The Singapore Convention on Mediation could revolutionise how cross-border disputes are resolved
In its recently published International Dispute Resolution Survey, the SMU Singapore International Dispute Resolution Academy (SIDRA) found that “international commercial arbitration remains the most-used mechanism for international dispute resolution”.
74 percent of the 304 survey respondents, which included Client Users (corporate executives and in-house counsel) and Legal Users (lawyers and legal advisers) across 46 countries in six languages, had engaged in international commercial arbitration between 2016 and 2018.
This was despite the fact that users of this dispute resolution method had expressed lower satisfaction with the speed and costs involved. So why is arbitration still so widely used?
“Arbitration has benefitted enormously from 60 years of an international expedited enforceability mechanism established by the international treaty called the New York Convention. This Convention has helped to build confidence and institutional capacity and practice in arbitration,” explains Nadja Alexander, Professor of Law at the SMU School of Law, and co-author of the survey report.
The New York Convention, formally known as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, includes 160 of the United Nations’s 193 member states. The critical mass makes arbitration rulings more easily enforceable across international borders, which is a key factor in its prominence.
“It’s the enforceability factor that lawyers are looking out for: ‘What if the other party doesn't comply with a dispute resolution outcome or something goes wrong? How are we going to enforce the arbitral award, the court judgment or the mediated settlement agreement?’ Alexander points out. “And so in the survey you will see that legal users, in particular, identified enforceability as the most important factor in selecting a dispute resolution mechanism.
“By ‘enforceability’, users mean having a fast track expedited mechanism to enforce internationally.”
The Singapore Convention on Mediation and hybrid dispute resolution mechanisms
The survey also found that international commercial mediation users did not rank enforceability as an important factor in choosing to mediate. Rather, mediation users prioritised factors such as impartiality, confidentiality and speed. It is likely that users’ awareness of the the lack of a mediation equivalent of the New York Convention reflects low expectations in relation to expedited enforceability of mediated settlements internationally.
The Singapore Convention on Mediation (the “Singapore Convention”), which comes into force on 12 September 2020, could change all that. As of August 2020, there are 53 signatories with five ratifications just 12 months after it was opened for signatures. As stated on its website, the Singapore Convention:
“…will facilitate international trade and commerce by enabling disputing parties to easily enforce and invoke settlement agreements across borders. Businesses will benefit from mediation as an additional dispute resolution option to litigation and arbitration in settling cross-border disputes.”
With COVID-19 rendering many companies incapable of fulfilling contractual obligations, the Singapore Convention is perhaps a prime example of being in the right place at the right time.
“You’ve got a situation where people can't comply or can't fulfil their agreements through no fault of their own,” explains Alexander, who is also the Director of SIDRA. “We have a global situation that cries out for timely and cost effective dispute resolution, while keeping business relationships intact.
“So more than ever, mediation is an attractive option. The Singapore Convention is incredibly timely.”
However, until the Singapore Convention reaches critical mass as the New York Convention – in force since 1959 – has, hybrid dispute resolution methods will continue to be attractive for both legal and client users seeking to benefit from the best features of both arbitration and mediation.
While there is a diverse range of hybrid dispute resolution procedures, Alexander opines that Arb-Med-Arb, short for Arbitration-Mediation-Arbitration, is one of the best known hybrid formats.
Beginning with the commencement of arbitration proceedings, the case directly moves to mediation in an attempt to deliver an amicable solution. If the mediation results in settlement, arbitration proceedings resume to convert the settlement into an arbitral award which can enjoy the enforceability benefits of the New York Convention; if there is no mediated agreement, then arbitration proceedings resume and the arbitrator will make a decision to determine the outcome of the dispute.
“Med-arb, which is also popular, is the same as Arb-Med-Arb except that you begin with mediation rather than opening with arbitration. However it comes with a risk. Generally speaking, you cannot commence an arbitration without a dispute. In med-arb, once you have settled the dispute in mediation, there is no longer a dispute and therefore it may be difficult to commence arbitration proceedings and seek to convert it into an arbitral award,” Alexander tells Perspectives@SMU.
“It’s a technical point but a crucial one. The Singapore International Mediation Centre (SIMC) and Singapore International Arbitration Centre (SIAC) have set up a really streamlined Arb-Med-Arb procedure to address this concern. It helps that they are in the same building so it supports effective cross-institutional communication and efficiency.
“You commence the arbitration, go straight into mediation without an arbitration hearing and then back to arbitration as needed. These are some of the reasons why Singapore’s Arb-Med-Arb procedure is growing in popularity”.
Mediating investor-state disputes and the road ahead
A key area of international disputes is in the investor-state space where private companies invest money – foreign direct investment (FDI) – into another country. Bilateral investment treaties (BITs) which manage such investments usually include arbitration clauses, often as much the result of the enforceability provided by the New York Convention as it is a matter of habit for lawyers.
When the Singapore Convention gains the necessary critical mass of ratifying states, would lawyers handling investor-state disputes consider mediation instead of arbitration?
“Some people say, ‘Oh, governments would never mediate’ or ‘you can't do it because mediation is confidential.’ But actually, arbitration is generally confidential also. Governments negotiate privately and out of the public eye all the time, so why wouldn't they mediate?
“The thing is if disputing governments and investors don't reach an agreement, they can always go on and arbitrate. So I think there's also a great opportunity for mediation in investor-state dispute settlement, and this was certainly the view of more than half of the respondents in the SIDRA survey. There's certainly a lot of interest now with the coming into force of the Singapore Convention.”
Alexander explains that these developments, along with the recent formation of international commercial courts in Singapore, Dubai and elsewhere point to a new age in dispute resolution post-arbitration. She says:
“I used to say the 21st century will be the century of mediation but now I'm hedging my bets. It could be the century for what the Singapore Chief Justice Sundaresh Menon has called Appropriate Dispute Resolution – being able to select the appropriate forum to deal with your dispute.
“You've got this sophisticated ecosystem with a framework for recognising and enforcing different types of dispute resolution outcomes from mediation, arbitration, or litigation.
“We have the New York Convention regulating the enforcement of foreign arbitral awards, the Singapore Convention regulating the enforcement of international mediated settlement agreements and a new Hague Convention (not yet in force) regulating the enforcement of Foreign Judgements.
“I think this sends a clear signal about where international dispute resolution is headed.”
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