The London Chamber of Commerce and Industry (LCCI) has expanded its dispute resolution services by launching the London Chamber of Arbitration and Mediation (LCAM) on 26 May 2020. Continue reading
In Wales (t/a Selective Investment Services) v CBRE Managed Services Ltd & Anor  EWHC 1050 (Comm) (30 April 2020) (Wales), the High Court (the Court) disallowed a substantial part of a successful defendant’s costs as a result of its failure to engage in mediation. This is the latest decision in a number of recent High Court cases where the Court has shown willing to impose cost sanctions on the basis of a party’s refusal to participate in ADR (as discussed in a previous post here). Continue reading
We have previously reported on the Court of Appeal judgment in Lomax v Lomax  EWCA Civ 1467. In the Lomax decision, the Court held that it had the power to order an early neutral evaluation (ENE) even where one or more parties did not consent to that course. At the time we observed, among other points, (i) that the Lomax judgment had the potential to prompt an increase in use of ENE by parties (either on their own initiative or further to directions from the judge); and (ii) that the decision was of wider significance in the context of the debate as to whether the courts’ encouragement of ADR should extend into compulsion. Continue reading
From 12 September 2020, all international settlement agreements resulting from mediation will potentially be able to be enforced under the new Singapore Convention, regardless of where in the world the mediation took place.
Article 14 of the Singapore Convention provides that it will enter into force six months after three signatory states have ratified it into their domestic law. We have previously reported that Fiji and Singapore deposited their instruments of ratification on 25 February 2020. On 12 March 2020, Qatar became the third state to ratify the Convention, meaning that the Convention will enter into force on 12 September 2020 – just over a year after its signing ceremony on 7 August 2019. Continue reading
Yesterday, on 25 February 2020, Singapore and Fiji became the first two countries to deposit at the United Nations Headquarters their instruments of ratification of the Singapore Convention, more formally known as the United Nations Convention on International Settlement Agreements Resulting from Mediation. Singapore and Fiji have taken an important step towards bringing the Singapore Convention closer to coming into force. Continue reading
At a launch event on 29 January 2020, the Centre for Effective Dispute Resolution (CEDR) released updates to its ADR and mediation documents. Continue reading
It has been reported that the Civil Justice Council (CJC) has established a Judicial ADR Liaison Committee (the Committee). The formation of the Committee was one of several recommendations made by the CJC’s ADR Working Group in its November 2018 ADR and Civil Justice Report (the Report) considering various ways to encourage the use of ADR in the civil justice system (which are summarised here in a previous post).
The Report concluded that stakeholders (ADR professionals, lawyers, and judges) would benefit from the creation of the Committee to monitor and support the role of ADR in the civil justice system. It suggested that the Committee would (among other responsibilities) be involved in any further steps for greater regulation of mediation and would monitor the promotion of the use of ADR in several areas, including law schools and legal practitioners’ professional conduct requirements. The Working Group therefore recommended in the Report that “a liaison committee should meet on a regular basis at which ADR professionals and Judges can monitor and give advice on the role of ADR in the rapidly changing Civil Justice landscape“.
We understand that the Committee has now been established and that, in accordance with the recommendations of the Report, its mandate involves reporting to judicial bodies on several ADR-related issues. It will advise on:
- the encouragement of the use of ADR;
- the awareness of ADR (including in legal education);
- the availability of ADR (including issues of funding); and
- the adaptability of ADR in relation to new developments in the civil justice system.
The establishment of the Committee will likely assist with the consideration and potential implementation of other recommendations in the Report.
As the spotlight shines on mediated settlements with the signing of the Singapore Convention on Mediation on 7 August 2019, it is timely to recall that settlement agreements, like any other contract, are only as useful as they are enforceable. While parties may often feel that they have completed the hard work in reaching a negotiated settlement, it is crucial that the settlement is documented carefully to avoid subsequent disputes. Two recent decisions in the Malaysian courts are instructive examples of how ambiguity in settlement agreements can be the cause of further costly and time-consuming litigation rather than putting an end to it.
Peter Godwin, Nicholas Hoh, Daniel Chua and Rebecca Pang of our Kuala Lumpur office consider the decisions below.
On 24 September 2010, the High Court granted summary judgment against Reebok in the sum of:
- RM5,329,067,93 and interest due under CIMB Bank’s overdraft facilities; and
- RM589,074.67 and interest due under CIMB Bank’s term loan facilities
(together the Judgment Sum).
On 18 March 2011, the parties entered into a settlement agreement for the payment of the outstanding Judgment Sum, which included the following terms:
- That the amount of “RM4,990,000 as at 18 [March] 2011” be repaid in 71 monthly instalments of RM50,000 per month, and a final bullet payment of the balance of the total outstanding sum in the 72nd month.
- That CIMB Bank will proceed to execute the judgment of the High Court by foreclosing on Reebok’s property in the event of default of payment.
