The United Nations General Assembly took an important step toward ensuring an efficient and harmonized framework for cross-border enforcement of settlement agreements resulting from mediation.
In late 2018, the UN adopted the Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention). It is anticipated that member states will meet in Singapore to sign the Convention later in 2019.
New York Convention
For decades, the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) has allowed parties to enforce arbitral awards in any country that is a signatory to the Convention (currently 159 states), but there has not been a similar enforcement procedure for settlement agreements.
Until now, the primary mechanism to address a party’s failure to comply with a settlement agreement has been to obtain a court judgment that the party breached a contract—and then seek to enforce that judgment where the party has assets. The Singapore Convention renders the settlement agreement itself enforceable as a stand-alone document.
The Convention meets a need in the international disputes community. In a survey of participants at the Global Pound Conference series hosted by the International Mediation Institute, the lack of a universal enforcement mechanism was the second most cited reason that parties do not attempt to resolve their commercial cross-border disputes through mediation.
Practitioners familiar with enforcing awards under the New York Convention will recognize some of the Singapore Convention’s provisions. The Singapore Convention has important limitations as well, however.
As with the New York Convention, the Singapore Convention requires an international hook before it can be invoked: it requires that (a) at least two of the parties have their places of business in different countries; or (b) the parties have their places of business in a different country from (i) the country in which the obligations of the settlement agreement will be performed, or (ii) the country most closely connected to the subject matter of the settlement agreement. See Art. 1(1).
Settlement Must Be Mediated
The Singapore Convention’s requirement that the settlement must be mediated adds an additional layer to the procedures for enforcement, which are otherwise similar to the New York Convention’s procedures for enforcement of arbitral awards.
To enforce a settlement agreement under the Singapore Convention, the party must supply the signed settlement agreement along with “[e]vidence that the settlement agreement resulted from mediation.” See Art. 4(1). The Convention supplies a non-exhaustive list of examples of such evidence, including the mediator’s signature on the agreement itself. See Art. 4(1).
One possible complication to enforcement is that mediations sometimes end with an “agreement in principle,” where the parties agree on primary terms at the mediation but agree to iron out the details in a more formal settlement agreement later, which may not mention the mediation.
To ease enforcement under the Singapore Convention, it will be important for the parties to memorialize that the final settlement agreement resulted from mediation.
The Singapore Convention includes several grounds on which a court could refuse enforcement, many of which are also found in the New York Convention. See Singapore Convention, Art. 5; New York Convention, Art. V.
As an additional ground, the Singapore Convention provides that a settlement agreement is not enforceable if it is not binding or final according to its terms or if the obligations under the agreement have already been performed or are “not clear or comprehensible[.]” See Art. 5(1)(b)(ii).
The New York Convention contains no specific grounds for a party to defeat enforcement because of arbitrator misconduct, leaving that issue for the relevant State’s arbitration act or other source of law.
In contrast, the Singapore Convention provides that a settlement agreement is not enforceable if there was a “serious breach” by the mediator of the applicable standards or if the mediator failed to disclose “circumstances that raise justifiable doubts as to the mediator’s impartiality or independence and such failure to disclose had a material impact or undue influence on a party without which failure that party would not have entered into the settlement agreement.” See Art. 5(1).
As demonstrated above, the Singapore Convention borrows from the New York Convention’s procedures and overall framework, but there are significant differences and limitations, which could prevent enforcement in some cases.
Perhaps most importantly, the Singapore Convention is recognition by the international community that mediation can be an effective means for resolving disputes and that there is a gap to be filled for streamlining enforcement of international settlement agreements.
Merely by providing some framework for enforcement where none existed before, the Convention is likely to result in increasing numbers of cross-border mediated settlements.
Jennifer M. Smith, a partner at Hogan Lovells in Houston, has significant experience when it comes to international dispute resolution. Dual-qualified in England and Texas, she has advocated for companies involved in complex international commercial disputes for more than 25 years.
Russell Welch is an associate at Hogan Lovells in Houston. He began his legal career as a judicial clerk for the Honorable Zack Hawthorn of the U.S. District Court for the Eastern District of Texas.