Published in Law360 (August 28, 2019)
The United States joined 45 other countries on August 7, 2019 as the initial signatories of the UN Convention on International Settlement Agreements Resulting from Mediation (the “Singapore Convention”). Other notable vanguard signatories included China, India, South Korea, and of course Singapore. The aim of this Convention is to make mediated international settlement agreements as easily enforceable as international arbitration awards now are under the New York Convention. But is it likely to succeed? We think it could . . . to a degree.
The Singapore Convention applies to mediated settlement agreements, reached outside of judicial or arbitral proceedings, that are “concluded by the parties in writing,” “resolve a commercial dispute,” and are “international” in nature. The operative provision is that “[e]ach party to the Convention shall enforce a settlement agreement in accordance with its rules of procedure and under the conditions laid down in this Convention.” Singapore Convention Art. 3(1). The Convention seeks to eliminate the need for a court to address all but a few enumerated defenses relating to the mediation process and the subject of the settlement. In principle, a breached qualifying settlement agreement should be enforced according to its terms more or less summarily by the national courts of a Convention country, rather than being considered merely the basis for a plenary proceeding for breach of contract.
However, the ultimate breadth of use of the Singapore Convention seems less than clear. One possible impediment to the success of the Convention is a consequence of the differences in (a) the arbitration and mediation processes, (b) the motivations for employing one or the other, and (c) their respective “products”.
Arbitration is an adjudication in a private proceeding, and entry into that process generally signals the termination of a commercial relationship. The arbitrator has authority, by agreement, to resolve certain claims and defenses and to prescribe a remedy, much as a judge would. In most instances that remedy is likely to be money damages; less frequently, it might include an injunction against the continuation of specific conduct that is deemed wrongful. A continuing relationship of the parties is rarely in contemplation in an arbitral award.
Judicial involvement in the review of an arbitral award is limited to assessing (a) whether the adjudication process was corrupted by bias or interest or fraud; (b) whether the arbitrator exceeded his/her contractedly-authorized powers; and possibly (c) whether the arbitrator knowingly ignored well established determinative law. If the arbitration has “run amok” in any of these ways, then the losing party is presumed to have been prejudiced, and a court may vacate such an award. If, on the other hand, the court determines to confirm and/or enforce the award, the award remedy will very likely be consistent in kind with what a court would ordinarily order, and the local laws governing enforcement of the resulting judgment will be attuned to enforcing just such remedies.
Compare mediation -- a facilitated settlement negotiation with no adjudicator. The mediator has virtually no noteworthy “powers,” as his/her job is merely to assist the parties in reaching a settlement. Any evaluation of the law and the facts is up to the parties, and they devise the “remedy” for their dispute(s). A mediation may produce an agreed remedy that looks a lot like an arbitral award -- perhaps involving a payment of money (although possibly with a structured payment schedule), perhaps including an agreement to cease specified conduct, and perhaps ending the commercial relationship. Enforcement of an agreed “plain vanilla” remedy of this sort could be expedited by reason of the Singapore Convention. A court’s order of compliance with such settlement terms would produce a familiar-looking judgment, to be enforced by familiar means.
However, an agreed resolution of a commercial dispute could easily be significantly different -- for example, preserving a complex commercial relationship and/or requiring specified commercial conduct or “cooperation” for an extended period. In case of a breach, are national courts and applicable laws geared to enforcing specific performance of such terms, e.g., requiring a court to act as a monitor and umpire for an extended period? Courts in the U.S., for example, rarely order and are rarely required to enforce a judgment of specific performance in a commercial dispute, and they are even less often (if ever) required to enforce a judgment of specific performance in a commercial relationship over an extended period.