CIMB Bank attempted to foreclose on Reebok’s property in 2015, alleging that Reebok had failed to make timely payments. However, this action was discontinued when it was discovered that a competing creditor had already foreclosed on the property. In response, Reebok claimed against CIMB Bank that it had paid RM532,746.75 in excess of the agreed settlement amount of RM4,990,000, on the basis that the settlement agreement did not refer to interest on the principal sum of RM4,990,000.
Among the issues before both the High Court and the Court of Appeal were as follows:
- First, whether CIMB Bank was entitled to claim interest on the Judgment Sum when its repayment was subject to the terms of the settlement agreement
- Second, whether CIMB Bank must first terminate the settlement agreement before executing the judgment by commencing foreclosure proceedings
Both the High Court and Court of Appeal rejected Reebok’s claim for repayment, finding that:
- CIMB Bank was entitled to claim interest on the Judgment Sum as there were no express words in the Settlement Agreement stating that RM4,990,000 was a final sum. Instead, the Settlement Agreement expressed the Judgment Sum to be the amount “as at 18 [March] 2011”. This meant that the terms of the Settlement Agreement were sufficiently broad to include interest on the sums payable under it.
- There was no need to expressly terminate the Settlement Agreement prior to executing the judgment, given that the Settlement Agreement expressly provided that CIMB Bank could proceed to execute the judgment in the event of default upon any instalment payment. This fell squarely within the Court of Appeal’s requirement that, “[a] party who wishes to revive his original claim in the event of the other party’s inability to comply with his obligation under the terms of the settlement should incorporate such term in the settlement agreement to give effect”.
In 2009, the Appellants (consisting of Abdul Razak and Kamil Azman, amongst others) commenced proceedings against the Respondents (consisting of Amanah Raya Berhad (ARB), Amanah Raya Development Sdn Bhd (ARD) and Amanah Raya Capital Sdn Bhd (ARC) for breach of trust, alleging that the Respondents mismanaged a trust (Trust) settled by one of the Appellants. A consent judgment was recorded in 2010 to compromise the suit, on the following terms (Consent Judgment):
- The maturity of the loan facilities granted by ARC to both Abdul Razak and Kamil Azman respectively is extended to 27 July 2012 on an interest-free basis (Clauses 1 to 3).
- In the event that only part payment(s) of the amount(s) payable are made by the Abdul Razak and Kamil Azman on 27 July 2012, and subject only to the condition that the amount remaining outstanding as at 27 July 2012 from Abdul Razak and Kamil Azman do not exceed RM2,000,000, the parties shall within three months from 27 July 2012 (unless mutually extended by the parties) enter into negotiations to restructure their respective Loan Facilities which shall take into account the Abdul Razak’s 25% interest in the Joint-Venture Agreement referred to in Clause 9 of the Consent Judgment (below) and the assignment of the said interest to ARC towards the repayment of the outstanding sums under the Loan Facilities (Clause 5).
- Abdul Razak, Kamil Azman, and their nominated entity (the Trust) shall enter into a Joint Venture Agreement (JV Agreement), in form and substance as pre-agreed between the Appellants and ARD by 11 August 2010 (Clause 9).
- The parties agree that they shall have no further claims against each other and undertake not to raise the allegations raised in this action in the future (Clause 10).
Two years after the Consent Judgment was recorded, no JV Agreement had been concluded in light of disagreements between the parties as to the legal capacity of the Trust to be a party to the intended JV Agreement. Nor was any payment on the Loan Facilities made. As a result, the Appellants and Respondents commenced a series of cross-claims against each other. The Appellants sought, amongst other claims, specific performance of the JV Agreement, whereas the Respondent sought, amongst claims, a declaration that ARB was released from any obligation to enter into the JV Agreement, and that Abdul Razak and Kamil Azman repay the loan facilities with interest.
The High Court and Court of Appeal held that:
- The Respondents were released from their obligation to conclude the JV Agreement.
- The Appellants were to repay the Respondents the loan amount with interest.
On appeal to the Federal Court, the critical issue for determination was whether the Consent Judgment consisted of mutual promises and obligations which were dependent upon each other, to the effect that the performance of one (the repayment of the loan facilities) was dependent upon the fulfilment of the other (the conclusion of the JV Agreement between the parties). In support of this, the Appellants argued:
- First, that the Consent Judgment created mutual obligations on the basis that (i) the parties agreed to extend the loan repayment date to post-date the envisaged signing of the JV Agreement, and (ii) Clause 5 of the Consent Judgment envisages the restructuring of the loan facilities would include Abdul Razak’s 25% interest in the JV Agreement as some form of collateral.
