We are soon to have a new international regime for the enforcement of mediated settlement agreements.
The UN Convention on International Settlement Agreements Resulting from Mediation, which will be known as the Singapore Convention, was approved in June 2018 by UNCITRAL (the United Nations Commission on International Trade Law). It is expected to be open for signature from 1 August 2019 and will come into force upon ratification by at least three contracting States.
The Convention will oblige contracting States (except in specified limited circumstances) to recognise international settlement agreements resulting from mediation in commercial disputes, either to enforce the agreement or allow it to be invoked as a defence to a claim (that is, either as a sword or a shield).
It is hoped that the Singapore Convention will achieve for mediation what the New York Convention has for international arbitration, encouraging a greater global acceptance of mediation as a credible and reliable dispute resolution mechanism in international commerce.
For more detail on the Convention, and commentary on how likely it is to achieve that aim, see the article by Jan O’Neill (Professional Support Lawyer, London) recently published on the Practical Law Dispute Resolution Blog, here.
Further to our earlier post, the Singapore Convention has now been published. It will be signed in Singapore on 1 August 2019 and will come into effect six months after at least three states have ratified it.
The drafters’ goal is for the Singapore Convention to be for mediation what the New York Convention is for arbitration. That the Convention is potentially significant in terms of enforcement is clear. But it is also important in terms of elevating the status of international commercial mediation and lending greater credibility to the process. Much will depend on uptake, but with the New York Convention as a blueprint, the goal is to secure numerous signatory states at the outset.
The Convention will aid enforcement of mediated settlement agreements relating to international commercial disputes, being those where:
- at least two parties to the settlement agreement operate in different contracting states; or
- the state where the substantial part of the settlement agreement is to be performed is different to where the parties to the settlement conduct business; or
- the state where the settlement agreement is most closely connected is different to where the parties to the settlement conduct business.
The Convention carves out consumer, personal, household, family, inheritance and employment disputes from its jurisdiction.
There are various procedural requirements for the underlying settlement agreement to qualify for enforcement under the Convention. There are also grounds for refusing to grant relief listed in the Convention. These include the incapacity of the parties, invalidity of the settlement agreement, serious breach of mediator standards, mediator bias and public policy.
Following our report on the Global Pound Conference series, which brought together over 4000 stakeholders at 28 conferences worldwide, our analysis of the Asia Pacific results reveals different demands in Asia and Oceania.
Six Asia Pacific cities hosted conferences to assess how dispute resolution can be improved: Singapore; Hong Kong; Chandigarh, India; Bangkok, Thailand; Sydney, Australia and Auckland, New Zealand. Each conference addressed the demand side (commercial party perspectives on dispute resolution); the supply side (what advisers and providers are delivering to commercial parties); the key obstacles and challenges; and what needs to be addressed to effect change.
Region-wide, the data highlights that commercial parties want to use mediation and other ADR processes more, either alone or as an adjunct to adversarial proceedings. However, the data shows that the market is not responding adequately. As a result, mediation remains under-utilised, and actual use lags behind positive attitudes to it. Unless parties and their advisors actively take a different course (for example through inserting escalation clauses in contracts, actively proposing mediation at the point of dispute, or by following mandatory mediation protocols), there is likely to remain a perpetuation of the “same old processes” – litigation and arbitration.
Read more analysis of the Asia Pacific results on our Asia Disputes Notes blog here.
It has recently been announced that a new “Japan International Mediation Centre” (JIMC) is to open in Kyoto in early 2018.
While details on the new centre are still limited, it is known that it is being established in collaboration and with the assistance of the Singapore International Mediation Centre (SIMC), which may provide an indication of how the new centre is likely to operate.
The establishment of the centre is an interesting development in a jurisdiction which is known for its amenability to privately negotiated settlements of disputes but in which (along with many other Asian jurisdictions) the concept of mediation has failed to thrive and become institutionally embedded.
For more on the JIMC, read our Japan Dispute Avoidance Newsletter.
