October 08, 2019 Articles

The Singapore Mediation Convention: What Will Be Its Impact?

Mediation will not eclipse arbitration anytime soon, but the Singapore Convention is a positive development for dispute resolution as a whole.

By Iris Ng

International arbitration and mediation are often viewed as opponents in an antagonistic battle for the hearts, minds, and wallets of disputants. The fear of arbitration losing its status as the most preferred form of alternative dispute resolution is palpable: Mediation’s key disadvantage has long been the difficulty of enforcing mediated settlement agreements. But the United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention) would promote the widespread international enforceability of settlement agreements, which directly erodes the edge of arbitration considering that the enforceability of arbitral awards is usually ranked as arbitration’s best feature

The Singapore Convention Versus the New York Convention

By way of introduction, at the time of writing, the Singapore Convention has been signed by 46 countries including the United States, China, India, and South Korea. It needs to be ratified by three countries before it comes into force. In comparison, the New York Convention has 160 state parties to date.

The Singapore Convention applies when there is a “settlement agreement” resulting from mediation that was concluded in writing to resolve a “commercial dispute,” which at the time of conclusion is “international,” under Article 1(1). The New York Convention applies to “arbitral awards” that are made in the territory of a state other than the state where the recognition and enforcement of such awards are sought, as well as awards “not considered as domestic awards” in the enforcing state, under Article I(1).

The two conventions have a similar scheme, with Articles 3 and III respectively of the Singapore Convention and New York Convention requiring state parties to enforce settlement agreements or arbitral awards in accordance with their rules of procedure, and Articles 5 and V exhaustively listing the defences to recognition. These defences fall into three categories:

 

Singapore Convention

New York Convention

Identical grounds

Article 5(2)(b) Subject matter of the dispute incapable of settlement by mediation

Article V(2)(a) Non-arbitrability

Article 5(2)(a) Public policy

Article V(2)(b) Public policy

Similar grounds

Article 5(1)(a) Party to the settlement agreement was under some incapacity

Article V(1)(a) Party to the arbitration agreement was under some incapacity under the law applicable to them

Article 5(1)(b)(i) The settlement agreement sought to be relied upon Is null and void, inoperative or incapable of being performed under the law to which the parties have validly subjected it or, if not indicated, the law deemed applicable by the court of the enforcing state

 

Article V(1)(a) Invalidity of arbitration agreement under the law to which the parties have subjected it or, if not indicated, the lex arbitri

See also Article II(3) requiring a court to refer parties to arbitration unless the arbitration agreement is “null and void, inoperative or incapable of being performed”

Article 5(1)(b)(ii) Settlement agreement not binding or not final according to its terms

 

Article V(1)(e) Award not yet become binding, or set aside or suspended by the seat court

Unique grounds

Article 5(1)(b)(iii) Settlement agreement has been subsequently modified

Article 5(1)(c) Obligations in the settlement agreement have been performed or are not clear or comprehensible

Article 5(1)(d) Granting relief would be contrary to the terms of the settlement agreement

Article 5(1)(e) Serious breach by mediator of standards applicable to the mediator or the mediation without which breach that party would not have entered into the settlement agreement

Article 5(1)(f) Mediator’s failure to disclose the mediator to disclose circumstances that raise justifiable doubts as to the mediator’s impartiality or independence and such failure to disclose had a material impact or undue influence on a party without which failure that party would not have entered into the settlement agreement

Article V(1)(b) Party against whom the award is invoked was not given proper notice of arbitrator appointment or proceedings or was otherwise unable to present his case

Article V(1)(c) Award deals with a difference outside the scope of submission to arbitration

Article V(1)(d) Tribunal composition or arbitral procedure not in accordance with parties’ agreement or, if no such agreement, the lex arbitri


Uncertainties in the Operationalisation of the Singapore Convention

Notwithstanding the similarities in their scheme and range of defences, there is room for some healthy scepticism over the Singapore Convention. The first reason why this is the case is that there is some uncertainty over how the Singapore Convention will be operationalised. This has several facets, which I will consider in turn.

First, as arbitration practitioners may think with a bit of schadenfreude, the take-up rate of the Singapore Convention is still up in the air. A treaty’s effectiveness hinges on its widespread adoption and acceptance, and the Singapore Convention is still in its infancy compared to the New York Convention.