- Second, that the clauses in the Consent Judgment depict a particular order of performance so as to enable the court to either apply section 53 of the Contracts Act 1950 (Act), or to employ a common sense order of precedence set out in section 55 of the Act. These provisions read as follows:
“53. Order of performance of reciprocal promises
Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and, where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires.
55. Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises
When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, the promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which the other party may sustain by the non-performance of the contract.”
The Federal Court dismissed the appeal, finding “nothing from all these clauses that can be construed to say that the performance of one condition (such as repayment of loan) may be subject to a pre-condition that the JV Agreement.” In particular, the Federal Court observed that “the Consent Judgment does not say that the repayment of loans would be made from the proceeds of the Joint Venture”. As a result, there was no express or implied order of performance under sections 53 and 55 of the Act, which meant that Abdul Razak and Kamil Azman’s obligation to repay the loan was not conditional upon the conclusion of the JV Agreement. Tellingly, the Federal Court opined that “the appellants had woven some legal intrigues, bereft of credible facts and legal findings by the Court below, in characterising the Consent Judgment as they did”.
As regards the release of the Respondent’s obligation to enter into the JV Agreement, the Federal Court considered the declaration of release as consistent with the principle “that, where one party refuses to perform an agreement, the counterparty may treat himself as discharged”. This was on the basis that the Appellants insistence on nominating the Trust as party to the JV Agreement, which was found to be legally impossible given the Trust’s absence of any legal capacity.
The Federal Court also affirmed the principle that a settlement agreement recorded as a judgment:
“… must be construed as a commercial instrument. The aim is to ascertain the contextual meaning of the relevant contractual language. It must be done objectively as to what a reasonable person, circumstanced as the actual parties in a commercial environment were, would have understood it to mean. This must be gathered from the language used and its relevant contextual sense.”
Notably, Article 1(3) of the recently inked Singapore Convention (which Malaysia signed as one of 46 day-one signatories) excludes the Singapore Convention’s application to settlement agreements: (i) that are approved by a court or concluded in the course of proceedings and are enforceable as a judgment in the state of that court; or (iii) that are recorded and enforceable as an arbitral award. The rationale for this carve out is the existence of other international instruments such as The Hague Convention on Choice of Court Agreements and the New York Convention, which govern the enforceability of some court judgments and of arbitral awards respectively (the former of which Malaysia is not a signatory). However, this does not diminish the importance of ensuring that settlement agreements, whether concluded before or during the course of formal proceedings, are properly negotiated and drafted. These cases stand as a reminder of the risks of protracted and costly disputes arising from vague terms of a settlement agreement. These can be avoided through effective settlement advocacy in negotiating and concluding a clear and unambiguous settlement agreement. As the adage goes, “nothing is agreed until everything is agreed”.
Herbert Smith Freehills LLP is licensed to operate as a Qualified Foreign Law Firm in Malaysia. Where advice on Malaysian law is required, we will refer the matter to and work with licensed Malaysian law practices where necessary.
The Singapore Convention, more formally known as the United Nations Convention on International Settlement Agreements Resulting from Mediation, was signed today in Singapore by 46 countries – a record number of first-day signatories for a UN trade convention.
While not including the UK or any EU countries, the signatories do include the world’s two largest economies, China and the US. (A full list of signatories is at the end of this post).
The aim of the Convention is to implement an international regime for the enforcement of settlement agreements reached through mediation, broadly akin to the 1958 New York Convention for the enforcement of arbitral awards.
The new Convention clearly has the potential to increase the attraction of mediation for international parties and to solidify its role as a reliable option for resolving cross-border commercial disputes, which courts around the world will recognise. Many hope that it will achieve for mediation what the New York Convention has done for international arbitration.
Mediation and enforcement
The initiative stems from a concern that the use of mediation to resolve international disputes has been impeded by the fact that, unless a settlement reached via mediation is in the context of a pending arbitration and can be converted into an arbitral award, parties can only enforce it in the same way as any other contract. That will usually involve bringing fresh proceedings for breach of contract. In an international context, this can involve potentially difficult (and usually lengthy) processes to obtain a court judgment and then enforce it in a foreign jurisdiction.
In practice, enforcement of mediated settlements is rarely an issue (at least compared to litigation and arbitration) given that the terms are the result of a negotiated resolution reached through a voluntary process. Having negotiated and documented a resolution through a formal process, commercial parties do for the most part tend to stick to it. Nevertheless, it does appear that the potential for difficulty if enforcement is required may account for at least some for the patchiness with which mediation has been embraced across different jurisdictions globally.
This is supported by our analysis of the data collected at the recent Global Pound Conference series. That project sought the views of thousands of dispute resolution stakeholders across the globe on various issues, including as to what would most improve commercial dispute resolution. In Asian jurisdictions, nearly two thirds of respondents said that the development that would be of most benefit would be legislation to aid enforcement of settlement agreements, including those reached through mediation. In other regions, this was seen as less pressing than other factors but still received substantial support. The new Convention directly meets this call for regulation and certainty.
