On 12 September 2020, the United Nations (UN) Convention on International Settlement Agreements Resulting from Mediation, also known as the Singapore Convention on Mediation (the Convention), entered into force.
The Convention entered into force six months after the deposit of the third instrument of ratification, done so by Qatar on 12 March 2020. To this date, six States are Parties to the Convention, namely Singapore, Fiji, Qatar, Saudi Arabia, Belarus and most recently Ecuador; already fifty three countries have signed it, including the United States, China and India.
What is important about the Singapore Convention on Mediation
The purpose of the Singapore Convention on Mediation is to facilitate the recognition and enforcement of international commercial settlement agreements resulting from mediation within its member States in accordance with a simplified and streamlined procedure. With this Convention, as stated in the media release of the Singapore Convention on Mediation’s website, “businesses seeking enforcement of a mediated settlement agreement across borders can do so by applying directly to the courts of countries that have signed and ratified the treaty”. Indeed, such type of settlements had been experimenting serious obstacles for their enforcement in different jurisdictions.
The Convention really stems from the global recognition of the value of mediation as a method of amicably settling disputes and therefore the adopted framework is the result of a consensus across States with different legal, social and economic systems. The Convention is now called to become an essential instrument in the facilitation of international trade and in the promotion of mediation as an alternative and effective method of resolving trade disputes.
According to its Art. 1(1), the Convention is applicable to a settlement agreement of international nature, if:
- at least two parties to the settlement agreement have their places of business in different contracting States; or
- the contracting State in which the parties to the settlement agreement have their places of business is different from either: (i) the contracting State where the settlement agreement is to be performed or (ii) the contracting State with which the settlement agreement is most closely connected.
Moreover, it is important to note that the Convention is not applicable to settlement agreements:
- resulting from transactions engaged in by a party (a consumer) for personal, family or household purposes;
- relating to family, inheritance or employment law matters;
- that are enforceable as a judgment or as an arbitral award.
Finally, the Convention adopts conditions that courts of contracting States are expected to follow when requested to recognise and/or enforce a settlement agreement (Art. 4) as well as a list of grounds according to which courts of a contracting State may refuse to recognise and/or enforce a settlement agreement (Art. 5).
Building on the New York Convention of 1958 for foreign arbitral awards?
The Convention can certainly be regarded as emulating the New York Convention for the recognition and enforcement of foreign arbitral awards (the New York Convention).
Signed in 1958 and entered into force in 1959, the New York Convention now counts 165 member States, Togo being the latest State acceding to the New York Convention on 12 June 2020. It has largely been hailed as a fundamental instrument for the effectiveness and wide-use of international arbitration as a means of resolving international disputes.
Yet, there have recently been voices raising concerns regarding international arbitration, its users often citing issues of costs, length and overregulation. Mediation provides further flexibility in the process, thus generally resulting in a more cost and time efficient dispute resolution mechanism. Indeed, contrary to an adjudicator that must render a final decision, the mediator is engaged to guide the parties in reaching a mutually acceptable solution, allowing the parties’ control over the outcome of the process.
The adoption of the Convention is thus intended to boost mediation as an efficient tool for commercial parties to resolve their disputes. Moreover, and unlike the New York Convention, the Convention does not provide a reciprocity obligation, meaning that a mediation situated in any location across the globe could be recognised and enforced in a contracting State.
What are the stakes?
It now remains to be seen how many States will ultimately ratify the Convention in order to facilitate a wider use of mediation within the international community. Yet with its entry into force in 2020, the Convention is already making history. Moreover, the fact that economic powerhouses such as China, India and the United States – pivotal in international trade – have signed the Convention is a strong invitation for other States to join the club.
Along, among others, the Hague Convention on the Recognition and Enforcement of Foreign Judgments and the New York Convention, the Singapore Convention on Mediation now completes the landscape of international instruments for the enforcement of awards, judgments, and settlement agreements arising from international disputes.
What about Switzerland?
At this stage, neither Switzerland, the United Kingdom nor any country from the European Union have signed or ratified the Singapore Convention on Mediation.
Switzerland has nevertheless a long-standing tradition and reputation in mediation, being host to the European headquarter of the United Nations and many other specialised UN agencies. Most recently, the Swiss Chambers’ Arbitration Institution (SCAI) has adopted its revised Swiss Rules of Mediation which entered in force on 1 July 2019.
Mediation is also set to become more important within the Swiss financial sector with the entry into force on 1 January 2020 of the Swiss Financial Services Act (FinSA). Indeed, under the FinSA, financial service providers active in Switzerland must be affiliated to an ombudsman / mediation organ recognised by the Swiss Federal Finance Department. This means that clients of financial service providers will need to refer their disputes to said recognised ombudsman / mediation organ – the SCAI being one of them.