Second, it is an open question how Article 12(4) of the Singapore Convention will affect its implementation in member states of regional economic integration organisations. Article 12(4) provides that the Singapore Convention “shall not prevail over conflicting rules of a regional economic integration organization” if the settlement agreement is sought to be relied on in a member state, and the states involved that make the mediation “international” under Article 1 of the Singapore Convention are member states. The enforcement regime under the Singapore Convention would therefore be subject to any additional preconditions imposed by regional organisations, such as obtaining the counterparty’s consent—as required under the EU Directive on Mediation before a settlement agreement may be relied on.

Third, Article 5(1)(d) of the Singapore Convention has the potential to greatly limit the applicability of this Convention. Article 5(1)(d) affords a defence if granting relief would be contrary to the terms of the settlement agreement. On this view, which is supported by the travaux préparatoires (see the discussion in T Schnabel, “The Singapore Convention on Mediation: A Framework for the Cross-Border Recognition and Enforcement of Mediated Settlements” (2019) 19 Pepp Disp Resol LJ 1 at 48–49.), parties would be allowed to “contract out” of enforcement of their settlement agreement under the Singapore Convention by so providing in their settlement agreement. Although Article 5(1)(d) might still be limited in effect if courts adopt a strict approach towards interpreting clauses that purport to contract out of the Singapore Convention, legally advised commercial parties are unlikely to face difficulty drafting a sufficiently clear and enforceable clause.

Arbitration and Mediation: Frenemies in Mutualistic Competition

The second reason why arbitration practitioners need not panic just yet is that arbitration and mediation are not true enemies, but “frenemies.” To characterise the arb-med relationship as the former would be to make two wrong assumptions: (1) that it is impossible to increase the attractiveness of a jurisdiction as a whole as a dispute resolution hub, such that arbitration and mediation advance in tandem (the “fixed pie” assumption); and (2) that disputant-consumers inevitably choose either arbitration or mediation, but not both (the “either/or” assumption).

First, the “fixed pie” assumption is contradicted by empirical evidence. The availability of mediation at several renowned arbitral institutions has not dampened demand for arbitration services. The International Chamber of Commerce, Stockholm Chamber of Commerce, and LCIA are amongst the institutions which have all recorded robust growth over the years despite offering mediation services. This phenomenon arises from the fundamental differences between arbitration and mediation, and how disputants choose one mode of dispute resolution over another for their different competitive advantages. Arbitration is regarded as a “litigation-substitute” pathway to a final and binding determination, which carries precedential value in fact if not in law (especially for test cases with multiple similar claims). By contrast, mediation is a less adversarial mode of dispute resolution that saves “face” and preserves relationships at lower financial cost. In view of the different cost-benefit analyses for disputes of different natures (such as complexity and dollar value), the “fixed pie” assumption is incorrect.  

Secondly, the “either/or” assumption underlying a zero-sum mentality is that parties choose arbitration or mediation, but not both. That is disproved by the existence of various combinations of the two under arb-med, med-arb and arb-med-arb protocols (collectively referred to as “AMA protocols”), which are increasingly popular. According to the 2018 Global Pound Conference Series report, the combining of adjudicative and non-adjudicative processes features in the top three ways to improve the future of commercial dispute resolution. The question then is not whether AMA protocols should be adopted, but which of its forms has the most potential. In this connection, it is significant that the Singapore Convention carves out from its scope of application, under Article 1(3)(b), settlement agreements that have been recorded and are enforceable as an arbitral award.

The New York Convention, the Singapore Convention, and the Future of Dispute Resolution

Speaking in 2016, the Chief Justice of Singapore called for a shift from viewing “ADR” as alternative dispute resolution, to appropriate dispute resolution. The underlying idea is that modern legal systems should provide a diversified range of dispute resolution options, so parties can pick the mode of justice that is most suited to the subject matter, parties, and desired outcomes. Taking that perspective, the Singapore Convention is but another piece in the jigsaw of global conventions that work towards this end. It joins the ranks, but does not seek to usurp the place, of the New York Convention for arbitration and the 2005 Hague Convention on Choice of Court Agreements for litigation. All things considered, the Singapore Convention is a development that the arbitration and mediation fraternity alike has cause to celebrate.

Iris Ng  is a Justices’ Law Clerk in Singapore

The article is written in the author’s personal capacity, and the opinions expressed in the article are entirely the author’s own views.

First published on Kluwer Law Blog. Edited for republication on ABA. 


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