No Longer a Toothless Tiger: Internationally mediated settlements set to be directly enforceable
August 20, 2019
2 min read
What's going on here?
46 countries including China, US, India, and the Republic of Korea signed the Singapore Convention on Mediation, a treaty enabling the cross-border enforcement of mediated settlement agreements.
What does this mean?
The Singapore Convention on Mediation seeks to remedy a problem that currently exists for settlement agreements with a cross-border nature. At the moment, if two parties enter into a settlement agreement following mediation and one party does not comply with its terms, the other party can refer to the dispute resolution clause in the settlement agreement. That clause will state any disputes that arise should be resolved through court/arbitration proceedings in a certain jurisdiction. Dispute resolution is straightforward if the parties, the business assets disputed over and legal proceedings take place in the same jurisdiction.
For international businesses, this is often not the case. For example, one party could be operating in China and the other in India, the business assets located in Texas, USA and the jurisdiction of choice being Hong Kong, China. Pursuing enforcement mechanisms will take substantial time and money because of jurisdictional issues with enforcement (i.e. a court judgement must first be passed in that separate jurisdiction or an arbitral award must be issued before enforcement in the courts). For this reason, it is hard to pursue cross-border mediated settlement agreements due to barriers of jurisdictional enforcement present.
The Singapore Convention on Mediation proposes to remedy this by providing a process to directly enforce cross-border settlement agreements resulting from mediation. Now, parties will only need to apply directly to the court of the relevant State in order to pursue the disputed business assets and prevent potential multiple proceedings.
What's the big picture effect?
With 46 countries showing their support (excluding the EU, UK and Australia), it is highly anticipated that this will finally give “teeth” to mediation conducted in different jurisdictions.
The Singapore Convention is seen as the missing third piece in the international dispute enforcement framework. Awards resulting from arbitration and court judgements are already enforceable across borders under the New York Convention and Hague Judgements Convention respectively. As such, until very recently, mediation is viewed as the less costly, less adversarial option but ultimately weak on enforcement.
Overall, the success of the Convention will largely depend on the extent it is accepted and ratified by the States (with a minimum of 3 states needed to ratify in order for the treaty to come into force). On this, Law and Home Affairs Minister (Singapore) K. Shanmugam expresses optimism, describing the current response rate as “astonishing”. He adds “If it is signed up to by a large number of countries, and it is enforced by a large number of countries, then you can imagine mediation will become very attractive because it is now enforceable. That’s why this 46 as a start is a flying start.”
Report written by Roslyn Lai
Share this now!