Hong Kong has published its long-awaited Code of Practice for third party funders, and announced that amendments to the Arbitration Ordinance which permit funding of Hong Kong arbitrations will come fully into force on 1 February 2019. Similar amendments to the Mediation Ordinance (Cap. 620) have been deferred for further consultation.
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.
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.
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.
The Global Pound Conference series – a unique and ambitious project to inform how commercial disputes should be resolved to better serve modern business – brought together over 4000 dispute resolution stakeholders, at 28 conferences in 24 countries worldwide.
Herbert Smith Freehills, global founding sponsor of the series, has teamed up with PwC and IMI (International Mediation Institute) to identify key insights from the voting data. With a focus on the needs of in-house counsel, this ground-breaking report challenges the traditional and fundamental notions of what clients want and how lawyers should represent them in a dispute. Continue reading
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
Justin D’Agostino, Herbert Smith Freehills’ Global Head of Disputes, has been appointed chair of a new ICC Court commission to develop the ICC’s approach to dispute resolution procedures for China’s Belt and Road initiative.
“There is no ‘one-size-fits-all’ method of resolving Belt and Road disputes. But there is a concerted effort to encourage mediation clauses in Belt and Road agreements, with provision for arbitration if mediation fails,” said D’Agostino, who is also Hong Kong’s alternate member of the ICC Court.
“ICC is already a world leading provider of arbitration and mediation services, with tried and tested mechanisms and a strong pool of arbitrators and mediators. It is ideally placed to provide appropriate, effective dispute resolution services to parties all along the New Silk Road”.
The massive scale of Belt and Road is generating huge numbers of infrastructure projects across Asia and beyond – and every new project also has the potential for complex disputes.
Herbert Smith Freehills is engaged in a significant quantity of work generated by the US$900 billion Belt and Road initiative, advising on deals and projects worth over US$10 billion. Last week, the firm welcomed three new partners to our Greater China practice. Hew Kian Heong, Ellen Zhang and Michelle Li will further strengthen our existing team advising clients on Belt and Road projects.
“As China’s new business champions go global, we are increasingly well-placed to advise them on expansion around the globe, including any international disputes that may arise – both along the Belt and Road and other investment corridors,” said D’Agostino.
For further information, please contact Justin D’Agostino, Global Head of Practice – Dispute Resolution and Regional Managing Partner – Asia, or your usual Herbert Smith Freehills contact.
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
It has recently been announced that a new “Japan International Mediation Centre” is to open in Kyoto, reportedly in early 2018.
Mediation is a form of alternative dispute resolution in which an independent third party helps resolve a dispute through negotiation. The opening of a new centre dedicated to resolving commercial disputes in this manner is an interesting – and welcome – addition to the international dispute resolution landscape in Japan.
To read more on this development, please click here.
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.
In September 2017, the Singapore International Mediation Centre (SIMC), and the China Council for the Promotion of International Trade China Chamber of International Commerce Mediation Center (CCOIC) agreed to cooperate on assisting businesses to resolve cross-border disputes arising out of the BRI. The two mediation centres will help: (a) Chinese companies investing in Singapore (33% of its investment in BRI countries); (b) Singapore companies investing in China (85% of the total inbound investment from BRI countries); and (c) companies investing in other markets under the BRI.
In tandem, Hong Kong has also signalled its willingness to embrace mediation as an intrinsic BRI dispute resolution tool. The Department of Justice appears keen to develop eBRAM.hk – an online dispute resolution tool tailored to big infrastructure projects under the BRI providing for secure online arbitration and mediation services. Other proposals discussed recently at the Hong Kong government’s Belt and Road Summit include a bespoke BRI arbitral and mediation centre, as well as a harmonised dispute resolution clause for BRI disputes requiring mediation first, then arbitration.
The rate of investment under the BRI – for example, major projects like the US$13bn Malaysian East Coast Rail Link and a US$105m Thai rail contract have just been agreed – may simply outpace development and harmonisation of BRI dispute resolution provisions in underlying contracts. However, these recent statements and discussions in Singapore and Hong Kong represent a further demonstration of the growing popularity of mediation in Asia, and the central role it could play in years to come under the BRI. Continue reading