Accordingly, regardless of how many mediated settlements actually need to enforced under the Convention, simply the existence of such a global enforcement regime may provide the long-awaited boost to the global adoption of mediation by assuaging parties’ reservations in this regard – particularly in jurisdictions where commercial parties are currently less familiar with the process.
Considering the overall dispute resolution landscape, the Hague Convention on Choice of Court Agreements and the new Hague Judgments Convention are designed to assist enforcement of court judgments internationally (although their practical impact to date has been limited). The New York Convention has of course hugely benefited international arbitration, with enforcement regarded as arbitration’s trump card. In many ways, the Singapore Convention is the missing piece in the enforcement jigsaw.
When will the Singapore Convention apply?
The Convention applies to settlement agreements resulting from mediations resolving international commercial disputes. It seeks to give mediated settlement agreements bite by requiring member states to enforce such agreements if they meet the following criteria:
- The settlement agreement is “international” – meaning either: (i) at least two parties have their place of business in different countries or (ii) the country where the settlement agreement is to be performed, or the country with which the agreement is most closely connected, is different to the parties’ place of business
- The agreement is signed by the parties and “resulted from mediation”. Mediation is defined broadly as “a process, irrespective of the expression used or the basis upon which the process was carried out, whereby the parties attempt to reach an amicable settlement of their dispute with the assistance of a third person or persons (the “mediator”) lacking the authority to impose a solution upon the parties to the dispute”
- The agreement does not fall within the excluded category of settlement agreements (which includes agreements relating to consumer disputes, family, inheritance or employment law)
- None of the (limited) listed grounds to refuse enforcement applies
If a settlement agreement meets these criteria, each signatory state to the Convention (and its courts) must recognise and enforce the agreement in accordance with its own rules, without substantive review or fresh litigation.
This will aid enforcement against assets located in the signatory state and also the discharge of other remedies like specific performance or injunctions. Conversely, if a dispute arises in a signatory state and a party claims it was already resolved by the agreement, the settlement agreement can be invoked to prove that the matter has already been resolved on those terms. That is, the Convention can be relied on as either a sword or a shield.
It is understood that further states are planning to sign the Convention in the near future. It will formally come into effect once the second formal step of ratification has been completed by at least three signatory states.
Its full impact, and in particular whether it will be as significant as the New York Convention, remains to be seen. But the strong early uptake is a very promising indicator. .
You can find our guidance on incorporating mediation into dispute resolution clauses, dispute avoidance and improving conflict management here. And for guidance on preparing for and conducting mediations, see our series of ADR Practical Guides, here.
- For commentary on some of the Convention’s more interesting features, see also the article by Jan O’Neill (Professional Support Lawyer, London) published on the Practical Law Dispute Resolution Blog here. This includes discussion of the ‘Article 8 reservation‘ which allows a state to join the Convention on the more limited basis that it will only enforce settlement agreements where the settling parties have specifically agreed that the Convention will apply. We understand (informally) that 2 of the 46 initial signatory states intend to exercise this reservation, although it can be exercised at any time by existing signatories.
- Full list of signatories as at 7 August 2019: Afghanistan, Belarus, Benin, Brunei, Chile, China, Colombia, Congo, Democratic Republic of Congo, Eswatini, Fiji, Georgia, Grenada, Haiti, Honduras, India, Iran, Israel, Jamaica, Jordan, Kazakhstan, Laos, Malaysia, Maldives, Mauritius, Montenegro, Nigeria, North Macedonia, Palau, Paraguay, Philippines, Qatar, Republic of Korea, Samoa, Saudi Arabia, Serbia, Sierra Leone, Singapore, Sri Lanka, Timor-Leste, Turkey, Uganda, Ukraine, USA, Uruguay, Venezuela.
The High Court has held that correspondence marked “without prejudice save as to costs” and which described the conduct of prior “without prejudice” (WP) negotiations (including a mediation and subsequent discussions) was admissible in an application for costs against the claimant’s lawyers: Willers v Joyce & Ors  EWHC 937 (Ch).
The court accepted that the WP rule attached to the negotiations during and following the mediation. However, the subsequent “without prejudice save as to costs” correspondence amounted to an agreement to vary the WP status of the earlier negotiations, so that both parties would be able to deploy evidence of the WP negotiations in future arguments about costs.
The decision serves as a reminder to parties and practitioners to exercise care when referring to the substance of mediation discussions (or any other WP communications) in any subsequent correspondence that is not expressed to be WP. Depending on the terms of that correspondence, a court may conclude that the correspondence amounts to an agreement to exclude or vary the application of the WP rule, and therefore the circumstances in which the WP communications may be admissible.
Matthew Eglezos, a Senior Associate (Australia) in our disputes team, outlines the decision below. Continue reading