United States: International Mediation: The New Mode Of The Future?

As global businesses have had to adapt to the curveballs thrown by COVID-19, innovation has sprung from adversity and the future of international trade is bright. One area of innovation is the continued development and adoption of the Singapore Convention on Mediation ("Singapore Convention"), which if ratified more widely in the coming years will provide an enforceable framework for international mediation.¹

Businesses often prefer mediation because it is flexible, confidential, and cost-effective. As compared to a "zero sum" adjudication in litigation or arbitration, a compromise can be achieved by the parties in mediation. However, before 2018, there was no enforcement mechanism for a Compromise Settlement Agreement ("Settlement") that resulted from a mediation. In 2018, the United Nations adopted the Singapore Convention for signing in August 2019.² During the initial signing, 46 countries signed on, with symbolic support by another 26 countries.³ In February 2020, Singapore and Fiji became the first two countries to ratify the Singapore Convention.⁴ When the third country, Qatar, ratified the Singapore Convention, it entered into full force six months later on September 12, 2020.⁵

What this means for global businesses is that now when the parties mediate and enter into a Settlement as a result, such Settlement will become binding and enforceable in any State that has adopted and ratified the Singapore Convention. Each State that ratifies the Singapore Convention agrees to:

• "Enforce a settlement agreement in accordance with its rules of procedure and under the conditions laid down in this Convention."⁶
• "Allow the party to invoke the settlement agreement in accordance with its rules of procedure and under the conditions laid down in this Convention, in order to prove that the matter has already been resolved."⁷

It is worthy to note, that once ratified by a State, the Singapore Convention will not apply retroactively, "[t]he Convention...shall apply only to settlement agreements concluded after the date when the Convention, reservation or withdrawal thereof enters into force for the Party to the Convention concerned."⁸

Previously, there was the potential for parties to refrain from engaging in the mediation process, even if contractually required, or to impasse mediation without full, good faith engagement in the process, because any resulting Compromise Settlement Agreement was questionable as to enforcement. If a bad faith party intended not to honor such Settlement, they could agree to anything in mediation knowing the other party would not be able to force them to comply with the terms. Thus, as an unintended consequence, parties preferred to push the claims into arbitration (or international litigation) to seek an enforceable adjudication. Many businesses engaged in international trade prefer international arbitration, due to its internationally enforceable nature, provided by the New York Convention.⁹

This unintended consequence, resulting in the preferred use of arbitration, is reduced by the Singapore Convention, which provides an enforceable framework for international mediations.¹⁰ It therefore promotes international business and international cooperation. Importantly, the Singapore Convention only applies to international commercial agreements and not personal agreements that involve family or household matters.¹¹ By also promoting uniform legal application, the Singapore Convention further promotes business growth by encouraging businesses that enter international agreements with a mediation clause, knowing that a resulting Settlement will be enforceable and binding.¹²

Currently,¹³ the Singapore Convention has 53 signatories and 6 countries which have ratified or accepted it.¹⁴However, three of those signatories,¹⁵ including ratifying countries Belarus and Saudi Arabia, have signed on with reservations.¹⁶ For example, Belarus has made reservation upon signature that "[i]n accordance with the article 8 of the Convention the Republic of Belarus shall not apply this Convention to settlement agreements to which it is a party, or to which any governmental agencies or any mediation person acting on behalf of a governmental agency is a party."¹⁷This reservation is one of two expressly available, the other being that the State "shall apply this Convention only to the extent that the parties to the settlement agreement have agreed to the application of the Convention."¹⁸ Either of these reservations are available to ratifying countries.¹⁹

Other current signatories include Afghanistan, Armenia, Belarus, Benin, Brunei Darussalam, Chad, Chile, China, Columbia, Democratic Republic of Congo, Ecuador, Eswatini, Fiji, Gabon, Georgia, Ghana, Grenada, Guinea-Bissau, Haiti, Honduras, India, Islamic Republic of Iran, Israel, Jamaica, Jordan, Kazakhstan, Lao People's Democratic Republic, Malaysia, Maldives, Mauritius, Montenegro, Nigeria, North Macedonia, Palau, Paraguay, Philippines, Qatar, Republic of Korea, Rwanda, Samoa, Saudi Arabia, Serbia, Sierra Leone, Singapore, Sri Lanka, Timor-Leste, Turkey, Uganda, Ukraine, USA, Uruguay, and Bolivarian Republic of Venezuela.²⁰