Herbert Smith Freehills also hosts a dedicated ADR Hub as a resource for our clients. This includes a spotlight series on ADR in Asia Pacific, Issue 2 of which specifically delves into ADR in Singapore including the features of the SIMC.
China’s Belt and Road Initiative (BRI) has gained huge momentum of late, with governments, companies and lawyers keen to maximise the many opportunities it presents. The resolution of disputes arising from the BRI is no exception. The sheer complexity and scale of BRI projects is prompting a welcome review of dispute resolution processes, with a view to resolving BRI disputes more quickly and amicably, ideally in a confidential and enforcement-friendly environment.
Recent developments suggest that the BRI presents an opportunity for less formal procedures, like mediation, to flourish and enter the mainstream. Indeed, three key BRI jurisdictions – China, Singapore and Hong Kong – have recently promoted mediation in the context of BRI disputes.
Further to our earlier posts (here and here) highlighting material from our recently updated Guide to Dispute Resolution in Asia Pacific, we now feature in part 3 the responses from New Zealand, Pakistan, Philippines, Singapore, Taiwan, Thailand and Vietnam to the question whether parties to litigation or arbitration are required to consider or submit to ADR procedures before or during proceedings.
A Mediation Bill has recently been put before the Singapore Parliament with a view to encouraging the growth of mediation in the jurisdiction. The three key proposals in the Bill (which echo similar provisions in the EU Mediation Directive and various other mediation laws around the world) are:
(i) A power (though not a duty) in the courts to stay proceedings in favour of mediation agreed by the parties
(ii) A mechanism for settlement agreements reached at pre-litigation mediations to be recorded and enforced as court orders; and
(iii) Confirmation of the confidentiality of mediation communications.
Read more detail on the proposals here.
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Our updated Guide to Dispute Resolution in Asia Pacific aims to provide answers to some of the basic questions a party unfamiliar with a particular jurisdiction will wish to ask when facing the prospect of having to engage in a dispute resolution process in that jurisdiction (including at the stage of negotiating contracts, when deciding on the choice of law and whether to include jurisdiction or arbitration clauses in favour of a particular jurisdiction).
Amongst the range of topics addressed in the Guide, we asked local counsel whether parties to litigation or arbitration are required to consider or submit to ADR procedures before or during proceedings. We will feature the responses of the various jurisdictions in upcoming posts and cover our first five jurisdictions (Australia, Bangladesh, China, Hong Kong and India) below.
The Singapore Ministry of Law is seeking public feedback on a draft Mediation Bill. The Bill will give effect to one of the key recommendations of the International Commercial Mediation Working Group (ICMWG) in 2013, being the enactment of a Mediation Act (Act) to strengthen the framework for mediation in Singapore.
The other three recommendations of the ICMWG have already been implemented. As previously reported here, the Singapore International Mediation Centre and the Singapore International Mediation Institute were both launched on 5 November 2014. Withholding tax exemptions for non-resident mediators have been available since 1 April 2015. Click here to read more on our Asia Disputes blog.
As we look forward to convening in Singapore on 17/18 March at the inaugural Global Pound Conference, the World Bank Group's flagship report Doing Business 2016 has found Singapore to be the best jurisdiction worldwide on its quality of judicial processes index. The report cites Singapore as having the shortest time recorded worldwide for resolving a commercial dispute through the courts (at an average 150 days and a cost of 25.8% of claim value).
Of course, the World Bank's figures regarding the efficiency of litigating in Singapore likely pale compared to the time and cost savings ADR offers businesses operating there. For information on ADR in Singapore, download our latest guide.
Globally, the World Bank found that the most common feature in reforming contract enforcement throughout the world in the past year was the implementation of ADR mechanisms. The findings, based on data gathered across 189 economies, reinforce a 2014 EU-wide study suggesting that the average time taken to mediate a basic commercial dispute in the EU is 43 days, compared with 566 days – and an average 60% higher cost – of litigating it.
For information about the GPC conference in Singapore, and to register to attend, see our previous blog post here.