The UK government has this month signed the United Nations Convention on International Settlement Agreements Resulting from Mediation (the Convention).
What is the Convention?
The Convention is the output of work started by the UN Commission on International Trade Law in 2015.
It is a set of rules under which commercial settlement agreements resulting from mediation can be recognised and enforced in member states. It is intended to harmonise the rules for the enforcement of mediated settlement agreements across borders and make enforcement more efficient. Ultimately, it is intended to give transacting parties confidence that cross-border disputes resolved by way of mediation have a clear route to enforcement.
The Convention is not reciprocal; only the country in which enforcement of the settlement agreement is sought must be a signatory to the Convention. Therefore, if the necessary conditions are met, the UK courts will be bound to apply the Convention regardless of the location of the parties, the location of the performance of their contractual obligations or where they settled their dispute.
The Convention entered into force on 12 September 2020. It currently has 55 signatories. The European Union has not signed the Convention. Eight of the signatories have ratified the Convention. The US and China have both signed, but not ratified.
Further information regarding the scope of the Convention and conditions of its application are set out below.
Why has the UK signed the Convention?
In the announcement of its decision to sign, the government stated, "The Government has concluded that it is the right time for the UK to become a Party to the Singapore Convention on Mediation, as a clear signal to our international partners that the UK is committed to maintaining and strengthening its position as a centre for dispute resolution and to promote the UK’s flourishing legal and mediation sectors".
While most respondents to the government's consultation on the Convention were in favour of the UK becoming a party, this support was primarily associated with the UK's positioning within the private international legal landscape: for example, to reaffirm the UK's position as a hub for dispute resolution. Becoming a party to the Convention is unlikely to have a significant impact in the UK in practice. Non-compliance with mediated settlement agreements is relatively uncommon and, when it happens, there is already a route to enforceability through the UK courts, albeit by way of a breach of contract claim.
The decision to sign comes at a time when there is ever greater interest in all forms of ADR as a more cost-effective and less resource-intensive way of settling commercial disputes than litigation. Indeed, the UK government is currently consulting on its proposals to mandate the use of mediation in certain cases in the civil justice system. The Centre for Effective Dispute Resolution's latest audit of UK commercial mediation reckons mediation saves businesses around £5.9 million per year in wasted management time, damaged relationships, lost productivity and legal fees.
There will be some delay before the Convention enters into force in the UK. The government will first enact the necessary legislation and amendments to procedural rules. It will then deposit its instrument of ratification, and the Convention will enter into force in the UK six months later.
When does the Convention apply?
The Convention applies to settlement agreements that:
- result from mediation - the Convention excludes from its scope any settlement agreements that would otherwise already be recognized or enforced as court judgments or arbitral awards;
- were concluded in writing - this includes electronic format;
- were signed by the parties;
- resolve commercial disputes - the Convention excludes settlement agreements (i) relating to family, inheritance or employment law disputes, or (ii) concluded by a consumer for personal, family or household reasons;
- were of an international character at the time of their conclusion - this is where:
- at least two of the settling parties have their places of business in different States, or
- the State in which the settling parties have their place of business is different from either the State in which the settlement agreement’s subject matter is most closely connected, or the State in which a substantial part of the obligations under the settlement agreement is performed; and
- were concluded after the date on which the Convention enters into force for the relevant State.
The Convention provides limited grounds for refusing enforcement. These include (i) a party’s incapacity, (ii) issues with the settlement agreement (e.g. it is null and void, or not binding), (iii) a serious breach by the mediator of standards of conduct, (iv) where granting relief would be contrary to public policy, or (v) where enforcement would be contrary to the terms of the settlement agreement.
There are two Reservations open to members of the Convention. One is a declaration excluding settlement agreements involving the State. The other is a declaration that the Convention will only apply to the extent the settling parties have agreed to its application. The government has confirmed that it will not adopt either Reservation.
The Convention leaves some room for unpredictability. For example, it is unusual that an enforcing court would be enforcing an agreement drawn up by the parties rather than a court order or arbitral award. What if there is disagreement about the proper interpretation of the settlement agreement – the court will need to consider whether to engage with such disagreement, even though the Convention does not provide for substantive review of the agreement. Also, there is ambiguity in the condition "resulted from mediation" – what if, as sometimes happens, the settlement isn't reached until some time after the mediation? The temporal or causative link is not entirely clear.
Is there anything I need to do?
The Convention applies on an opt-out, rather than opt-in basis so, generally, no.
The caveat to this is that a State may choose to adopt the "opt-in" Reservation noted above, i.e. "It shall apply this Convention only to the extent that the parties to the settlement agreement have agreed to the application of the Convention". Although the government has confirmed that it will not adopt this Reservation, it may decide later that it does wish to adopt it. Likewise, other present or future members of the Convention may choose to adopt this Reservation. Commercial parties who reach a settlement as a result of mediation may therefore wish to consider whether to include in their settlement agreement a provision agreeing to the Convention's application. The potential country / countries in which enforcement is sought will be one of the key factors.