ENFORCEMENT OF INTERNATIONAL SETTLEMENT

• Citation: (2019) 31 SAcLJ 448
• Author: Shouyu CHONG LLM (National University of Singapore); Research Associate, Singapore International Dispute Resolution Academy, Singapore Management University. Felix STEFFEK LLM (Cambridge), PhD (Heidelberg), Habilitation (Hamburg); University Lecturer, University of Cambridge; Co-Director of the Centre for Corporate and Commercial Law; Deputy Director of the LLM; Senior Member and Director of Studies, Newnham College.
• Publication year: 2019
• Published date: 01 December 2019
• Date: 01 December 2019

I. Introduction

1 The Singapore Convention on International Settlement Agreements Resulting from Mediation1 (“Singapore Convention”) is a welcome addition to the toolbox of mechanisms for the enforcement of cross-border dispute resolution outcomes. Many stakeholders in the cross-border mediation community have high hopes that the Singapore Convention would do for mediation what the Convention on the

Recognition and Enforcement of Arbitral Awards2 (“New York Convention”) has achieved for arbitration. The Singapore Convention aims at establishing regulatory robustness,3 which is essential for elevating cross-border mediation to the role of a relevant player amongst the well-recognised and frequently utilised international dispute resolution forums such as litigation and arbitration.4

2 The genesis of the Singapore Convention can be attributed to a delegation from the US.5 At the end of the 2014 United Nations Commission on International Trade Law (“UNCITRAL”) Commission session, the delegation submitted a proposal6 that UNCITRAL Working Group II (Dispute Settlement) (“WG II”) should begin to examine how the attractiveness of mediation would be increased, if settlement agreements reached at the conclusion of a successful process could be enforceable in an expedited manner under some form of international-level treaty or instrument.7 Consequently, in 2015, WG II commenced deliberations for the preparation of an instrument (or, possibly, instruments) which would provide a mechanism to enhance the enforcement of international commercial settlement agreements resulting from mediation (hereinafter referred to as international mediated settlement agreements or “IMSAs”).

3 In February 2018, during its 68th session in New York, WG II concluded its work, having come to a consensus on the drafting of two instruments: the Convention and the Model Law on International Commercial Mediation8 embracing the principles found within the Convention. On 25 June 2018, UNCITRAL at its 51st session recommended that the final draft of the Convention be submitted to the United Nations (“UN”) General Assembly for its consideration, and adopted the Model Law.9 The UN General Assembly adopted the Convention on 20 December 2018, confirming that it shall be referred to as the “Singapore Convention on Mediation” and authorising that it be open for signature at a ceremony in Singapore on 7 August 2019.10

4 In this article, the authors examine the Singapore Convention on Mediation focusing on four themes. First, the rationale and scope of the Convention will be studied. Second, the application of the Convention will be considered against the background of private international law. Third, the requirements for enforcing IMSAs under the Convention will be investigated. Fourth, the circumstances under which judicial refusal of IMSA enforcement is permitted under the Convention will be determined.

II. Rationale

5 As an instrument that endeavours to provide a legal mechanism for the expedited enforcement of IMSAs across several jurisdictions, the Singapore Convention promotes conclusiveness of dispute resolution outcomes.11 This fosters confidence in the mediation process in respect to cross-border commercial disputes. International commercial mediation becomes a more attractive and accessible forum of alternative

dispute resolution and is elevated to possess the same status as international commercial arbitration. Whilst many mediation providers across the world enthusiastically proclaim that IMSAs should enjoy high compliance rates,12 lawyers and business people often remain cautious when deciding whether to proceed with international mediation at the occurrence of a dispute.13 At least from the perspective of a “common law” lawyer, it is common practice14 to first file a suit with the courts (or to initiate arbitration proceedings) and subsequently apply for a stay of proceedings in favour of mediation or out-of-court negotiations (sometimes upon recommendation of the court).15 Only then will the parties proceed to the mediation table in an attempt to resolve their conflict.

