A new international Convention for the enforcement of mediated settlements

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.

 

HONG KONG: UNLAWFUL DISMISSAL REINSTATEMENT RIGHTS FROM OCTOBER

Amendments to the Employment Ordinance (“EO“) which strengthen the Labour Tribunal’s (“LT“) powers to make an order for reinstatement or re-engagement where an employee has been unreasonably and unlawfully dismissed have been passed and are to take effect from 19 October 2018. This represents a move away from the current position where both the employer and employee must agree to reinstatement or re-engagement. We anticipate that applications for reinstatement will increase; including as a strategy by employees seeking to leverage greater settlement payments from employers unwilling to take them back.

Strengthening the power of the LT

Previously, the LT was only able to make an order for reinstatement or re-engagement with the consent of both the employer and the employee. From October, where the employee has been found to have been unreasonably and unlawfully dismissed under section 32A(1)(c) of the EO (“Unlawful Dismissal”), the LT can order reinstatement or re-engagement without the employer’s agreement. Unlawful Dismissal will occur where an employee is dismissed without a valid reason and one or more of the following is present:

  • the employee is pregnant or on statutory maternity leave;
  • the employee is on statutory sick leave or is suffering from a work-related illness or injury where an assessment of compensation due under the Employees’ Compensation Ordinance is pending;
  • the dismissal is due to the employee being a member or officer of a trade union or having engaged in lawful trade union activities; or
  • the dismissal is due to the employee having given or agreed to give evidence in relation to:
    • an alleged breach of the EO, the Factories and Industrial Undertakings Ordinance or any work safety obligations; or
    • a workplace accident.

In all other cases, an order for reinstatement or re-engagement will still require the consent of both parties.

Additional financial compensation and criminal liability

In the event the employer fails to comply with an order for reinstatement or re-engagement, they must pay compensation to the employee of the lesser of HK$72,500 or three times the employee’s average monthly wages.

If it later becomes no longer ‘reasonably practicable’ for an employer to re-instate or re-engage the individual, it can apply for relief against the payment of compensation provided that it can show that the circumstances making compliance ‘no longer reasonably practicable’ are ‘attributable to the employee’, or due to a ‘change in circumstances beyond the employer’s control’. This application for relief must be made within seven days from when the reinstatement or reengagement was to occur.

Non-compliance with an order for reinstatement or re-engagement is not itself an offence, however, if the employer then fails to pay the compensation due wilfully and without reasonable excuse, they will be guilty of a criminal offence and may be subject to fine of up to HK$350,000 and three years’ imprisonment.

Retrospective effect

The amendments to the EO will not have retrospective effect and will only apply to dismissals (or notice of dismissals) where the employee was informed of the dismissal after 19 October 2018.

Key takeaways

As noted above, the ability for the LT to order reinstatement without the consent of the parties is limited to Unlawful Dismissal cases. However, it may be that, where the relationship between the employer and employee has broken down, former employees may pursue applications for reinstatement as leverage in settlement discussions. Accordingly, to avoid increased risks of claims and the time and costs associated with responding to them, employers must take additional care when dismissing employees to ensure that they have a valid reason for doing so and the termination cannot be argue to be an Unlawful Dismissal.

Gareth Thomas
Gareth Thomas
Partner, Head of commercial litigation, Hong Kong
+852 2101 4025
Tess Lumsdaine
Tess Lumsdaine
Registered Foreign Lawyer (New South Wales)
+852 2101 4122

New convention on the enforcement of mediation settlement agreements approved

On 26 June, at the 51st session of UNCITRAL, final drafts for a Convention on the Enforcement of Mediation Settlements and corresponding Model Law were approved. This paves the way for adoption by UNCITRAL’s Commission later this year. It is understood that the Convention will be called the Singapore Mediation Convention and will be signed at a ceremony in Singapore in 2019. The Convention must then be ratified by at least three member states to come into force.

Approval of the drafts represents the culmination of several years’ work by UNCITRAL Working Group II. Its aim has been to implement an international regime for the enforcement of mediated settlements broadly akin to the 1958 New York Convention for the enforcement of arbitral awards. This will increase the attraction of mediation for international parties, with all its well-known cost efficiencies and other potential benefits.

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. 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.

