competent authorities.
Like the New York Convention, there are limited grounds under the Singapore Convention on which a State Party may refuse to grant relief requested by a party to a settlement agreement. Article 5(1) of the Singapore Convention provides that relief may be refused if the party opposing relief furnishes proof that
Further, Article 5(2) provides that relief may be refused if the competent authority where relief is sought finds that
The Singapore Convention is a positive development for mediation of crossborder disputes, and one which should enable easier enforcement of international mediated settlement agreements around the world.
However, the language of the Singapore Convention does allow for some uncertainties which will likely need to be clarified in domestic implementing legislation or procedural rules, in practice by national courts, and/or by users of the Convention. To give just a couple of examples: Article 3(1) provides that “each Party to the Convention shall enforce a settlement agreement …”; and Article 5(1)(e) provides that relief may be refused if “[t]here was a serious breach by the mediator of standards applicable to the mediator or the mediation …;”. Each of these provisions leave open important questions. First, what does it mean for a mediated settlement agreement to be “enforced”? Second, what “standards” apply to mediators and mediation?
With respect to the first question, while arbitral awards define the remedies available to the parties on the basis of which enforcement is sought, in practice mediated settlements generally do not. Therefore what relief would be available to a party seeking enforcement of a settlement agreement under the Singapore Convention? The answer is far from certain. In many common law jurisdictions, the enforcement of a contractual right normally takes the form of an order for damages reflecting the value of the right to the aggrieved party. In exceptional cases, the enforcement of a contractual right may take the form of an order requiring that the breaching party perform the contractual obligation. Such an order is often reserved for circumstances where damages would be unsuitable to compensate the aggrieved party for the breach. It is unclear under the Singapore Convention whether enforcement of a mediated settlement agreement would take the form of damages, specific performance; or another remedy called for under the law of the jurisdiction in which enforcement is sought.
Any party contemplating the enforcement of an international mediated settlement agreement through the Singapore Convention would be wise to define the remedies for breach of the settlement agreement in the agreement itself. In so doing, parties must be aware that certain remedies may not be enforceable under the laws of some jurisdictions. Therefore, when defining remedies, the parties should be mindful of the most likely enforcement jurisdiction/s and what remedies are available in each. These steps, taken at the outset, will provide greater certainty that the remedy a party is seeking will in fact be attainable should it prove necessary to pursue enforcement.
Turning to the second question, it is not entirely clear what standards are contemplated to apply to mediators or mediation, let alone what might constitute a breach of such standards for purposes of grounding a refusal to enforce a mediated settlement agreement. While international standards have been developed to guide certain aspects of international arbitrations, such as the IBA Rules on the Taking of Evidence in International Arbitration and the IBA Guidelines on Conflicts of Interest in International Arbitration, there are no equivalent international standards to guide international mediation. The International Mediation Institute’s Code of Professional Conduct is perhaps the closest to a global standard on mediator conduct, although it is not known how widely used it is. Local standards in enforcement jurisdictions differ across the globe, and may be applied to assess mediator conduct with varying enforcement outcomes across multiple jurisdictions.
The role of mediators in hybrid dispute processes, such as med-arb, arb-med, arb-med-arb or MEDALOA (mediation followed by last offer arbitration), also potentially complicate matters. In hybrid dispute processes, parties may shift between dispute phases and the same person may conduct the different phases of the dispute, potentially raising procedural integrity concerns. Proponents of hybrid processes argue such concerns are offset by efficiencies gained in such processes as compared to traditional dispute processes which proceed sequentially through escalating procedures with separate persons serving as mediator and arbitrator. In many instances, where a dispute process concludes in arbitration or with a mediated settlement agreement recorded in a consent award, the Singapore Convention will not apply. Any procedural integrity issues are therefore likely to be dealt with within the framework of the New York Convention. However, for those cases concluding in a settlement agreement to which the Singapore Convention applies, there may be uncertainty around the standards applicable to those involved in hybrid processes.
Again, forward planning is essential to an enforceable result, including an understanding of the requirements of jurisdictions where enforcement is sought, and express agreement by the parties to the approach to be adopted and implemented by the mediator.
For all financial services practitioners, 2020 will be a year of dynamic developments.
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