The advent of globalization has manifested in manifold increase in cross-border
business, which has instigated commercial disputes to take new dimensions
including foreign disputants and multi-national corporations. In resolving such
disputes, litigation did not become the preferred choice for reasons ranging
from delays, exorbitant costs and inability to handle intricacies of
With this exclusion, alternative means for resolving
disputes in this arena have been resorted to and arbitration, in particular,
gained significance because to some extent, it overcame flaws found in
litigation and offered several advantages. However, corporations have now
started witnessing the downsides of arbitration because of its increasing costs,
delays and procedural technicalities and thus, have started to look towards
another mechanism: mediation.
The usage of mediation has exponentially increased over the past two decades.
Multi-national entities are seen incorporating escalation clauses in contracts,
requiring an attempt at mediation before commencing litigation or arbitration.
However, international corporations still hesitate in mediating their conflicts.
Various explanations can be attributed to this reluctance, but the lack of a
final, binding and uniformly enforceable settlement agreement is one of the
principal justifications as presently, there is no international framework for
direct enforcement of cross-border mediated settlements.
The subject of enforcement of cross-border mediated settlements poses two
primary questions: (a) whether a mediated agreement should be legally
distinguishable from an ordinary contractual settlement arrived at between
parties without the assistance of a third party? and (b) whether there is a
genuine need for an enforcement mechanism to make mediation a preferred choice
for international commercial disputants?
An internationally mediated settlement agreement versus a contractual settlement
It is argued that a cross-border mediated agreement and a contractual settlement
are legally identical and should be subject to the same enforcement regime for
protecting the rights of the parties. Although, in essence, a mediated
settlement is a private contract between parties, there are two fundamental
differences which indicate that a different legal status should be accorded to
each of them.
First, contrary to a contractual settlement, mediated settlement
is the outcome of a process wherein parties willingly resolve their differences
with the assistance of a neutral third party. In such a case, it would be
unpleasant for parties to approach a court for enforcement of the settlement
terms as no one would want to pursue additional set of proceedings to either
enforce the concluded terms or to resolve the disputes arising from mediation
and subjecting themselves to judicial or arbitral process, which the parties
aimed to circumvent at the very start.
Second, the process of mediation is governed by certain rules of procedure. The
interplay of these rules, which, inter alia, comprise of voluntary participation
of the parties, confidentiality of proceedings and assistance of a neutral
mediator, results in an amicable settlement. A contractual settlement, on the
other hand, does not necessitate any of these factors. Procedural justice
demands that a mediated settlement must be directly enforceable rather than
resulting in a paper settlement, lacking finality without the support of
contractual law for its enforcement.
Need for a legal framework for cross-border enforcement of mediated settlements
Currently, enforcement of a cross-border mediated settlement can be sought
through indirect modes, depending upon the existence of an enforcement
legislation in the enforcing jurisdiction. In countries lacking such
legislations, a settlement agreement is treated as a private contract and
enforced under the contractual law of that jurisdiction. On the other hand, two
trends for expedited enforcement emanate in jurisdictions, which have enacted
provisions to facilitate the same.
First, a mediated settlement can be enforced
through judicial means, by seeking its summary enforcement or by applying for
enforcement after getting the agreement notarized according to the requirements
of the enforcing State. For instance, Indian law provides for summary
enforcement of a settlement agreement, which will have the legal effect of an
arbitral award. Second, under domestic laws of some jurisdictions like South
Korea, the parties can appoint an arbitral tribunal for the limited purpose of
getting the mediated agreement recorded in an arbitral/consent award for
However, the present enforcement mechanisms are inconsistent and under-cut the
benefits of mediation as enforcing a mediated agreement as a private contract
exposes the parties to the intricacies of contractual law. They become the
subject of another set of proceedings where the contents of the settlement might
have to be proved according to the contract law and legalities of the enforcing
For example, in Hong Kong Special administrative Region of China,
a settlement agreement reached during conciliation proceedings will be
enforceable through the court, only if it is concluded between parties to an
arbitration agreement. Some countries restrict this approach to settlements
concluded during ongoing arbitrations, where, in fact, no real arbitration takes
place as an arbitral tribunal is appointed merely to record the settlement in a
Such a consent award, might be null, void and incapable of being
enforced in jurisdictions where the domestic arbitral laws stipulate �existing
or future dispute
� at the time of appointment of the arbitral tribunal as a
pre-condition for initiating arbitral proceedings. For instance, the Arbitration
and Conciliation Act, 1996 provides that an �arbitration agreement
� is an
agreement to submit to arbitrate �existing or future disputes
contractual or not. In the present context, as all the disputes are already
determined at the time of arbitral tribunal�s appointment, the award so rendered
would be incapable of enforcement. This could cast a doubt on enforcement of a
mediated settlement as an arbitral award.
