Recently, an UNCITRAL Working Group has concluded its work by proposing a “Convention on international settlement agreements resulting from mediation” (A/CN.9/942) with the aim of enabling the enforcement of such settlements via domestic courts.
Mediation (broadly understood) has been gaining traction for the resolution of international commercial disputes, in particular because it is usually faster, cheaper and less damaging to business relations than arbitration or litigation. However, the drawback of mediation is that a settlement agreement is usually not enforceable if one of the parties considers that the other party failed to honour it.
The draft convention aims to fill this lacuna by providing a legal framework for making mediated settlement agreements enforceable. Its scope covers only “international” settlement agreements, that is, between commercial parties having their main place of business in different states. Moreover, it is applicable only to settlement agreements “in writing” where they have been signed by all parties and the mediator.
When it comes to the enforcement of a settlement agreement, the convention contains several grounds for refusing such a request. To some extent, the grounds echo those contained in the New York Convention 1958. Accordingly, the competent authority where enforcement is sought may refuse such a request on the following grounds:
- The settlement agreement is null and void, inoperative or incapable of being performed under the law.
- It is not binding or final.
- There was a serious breach by the mediator of the applicable standards or the mediator failed to disclose to the parties circumstances that raise justifiable doubts as to their impartiality or independence.
- Granting the request would be contrary to public policy.
Besides, the draft convention enables the competent authority to adjourn its decision, if parallel arbitration or court proceedings have been launched. In this way, contradictory decisions can be avoided.
The draft convention requires ratification by three states to enter into force. Reportedly, the signing ceremony will take place in Singapore, in the third quarter of 2019. The convention will also be referred to as the Singapore Convention on Mediation.
Besides the convention, the UNCITRAL Working Group also prepared a draft “Model Law on international settlement agreements resulting from mediation” (A/CN.9/943) that would serve as an amendment to the UNCITRAL Model Law on International Commercial Conciliation 2002.
The draft model law essentially specifies the procedural requirements for mediation, such as how they should be conducted as well as the conditions for the enforcement of settlement agreement. The contracting parties are invited to implement these changes in their domestic laws so as to ensure full compatibility with and applicability of the convention.
If and when this convention enters into force, it has the potential of making mediation a serious alternative to arbitration and litigation. Moreover, it is not the first instrument to focus on enforceability in a bid to promote other dispute resolution methods besides arbitration. For example, in 2015, The Hague Convention on Choice of Court Agreements 2005 came into force, following its ratification by the EU. The Hague Convention, which has been described as a “New York Convention for litigation”, provides that courts must enforce the final judgments of courts from other member states if they were expressly chosen to hear a dispute by the parties.
Looking beyond commercial arbitration, mediation also increasingly features in the dispute resolution provisions of free trade and investment agreements as far as investor-state disputes are concerned. This is particularly the case for the free trade agreements recently concluded by the EU with Canada (CETA), Singapore (EUSFTA) and Vietnam (EUVFTA).
For example, Article 8.20 (mediation) of CETA reads as follows:
- The disputing parties may at any time agree to have recourse to mediation.
- Recourse to mediation is without prejudice to the legal position or rights of either disputing party under this Chapter and is governed by the rules agreed to by the disputing parties including, if available, the rules for mediation adopted by the Committee on Services and Investment pursuant to Article 8.44.3(c).
- The mediator is appointed by agreement of the disputing parties. The disputing parties may also request that the Secretary General of ICSID appoint the mediator.
- The disputing parties shall endeavour to reach a resolution of the dispute within 60 days from the appointment of the mediator.
- If the disputing parties agree to have recourse to mediation, Articles 8.19.6 and 8.19.8 shall not apply from the date on which the disputing parties agreed to have recourse to mediation to the date on which either disputing party decides to terminate the mediation. A decision by a disputing party to terminate the mediation shall be transmitted by way of a letter to the mediator and the other disputing party.
Accordingly, the arbitration community as a whole should start paying more attention to mediation as an additional tool in the toolbox of dispute resolution. This is especially the case where the parties to a dispute have a common interest in continuing their business relationship in the future and simply wish to resolve an isolated issue. In addition, mediation has the advantage of usually being faster and cheaper than arbitration and litigation, which is an important aspect for all disputing parties.
In sum, when this convention enters into force, it could effectively fill in the missing link that there is regarding the enforcement of settlement agreements thereby making mediation a far more attractive option.