6 Several reasons for this practice can be identified. From the point of view of a practitioner unfamiliar with mediation, the obligations enshrined in IMSAs may appear to be inconsistently enforced in different jurisdictions when they are subject to challenges in court.16 This leads to unpredictability and uncertainty in dispute resolution outcomes. Without an expedited enforcement mechanism, IMSAs are ordinarily enforced as legally binding contracts with an international character.17 The IMSA may have a procedural element in addition to its substantive contractual content if litigation or enforcement issues are covered.18 As such, IMSAs are subject to the relevant, but potentially idiosyncratic, mandatory rules and vitiating factors of the forum (for example, undue influence, unconscionability and illegality) administered in light of the private international law rules of the enforcing jurisdiction. This may prove costly for parties when disputes are concluded by settlement agreement through mediation, as further legal advice may be required at the jurisdiction(s) to which the IMSA will be taken to be enforced.

7 If an IMSA is brought to Singapore, which is a common law jurisdiction, for enforcement, courts are usually reluctant to order specific performance of contractual obligations if they are of the opinion that awarding damages would sufficiently compensate the innocent party to a dishonoured IMSA.19 There is also precedent from the

Singapore courts to grant equitable relief to parties from having to fulfil some of their contractual obligations. The rule against “penalty” clauses serves as an illustration,20 where an expressed secondary obligation for one party to the IMSA to pay another a sum of money in the event of a breach of its terms may not inevitably be enforced if the courts opine that the said payment clause amounts to a “penalty”.21 If, on the other hand, an IMSA is brought to Germany, which is a civil law jurisdiction, for enforcement, specific performance is the default position.22 Under German law, the enforcement of penalty clauses may also be restricted. However, these restrictions are not identical with the principles applying to penalty clauses under English and Singapore case law.23

8 Hence, to promote the conclusiveness of dispute resolution outcomes arising from cross-border commercial mediation, the Singapore Convention is desirable, as it endeavours to converge the functions of IMSAs with arbitral awards, galvanising its enforceability uniformly across signatory states.24 This appears to reflect the sentiment of practitioners and other members of international business and legal communities who participated in a 2014 study to examine the desirability of such a Convention when it was but a proposal: 74% of respondents polled expressed the belief that a multilateral convention establishing a cross-border enforcement mechanism for IMSAs would

encourage parties to resort to mediation services more frequently.25 At least in Singapore, specific performance of clearly defined obligations established in an IMSA would seem to be available to parties, if enforcement were to be sought under the Convention. Enforceability of IMSAs in the courts of signatory states under the Convention may only be challenged under some circumscribed conditions found in Art 5,26 resulting in a more predictable and certain enforcement regime.

9 Further, the Convention promotes a consensual and non-legalistic method of resolving disputes, embracing the intangible elements of business relationships – such as notions of respect, reputation and contextual sensitivity to business cultures – so as to secure continuity of co-operation, which may produce further economic benefits for society. In contrast with the adjudicative forums of dispute resolution such as arbitration and litigation, mediation is a harmonious alternative. It affords parties with an appreciably more informal and fluid setting for dispute resolution to take place, making room for them to consider extra-legal considerations which could truly yield the point in contention.27 Addressing the relevant elements at mediation with nuance, discretion and sensitivity – in contrast with proceeding with a large team of expensive high-profile lawyers to battle tooth-and-nail with each other to the bitter end at litigation or arbitration – can produce further economic benefits for society, in the form of productivity from continued business ties and reduced opportunity costs.

10 It is apt to conclude this part with the observation that through the provision of a robust enforcement mechanism, the Singapore Convention incidentally promotes mediation as a desirable and, at many times, appropriate alternative to international arbitration and litigation. From the economic point of view of a consumer in the market for dispute resolution services, parties will enjoy cost-saving and qualitative benefits, for they are provided with access to a bigger platter of options

to choose from. It is possible for them to better tailor how they wish to proceed to resolve their disputes.

III. Scope of the Convention

11 This part first examines the kinds of IMSAs which fall within the reach of the Convention. Second, it discerns the forms of IMSAs which have been expressly excluded from its reach, including those which may be enforced under other treaties. Finally, it examines the possibility of reservations made by signatory states.

A. Reach of the Convention

(1) Introduction

12 According to Art 1(1), the Singapore Convention applies to international agreements resulting from mediation and concluded in writing by parties to resolve a commercial dispute. In this part, the authors will establish the meaning of “international”, “commercial” and “mediation”. The essentials of the “in writing” requirement will be...