Singapore and Fiji ratify the Singapore Convention on Mediated Settlement Agreements taking a significant step towards its entry into force

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.

The Convention will commence operation six months after three signatory states have ratified it into their domestic law.  All it will now take therefore, for the clock to start ticking, is one more signatory state to deposit its instrument of ratification at the United Nations headquarters in New York.

Earlier this month, on 4 February 2020, the Singapore Convention on Mediation Bill was passed into law, though its provisions have yet to come into effect.  The Bill was effectively fast-tracked through the Singapore Parliament given it was only tabled on 6 January 2020 for its first reading.  The main purpose of enacting the Bill was to implement the Convention in Singapore and therefore allow for ratification.

The Singapore Convention was first opened during a signing ceremony and conference held in Singapore on 7 August 2019, where Singapore hosted more than 1500 delegates from 70 countries.  46 countries signed the Convention on the day.  In the months following the signing ceremony, 6 other countries signed the Convention bringing the current total number of signatories to the Convention to 52.  For more information on the signing ceremony and conference in August 2019, please click here and here to read our previous posts.  A full current list of the signatories can be found at the foot of this blog post.

Speaking in Parliament on 3 February 2020, during the second reading of the Bill, Senior Minister of State for Law in Singapore Edwin Tong stated that a key challenge that parties face when dealing with a business dispute which has settled is ensuring the counterparty complies with the terms of the agreement. While a mediated settlement agreement is contractually binding, it is not itself directly enforceable in courts unlike a court judgment or an arbitral award.  He emphasised that this difficulty was also highlighted by the 2016 Global Pound Conference Survey where respondents indicated that legislation or conventions that promote the recognition and enforcement of settlements including those reached in mediation would most improve commercial dispute resolution.

The Singapore Convention is an answer to a number of themes we observed at the Global Pound Conference series. That series sought the views of thousands of dispute resolution stakeholders across the globe on various issues, including which developments would most improve commercial dispute resolution.   The Convention’s proper impact however, and in particular whether it will be as significant as the New York Convention, remains to be seen. Meaningful engagement by signatory states through their domestic institutions, practitioners and businesses is required. In addition, making effort to promote ratification by signatory states will be important, as will be continued engagement with states that have not yet signed the Convention. Singapore and Fiji’s ratification, nevertheless, is an important step forward in building this international framework supportive of mediation.

 

Signatories as at 25 February 2020: Afghanistan, Armenia (26 Sep 2019), Belarus, Belize, Brunei, Chad (26 Sep 2019), Chile, China, Colombia, Republic of the Congo, Democratic Republic of the Congo, Ecuador (25 Sep 2019), Kingdom of Eswatini, Fiji, Gabon (25 Sep 2019), Georgia, Grenada, Guinea-Bissau (26 Sep 2019), Haiti, Honduras, India, Iran, Israel, Jamaica, Jordan, Kazakhstan, Laos, Malaysia, Maldives, Mauritius, Montenegro, Nigeria, North Macedonia, Palau, Paraguay, Philippines, Qatar, Rwanda (28 Jan 2020), South Korea, Samoa, Saudi Arabia, Serbia, Sierra Leone, Singapore, Sri Lanka, Timor Leste, Turkey, Uganda, Ukraine, the US, Uruguay and Venezuela. The rest of the countries signed the Convention on 7 August 2019.

 

Tomas Furlong
Tomas Furlong
Partner, Singapore
+65 6868 8085
Gitta Satryani
Gitta Satryani
Of Counsel, Singapore
+65 6868 8067
Priya Aswani
Priya Aswani
Professional Support Lawyer
+65 6868 8077

Hong Kong funding law to take effect 1 February

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.

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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.

 

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

Shaping the future of dispute resolution: global themes and regional differences revealed

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

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

Justin D’Agostino to lead ICC Court’s new Belt and Road Commission

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.

Click here for more on resolving disputes that arise out of Belt and Road transactions. This article originally appeared in the 5th edition of our quarterly publication, Inside Arbitration.

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.

Justin D'Agostino
Justin D'Agostino
Global head of practice, dispute resolution and regional managing partner, Asia
+852 2101 4010

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

Japan International Mediation Centre to open in Kyoto

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.