A New Era for International Mediation

On 7 August 2019, the Singapore Convention on Mediation (“Singapore Convention”), was signed by 46 countries (link), including China, the United States, Singapore, India and South Korea.  Support for the Convention from some of the world’s largest economies is encouraging: a recognition that mediation has become a viable dispute resolution option. 

The Singapore Convention seeks to expedite the enforcement of settlement agreements arising from the mediation of cross-border disputes by setting down a unified framework for enforcement.  It sits alongside other conventions that apply to the enforcement of judgments and awards in cross-border litigation and international arbitration – i.e., the Hague Convention and the New York Convention.

The Singapore Convention will enter into force six months after it has been ratified by at least three signatory States.  Ratification could take some time, depending on the domestic processes of the signatory States.

KEY CRITERIA

The Singapore Convention applies to mediated settlement agreements that satisfy the following main criteria:

  1. The agreement must be recorded in writing.
  2. The agreement must resolve a commercial dispute. The Convention does not apply to, for example, disputes arising from consumer contracts or are in relation to family, inheritance or employment law.
  3. The agreement must be international, i.e., at least two parties should have their “place of business” in different signatory States or the State in which the agreement will be performed is different from the place of business of the parties involved.  Where a party has multiple places of business, the Singapore Convention provides that the relevant place of business is that which has the “closest relationship” to the dispute (Article 2(1)(a)).
  4. The agreement must have resulted from mediation.  Mediation is defined broadly as “a process, irrespective of the expression used or the basis upon which the process is carried out, whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person or persons lacking the authority to impose a solution upon the parties to the dispute” (Article 2(3)).
  5. A signatory State may refuse to enforce an international mediation agreement if any of grounds under Article 5 apply.  To give a few examples, the grounds of refusal include:
  • incapacity of a party (Article 5(1)(a));
  • the settlement agreement is null and void, or is not binding or final (Article 5(1)(b));
  • the obligations in the agreement are not clear or comprehensible (Article 5(1)(c));
  • there was a “serious breach by the mediator of standards applicable to the mediator or the mediation” (Article 5(1)(e)); and
  • granting relief would be contrary to public policy of the State where enforcement is sought (Article 5(2)(a)).

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Some questions remain concerning the application and operation of the Singapore Convention.

First, the Singapore Convention does not define what constitutes a “place of business” or how a court should apply the “closest relationship” test.  This can potentially create uncertainties for parties seeking to rely on the Convention.  

Second, there may be arguments over what “standards” should apply when considering the ground of refusal under Article 5(1)(e) (serious breach of applicable standards), given that there are different models of mediation in use (facilitative, evaluative, transformative).  It will be interesting to see how frequently this ground is invoked and how a competent authority handles such challenges.  

Third, the public policy ground for refusal (Article 5(2)(a)) can give flexibility to some States to refuse enforcement.  We expect similar public policy arguments to be rehearsed under the Singapore Convention as the ones deployed under the New York Convention.

Fourth, at present, the European Union member states (including the United Kingdom) and some Commonwealth countries (such as Australia and Canada) have not signed the Singapore Convention.  Their support will be important in further promoting the adoption of the Convention by other States, although we do expect that, with time, many more countries will sign the Singapore Convention (to recall, the New York Convention had a slow start with only 10 initial signatories). 

Fifth, the Singapore Convention allows signatory States to make a reservation at any time to limit the application of the Convention to only those agreements where the parties have agreed to its application (Article 8(1)(b)).  This is a potentially significant limitation; there is currently no indication as to how many signatory States will decide to make this reservation. 

Sixth, it is debatable whether the Singapore Convention applies to agreements reached under Court-mandated mediation (e.g., in Hong Kong, there is a process for engaging in mediation following the close of pleadings).  This is because the Convention provides that it would not apply to settlement agreements that “have been…concluded in the course of proceedings before a court” (Article 1(3)(i)).  It is also questionable whether the Convention would apply to a settlement reached under the med-arb procedure, if the mediator is also the arbitrator.  The Convention contemplates that, in order to fall within the definition of “mediation”, the mediator should lack “the authority to impose a solution upon the parties” (Article 2(3)).

IMPLICATIONS FOR HONG KONG

Although China is a signatory of the Singapore Convention, this does not automatically result in Hong Kong being bound by the Convention, even after China has ratified the Convention.  According to Article 153 of the Basic Law of Hong Kong, international treaties and agreements acceded to by China do not automatically apply to Hong Kong, and the ultimate decision regarding the application of the Convention to Hong Kong rests with the Chinese Central Government, “after seeking the views of the government of the Region”.  

It is likely that the Chinese Central Government will take the relevant steps to apply the Singapore Convention to Hong Kong, in light of the clear benefits it brings to the enforcement of international mediated settlement agreements.  Application of the Singapore Convention to Hong Kong will further bolster its reputation as a leading dispute resolution centre in Asia.

It is also questionable whether the Singapore Convention would apply to the enforcement of mediated settlement agreements entered into between a Hong Kong and a Chinese party, because the agreement may lack the requisite “international” character, given that Hong Kong is a Special Administrative Region of China.  To remove any uncertainty, Hong Kong and China can make special arrangements for the mutual enforcement of such mediated settlement agreements, in the same way they addressed similar issues in connection with the enforcement of Hong Kong and Chinese arbitration awards. 

When drafting dispute resolution clauses for cross border disputes, always remember that a mediation clause by itself is not enough. You still need to provide for another dispute resolution method, either litigation or international arbitration, if the parties are unable to resolve the dispute.

Text of the Singapore Convention is accessible at this Link.

Partner, Simmons & Simmons JWS

Consultant, Simmons & Simmons