Whilst problems of enforcement of mediated settlements have been sparse in practice (certainly compared to court judgments or arbitral awards), the Convention will no doubt add credibility to mediation as an international dispute resolution process. It will also make mediation particularly well suited to cross-border disputes.  At the Global Pound Conference series, delegates in Asia, Africa, the Middle East and Latin America all revealed a desire for legislation or conventions to promote the recognition and enforcement of settlements. This may reflect the varied and complex legal and political frameworks in these regions. Many of those surveyed manage businesses and disputes across several borders, where legal regimes can vary from stable, tested and familiar to those that are only a decade old. The call for regulation and certainty is even more critical as the pace of development intensifies through new trade treaties and investment, and massive initiatives such as the Belt and Road. The Convention and Model Law look set to respond well to this demand and may hail an inflection point for the use of mediation in these developing regions.

Materials approved on 26 June have not yet been made available on the relevant UNCITRAL webpage.  However they will in due course be posted on this page, which currently contains the most recent drafts (from February 2018) together with other details of the initiative.

DISPUTE RESOLUTION IN ASIA-PACIFIC: PARTIES SEEK EFFICIENT PROCESSES AND ENFORCEABLE OUTCOMES

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.

In Asia the data revealed a clear desire for enhanced regulation of mediation compared to Oceania. At first blush, this could be said to be rooted in civil versus common law traditions. But only one of the Asian countries to host a GPC event, Thailand, has a civil-law system. The reason appears to be more complex: enhanced regulation, particularly around enforcement, would lend credibility to mediation in Asia as a viable alternative to litigation or arbitration. This is particularly so in the context of commercial cross-border disputes. UNCITRAL’s proposed New York-style Convention on the mutual recognition and enforcement of mediation settlement agreements is likely to be applauded in Asia and may hail an inflection point for the use of mediation.

In Oceania, the results reveal more appetite amongst businesses for (a) front-loading in terms of protocols and clauses promoting ADR and (b) collaboration between parties and lawyers. This accords more with the data from other GPC conferences worldwide.

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.

Yet parties increasingly seek informal processes driven by commercial, cultural, and business needs that require a negotiated settlement. Layered upon this, technology is likely to assist in any transition from formal to informal dispute resolution processes. Unconstrained by rules of procedure, mediation is well-placed to capitalise on the greater adoption of technology in dispute resolution. Online Dispute Resolution has the capacity to fundamentally change how disputes are resolved in the future. The planned Asia Pacific ODR platform for B2B disputes will promote negotiation and mediation as pre-cursers to arbitration. In the long-tern, the development of an online region-wide platform may be highly important in reforming approaches to commercial dispute resolution in the region.

To read more about the Asia Pacific GPC results and what this means for your business, please see our article published in the American Bar Association’s Dispute Resolution Magazine Spring 2018 edition here.

 

Justin D'Agostino
Justin D'Agostino
Global Head of Practice, Dispute Resolution and Regional Managing Partner
+852 2101 4010
May Tai
May Tai
Greater China Managing Partner, Hong Kong
+852 2101 4031
Dominic Geiser
Dominic Geiser
Partner, Dispute Resolution Hong Kong
+852 2101 4629
Anita Phillips
Anita Phillips
Professional Support Consultant, Dispute Resolution Hong Kong
+852 2101 4184

Podcast: How Arbitration and ADR can be used together

In this short podcast Professional Support Consultants Hannah Ambrose and Vanessa Naish look at how Arbitration and Alternative Dispute Resolution (or “ADR”) can work together. The podcast considers how parties can agree to an ADR process in addition to, or alongside arbitration, looking at approaches in different jurisdictions and under different arbitral institutional rules, before turning to the complexities of drafting escalation clauses in contracts. Finally it looks at how a successful settlement should be formalised to be most effective and enforceable. Continue reading

An international convention on the enforcement of mediated settlements – UNCITRAL moves one step closer

The UNCITRAL working group that has for several years now been considering the potential for an international enforcement regime for international mediation has now completed its work and produced draft instruments.

At its most recent meeting in New York, the UNCITRAL Working Group II (Dispute Settlement – formerly Arbitration and Conciliation) approved a draft convention and a draft amended Model Law on international settlement agreements resulting from mediation. Continue reading