Importantly, while the United States has signed on to the Convention as of August 7, 2019, there does not appear to be current progress towards ratification, as there is no bill introduced yet to consider it,²¹ and we have not seen any senator that has publically expressed intent to do so. Nevertheless, if/when the United States ratifies the Singapore Convention, the potential impact on American businesses engaged in international trade would be significant. The Singapore Convention has the potential for as much impact as the New York Convention, but it depends largely on the level of adoption globally.²² The New York Convention has been adopted by over 160 countries, including the United States as early as 1970.²³

The widespread adoption of the Singapore Convention does not replace arbitration as a dispute resolution mechanism; Rather, it merely provides an additional available method of dispute resolution with both options having different advantages and disadvantages. Many businesses may choose mediation in addition to arbitration, as it is less adversarial and more cost-beneficial to seek a Settlement first. However, if the parties cannot compromise, then they should still have the ability to resort to arbitration for an adjudication. Other businesses may still choose arbitration without mediation as a pre-requisite because it is internationally enforceable as a substitute for litigation.²⁴

Also, even after the Singapore Convention is adopted more widely, there may still be domestic and regional laws that take precedent—for example, the EU Directive on Mediation²⁵ may have preconditions that need to be fulfilled before the Singapore Convention would be invoked to enforce a Settlement.²⁶

For our global business clients, we recommend keeping a watchful eye on the U.S. potential to ratify the Singapore Convention. If ratified, it would be highly beneficial to businesses to have multiple enforceable dispute resolution mechanisms as options in the international context. At this time, we still encourage clients to carefully consider the benefits and risks of mediation in their international commercial contracts, and to take the totality of circumstances into consideration. Currently, while the Singapore Convention is relatively new in its inception, its future appears bright and it may become the primary international dispute resolution mode of the future!

This publication was prepared with the assistance of one of our Summer Clerks, Maria Aguilera.

Footnotes

1. The Convention Text, Singapore Convention on Mediation, (accessed June 1, 2021) https://www.singaporeconvention.org/convention/the-convention-text/.

2. About the Convention, Singapore Convention on Mediation, (accessed June 1, 2021) https://www.singaporeconvention.org/convention/about-convention/.

3. Id.

4. Id.

5. Id.

6. United Nations Convention on International Settlement Agreements Resulting from Mediation, Dec. 20, 2018, Art. 3 [hereinafter Singapore Convention], https://uncitral.un.org/sites/uncitral.un.org/files/singapore_convention_eng.pdf.

7. Id.

8. Id. at art. 9.

9. Iris Ng, The Singapore Mediation Convention: What Will Be Its Impact?, ABA (Oct. 8, 2019), https://www.americanbar.org/groups/litigation/committees/alternative-dispute-resolution/articles/2019/the-singapore-mediation-convention-what-will-be-its-impact/.

10. Id.

11. Id.

12. See id.

13. As of February 6, 2021. Status of Treaties: United Nations Convention on International Settlement Agreements Resulting from Mediation, United Nations Treaty Collection, (accessed June 1, 2021) https://treaties.un.org/pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXII-4&chapter=22&clang=_en.

14. Id.

15. Belarus, Iran, and Saudi Arabia. Id.

16. Id.

17. Id.

18. Singapore Convention, supra note 10, at art. 8.

19. Id.

20. Id. (last checked June 1, 2021)

21. See Congress.gov, (accessed June 1, 2021) https://www.congress.gov/.

22. Id.

23. Status: Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the "New York Convention"), United Nations Comm'n on Int'l Trade Law, (accessed June 1, 2021)

https://uncitral.un.org/en/texts/arbitration/conventions/foreign_arbitral_awards/status2.

24. The Singapore Mediation Convention: What Will Be Its Impact?, supra note 6.

25. Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on Certain Aspects of Mediation in Civil and Commercial Matters, EUR-Lex, (accessed June 1, 2021) https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A32008L0052.

26. The Singapore Mediation Convention: What Will Be Its Impact?, supra note 6.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.