If a court, following its own rules of procedure, will not order such specific performance of settlement terms, what happens then? Could the court in effect amend the settlement terms by ordering the parties to engage an independent monitor and umpire (i.e., a private adjudicator)? Could it conduct a proceeding to determine an enforceable standard remedy for breach of contract -- e.g., money damages -- that is different from the terms of the settlement agreement? The Convention expressly provides that resort to its mechanism shall not be the exclusive means of enforcement of such an agreement. Id. Art. 7.
So it is fair to ask how much the Singapore Convention will expedite the ultimate resolution of a dispute in the event of a breach of a mediated settlement agreement. The answer may be that, except in the case of a plain vanilla settlement principally involving an exchange of money for a release, we don’t know.
In any case, here are the Convention’s principal details.
Scope of Convention’s Applicability
A mediated settlement agreement that is to be recognized and enforced under the Singapore Convention must have the following characteristics: (i) it resolved a commercial dispute; (ii) it resulted from mediation; (iii) it is written; (iv) it is signed by the parties; (v) it is “international”; (vi) it does not concern certain excluded types of disputes, such as consumer or employment disputes, or family or inheritance disputes; and (vii) none of the other few grounds, enumerated in the Convention, to decline enforcement exist. Id. Art. 1. For example, other excluded settlement agreements are those that have been approved by a court, concluded in the course of proceedings before a court, or are otherwise enforceable as a court judgment or as an arbitral award. Id. Art. 1(3).
For these purposes, “mediation” is defined broadly. See id. Art. 2(3).
A settlement agreement is “in writing” if it is recorded in any form, including electronically (with minimal qualifiers). See id. Art. 2(2). An electronic signature is permitted if specified conditions are satisfied. See id. Art. 4(2).
The “place of business” (or “habitual residence”) of each of the parties to a settlement agreement, and the place in which the agreement is to be performed, are the principal determinants of whether the settlement is “international”. See id. Arts. 1(1), 2(1)(a), 2(2).
Mediated Settlement Agreement as Basis for Claim
or Defense in Accordance with Local Procedures
A qualifying mediated settlement agreement may be invoked under the Convention either for enforcement or as the basis for a defense. Id. Art. 3. When presented with a request for relief, the “competent authority” within a Convention country “shall act expeditiously,” id. Art. 4(5), albeit “in accordance with its rules of procedure. . ,” id. Art. 3(1). So too, a party invoking a qualifying settlement agreement as a defense, contending that a dispute has already been resolved by settlement, may do so only in accordance with the Convention country’s rules of procedure.
Convention Defenses to Enforcement of Mediated Settlement Agreement
The party resisting enforcement of course has the burden of proof of grounds for a court’s refusing to grant relief under the Convention. Id. Art. 5(1).
Like the New York Convention concerning arbitral awards, the Singapore Convention identifies limited grounds to decline summary enforcement of a mediated settlement agreement. See id. Art. 5. They concern the settlement agreement’s (i) validity and enforceability under applicable law, (ii) finality, (iii) nature of terms, and (iv) prior performance. They also include severe misconduct of the mediator, provided it can be shown by the breaching/objecting party that it would not have entered into the settlement agreement absent that misconduct.
Finally, a court in a Convention country may decline to grant relief under the Convention (a) if granting such relief would be contrary to the public policy of that Convention country or (b) if the subject of the dispute is not settleable by mediation under the law of that Convention country. Id. Art. 5(2).
Commencing Proceeding Under Convention
When invoking the Convention, a party is required to supply to “the competent authority” of the Convention country: (a) the signed settlement agreement and (b) evidence that that agreement resulted from mediation. Id. Art. 4(1). Examples of such evidence are described in the Convention. See id. Art. 4(1)(b).
Ratification and Reservation vis-à-vis the Convention
Finally, in order to bring the Convention into effect, a signatory state must ratify it, and such ratification may be qualified by one or two permitted “reservations”. See id. Art. 8. One such reservation, which would affect the breadth of application of the Convention substantially, would require an agreement of the parties to a mediated settlement agreement that the Convention applies in order for it to have effect. Id. Art. 8(1)(b).