In a move that reflects the ongoing intention of the United Kingdom's Government to strengthen the country's status as a hub for commercial dispute resolution, the UK signed the United Nations Convention on International Settlement Agreements Resulting from Mediation (the "Singapore Convention") on May 3, 2023. This is an important development for companies considering mediation as a means of resolving international disputes in the UK or with UK-based counterparties.
International Mediation and the Need for Harmonization
Mediation is a form of alternative dispute resolution (ADR) that is facilitated by a neutral third-party mediator. The outcome of mediation is non-binding, unless the parties agree to memorialize the terms of the settlement in a mediation settlement agreement (MSA).
Generally, MSAs are enforced like any other contract. When the parties to an MSA are located in different countries, enforcing the MSA through cross-border claims for breach of contract can be difficult, expensive, and time-consuming. This has impeded the use of mediation as a means of resolving international disputes.
The Singapore Convention is intended to resolve this problem by making MSAs directly enforceable by the courts of States that ratify the convention ("States"). In this regard, the Singapore Convention does for mediation what the New York Convention has done for arbitration, i.e., it creates a harmonized framework for cross-border ADR enforcement.
Scope of the Convention
The Singapore Convention applies to any written settlement agreement that results from mediation, resolves a commercial dispute, and is international in nature.
For an MSA to be "international" for purposes of the Singapore Convention:
- At least two parties must have their places of business in different States; or
- The State where the parties have their place of business must be different from the State where a substantial part of the settlement agreement will be performed or with which the subject matter of the settlement agreement is most closely connected.
The Singapore Convention's scope expressly excludes:
- Disputes arising from consumer transactions for personal, family, or household purposes;
- Disputes relating to family, inheritance, or employment law;
- Settlement agreements concluded or approved in a court proceeding and enforceable as a judgment; and
- Settlement agreements that have been recorded and are enforceable as arbitration awards.
MSA Enforcement Under the Convention
As a State party to the Singapore Convention, the UK will have a duty to recognize and enforce an MSA from any jurisdiction, provided the MSA is within the Singapore Convention's scope.
To enforce an MSA under the Singapore Convention, a party must deliver a copy of the signed MSA to the court and provide evidence that the MSA resulted from mediation. The court is required to act expeditiously on a party's claim.
There are several grounds on which a court may refuse to enforce an MSA under the Singapore Convention, including the incapacity of a party, unenforceability of the MSA, and certain types of misconduct by the mediator. A court may also refuse to enforce an MSA if doing so "would be contrary to the public policy" of the State where the court is located.
Next Steps in the UK
The UK Government must lay the Singapore Convention before Parliament prior to ratification. The Convention will become effective in the UK six months after the Government delivers an instrument of ratification to the United Nations. Therefore, effectiveness is unlikely to occur in the UK until late 2023 or 2024.
Implementing the Singapore Convention in the UK will require amendments to the Civil Procedure Rules in England and Wales, the Session Rules in Scotland, and the High Court Rules in Northern Ireland.
Although there is still much implementation work to be done in the UK, the country is now ahead of both the United States and the European Union with respect to the Singapore Convention. The U.S. was one of the original signatories to the Singapore Convention in 2019 but has not yet ratified it. The EU has not yet signed the Convention.
Through our extensive network of relationships, Venable stands ready to assist our clients in achieving their international objectives. Companies with questions about this Alert are encouraged to contact Mike Pedone.
* Mike Pedone is authorized and regulated by the Solicitors Regulation Authority (SRA) under registration number 826497. Venable LLP is not authorized or regulated by the SRA.