Considerations in favour of an enforcement mechanism
Considerations against an independent enforcement mechanism
- Demand for economical and quick dispute resolution:
Speed and cost are pivotal factors for international corporations in dispute
as they save them from wastage of time and money. Mediation amply serves
this dual purpose. The estimated total time including mediation preparation,
conducting pre-mediation sessions between the parties and mediator and the
actual proceedings till the conclusion of a settlement agreement is about
three months. On the contrary, it might take over a year to procure an
arbitral award and over three years in obtaining a court decision. Inspite
of such enticing advantages, mediation has failed to be a preferred mode for
resolving cross-border business disputes. Absence of a predictable
enforcement mechanism plays a significant role in this unpromising trend.
- Change in circumstances:
There could be several reasons or excuses not to voluntarily implement a
mediation agreement. For instance, a change in the surrounding circumstances
after the conclusion of a mediation might cause a party to turn around from
the settlement. Disagreement between parties regarding the interpretation of
a term in the agreement, intervention of external elements factors like
change in government policy, currency fluctuations, etc. are all factors
which may dissuade a party from complying with the mediated agreement.
Moreover, internationally mediated settlements are not supported by
enforcement legislations in several countries, indicating that its
non-compliance would not result in an immediate action. This can induce a
party to either delay the performance of its obligations or withdraw from
the settlement. Thus, it is inevitable for a legal system to tackle this
problem of non-compliance in order to reinforce parties� confidence in
The Singapore Convention
- Reluctance to regulatory intervention:
The principal argument against
an enforcement mechanism is based on the impression that regulatory
intervention might impede flexibility and innovation of mediation process.
Mediated settlements, unlike judicial outcomes, are often beyond legal
rights and duties and regulating mediated settlements may suppress their
creativity and richness. An enforcement framework can also be resisted for
defeating the fundamental characteristic of voluntariness as the parties
subject to an enforcement mechanism would be legally obligated to comply
with the settlement rather than implementing it willingly.
- Compromise in confidentiality of mediation communications:
Confidentiality is one of the vital aspects of mediation. It enables
mediating parties to communicate freely, frankly and confidently, without
the apprehension of their communication being used against them in any
future process. With an enforcement mechanism, which would most likely and
should logically stipulate grounds for challenging enforcement of a
settlement agreement, there is a strong possibility of erosion of
confidentiality of mediation communications as an enforcing authority could
mandate its disclosure.
After several years of development within UNCITRAL, the UN General Assembly
adopted the United Nations Convention on International Settlement Agreements
Resulting from Mediation, commonly referred to as the �Singapore Convention� in
December 2018. Just like the efficient regime for recognition and enforcement of
international arbitral awards under the New York Convention, the Singapore
Convention intends to create an enforcement system for mediated settlement
agreements, thereby addressing the concerns discussed above.
The Singapore Convention on Mediation came into force 12.09.2020 with the
objective of providing a more efficient regime for enforcing cross-border
mediated settlements of corporate disputes between signatory countries. The
Convention specifically excludes consumer, family and employment settlements as
well as agreements reached through arbitral or court proceedings.
With the Convention in force, corporations seeking enforcement of an
international settlement agreement, can do so by directly approaching the courts
of countries that have signed and ratified the Convention, instead of having to
enforce the agreement as a contract in accordance with each country�s domestic
process. As on 01.09.2020, the Convention has 53 signatories, including India,
U.S.A. and China. As adoption of the Convention becomes more prevalent globally,
it will further fortify Singapore�s position as an international dispute
resolution hub and serve the requirements of multi-national entities that rely
on Singapore for their international commercial transactions.
Just like its counterpart, the Singapore Convention does not discuss how the
enforcement regime should look like. Rather, the form of enforcement proceedings
is determined by the jurisdiction.
The only substantive requirements for enforcement are (a) an agreement signed by
the parties; and (b) evidence that the agreement resulted from mediation.
However, the right to enforce a mediated settlement is not absolute.
The Convention stipulates 6 grounds on which the enforcing jurisdiction may
refuse to enforce a mediated agreement:
- incapacity of a party to the agreement;
- agreement not being final and binding or incapability of being
- obligations of the agreement have been performed or are
- express prohibition of enforcement under the mediated agreement,
- serious breach by mediator of standards applicable to him or mediation
without which breach a party would not have entered into the settlement
- failure on the part of mediator to disclose circumstances that raise
justifiable doubts as to his impartiality or independence causing material
impact or undue influence on a party.
The future of International commercial mediation is promising. In a world of
cross-border disputes, it is imperative for mediation to be made appealing to
potential users by according settlement agreements certainty and finality when
they operate internationally. A binding mechanism for international enforcement
of mediated agreements is one way of addressing these concerns.
Although creating an efficient legal regime for cross-border enforcement can be
can challenging, the developments in the field indicate progress. Such a
framework can be a catalyst in changing the attitudes towards international
commercial mediation by providing outcomes, which are final and binding as
outcomes of other adjudicatory mechanisms. This can ultimately promote and
foster mediation as an independent and co-equal mechanism of resolving
international commercial disputes as arbitration.
Written By: Mayanka Dhawan Advocate
- LLM, University College London (U.K)
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