By Parth Rishik (PH, CSDR) – Law College Dehradun, Faculty of Uttaranchal University.
Mediation is one of the procedures of Alternative Dispute Resolution that has gained popularity in the last few years. Mediation is a mode of negotiation in which a mutually acceptable third party helps the parties to a conflict find a solution that they cannot find by themselves . In mediation, parties within the nexus of a dispute out of some contractual agreement sit down together to find a common ground to agree upon and thus resolve the dispute. Mediation, if followed strictly, is a procedure where the parties are represented by their counsel, who pleads in front of a Mediator, who is an authoritative figure which guides and facilitates the whole procedure and tries to find a common ground for the parties to agree upon. The mediator does not act as a judge, does not impose solutions or decisions, he’s/she’s merely a third party outside the nexus of dispute who facilitates the procedure of mediation. The agreed-upon terms in mediation are also not enforceable without the want of the parties to the dispute, in other words, the terms accepted during mediation are not binding. This used to be the old legal framework regarding Mediation as a tool for Dispute Resolution. The article will probe into the latest development in the international legal framework that introduces the enforcement of Mediated Settlement.
International Framework of Mediation
On 20 December 2018, The Singapore Convention on Mediation, formally known as the United Nations Convention on International Settlement Agreements Resulting from Mediation came into existence which is opened for signatory states from 7 August 2019. This new multilateral treaty has been developed by the United Nations Commission on International Trade Law (UNCITRL). This treaty aims to provide a systematic, uniform, and efficient framework for recognition and enforcement of settlement agreements arising from mediation to resolve international commercial disputes – similar to the framework of 1958 New York Deceleration provides for Arbitral Awards. The primary objective is to achieve cross border disputes with the help of mediation and encourage mediation in international commercial disputes. The deceleration acts as an instrument for the facilitation of international trade and the promotion of mediation as an effective and alternative way for dispute resolution. Being binding in nature it aims to bring certainty and stability to the international framework on Mediation and thus leading to contribute towards the Sustainable Development Goals (SDG), mainly SDG 16.
One of the major barriers in cross border mediation which barricades the willingness of companies in a different state to approach mediation for dispute resolution is lack of an international legal mechanism for giving effect/enforcement to mediated settlement agreements; for instance, if after mediation process another party does not comply with the mediated settlement agreement then the other party have to approach in the traditional litigation manner or an arbitrational manner which results in wastage of time and money over the mediation process. In particular with disputes arising out of non-compliance of contract and even if the parties reach an agreed position by the means of mediation then the mediated settlement agreement is just another contract that needs to be enforced in an international real-time scenario, and if the party still fails to comply then the other party just have to start over through litigation or arbitration for the enforcement of the original contractual agreement or the mediated settlement agreement. Thus, the Singapore deceleration on Mediation aims to better and develop the international framework for the enforcement of mediated settlement agreements, which before could only be enforced through litigation under the contractual law of a state.
In many ways, this declaration aims to improve the international dispute scenario. This will create a willingness by the organization to enter into mediation for dispute resolution as it is more efficient in terms of time and money and at the same time the procedure is more flexible than that of arbitration and traditional litigation.
Nature of Enforcement
Once the declaration is put in force, it will apply to all international written settlement agreements which are a result of mediation . To understand what constitutes the basis of “international mediated settlement”, the following is necessary:
a. At least two parties who are within the nexus of the dispute have the operation of the business in a different state; or
b. Where the state in which the parties have their places of business is different:
- The state in which the substantial part of the obligations under the settlement/agreement is performed; or
- The state with which the subject matter of the settlement agreement is most closely connected.
The limitation of the application of the Deceleration is that it does not apply over the domestic mediated settlement agreement or court directed/approved mediated agreements that act and are enforceable as a judgment or arbitral award.
Article 3 of the declaration focuses on the key obligations that fall upon the parties who are signatory to the convention with respect to the enforcement of the settlement agreement and the right of a disputing party to invoke a settlement agreement covered by the convention . It also empowers the parties under the mechanism of mediation to prescribe any procedural mechanism for the parts where the declaration is silent thus making the whole process more flexible.
The grounds on which a court can deny the enforcement of a mediated settlement agreement are outlined under section 5 of the Declaration which can be grouped in three categories namely in relation to the disputing parties, the settlement agreement, and mediation procedure. Further, it also facilitates two more grounds according to which the court may deny granting any relief in the procedure of enforcement of mediated settlement agreement by its own motion which are public policy and the fact that the subject matter of dispute cannot be settled by mediation. The following is the points on which the court can deny the enforcement of the mediated settlement agreements:
a. The Party to the settlement was under some incapacity;
b. The mediated settlement agreement sought to be relied upon:
- Stands null and void;
- The nature of it is not binding or is it not final according to its own terms;
- Stands modified.
c. The obligations in the settlement agreement:
- Have already been performed;
- Stands unclear and not comprehensible.
d. The relief the party seeks is ultra vires to the terms of the mediated settlement agreement
e. Breach of the conduct standards applicable to the mediator by the mediator himself/herself and without such breach the parties could not get to the mediated settlement agreement .
Further, Article 5(2) of the Deceleration gives two additional ground through which the court may decline grant of relief on its own motion, they are:
a. The relief sought is ultra vires and contrary to the Public policy of the state.
b. The very subject matter of the dispute is not capable to be resolved by mediation under the law of the state where relief is sought.
The decelerations aim to have the same effects in the international alternative dispute resolution that the New York Declaration has had for arbitration.
Scope and Impact in the world of Mediation
The most important impact of this declaration will be distinguishing the formality of mediation as opposed to informal mediation. As the act provides for the definition of mediation under Article 2(3) which states, “to reach an amicable settlement of their dispute with the assistance of a third person or persons (‘the mediator’) lacking the authority to impose a solution upon the parties”, draws the very distinction that not all negotiations between two parties to dispute is called mediation. For as long, the process of mediation falls under this definition then the deceleration shall be applicable to it. Equally, there is no requirement that the mediation is administered by a mediation institution or conducted by an accredited mediator. This provision is intentionally broad and aims to increase the attractiveness of the Singapore Convention by not being overly prescriptive and maintaining the flexibility that is one of the attractive features of mediation.
With the development and the structured international legal system for the enforcement of mediated settlement agreements, the future of mediation in the field of international commercial dispute looks very promising. One primary fact that will draw the attention of international business to use mediation as an alternative dispute resolution will be the flexibility it provides which is tightly bound in the traditional litigation and such flexibility is also not present in the international commercial arbitration.
The only barrier that stopped various businesses from entertaining disputes through the procedure of mediation was the non-binding nature which the declaration takes care of. It provides a harmonized structure for the enforcement of settlement agreements which is a result of mediation. At the same time, it provides a definition that distinguishes the process of mediation from the informal negotiations between parties to the dispute.
Further, the deceleration also provides for two potential reservations under Article 8. A state party to the convention may declare that:
a. It shall not apply this convention to settlement agreements to which it is a party, or to which any governmental agencies or any person acting on behalf of governmental agencies is a party, to the extent specified in the deceleration;
b. It shall apply this convention only to the extent that the parties to the settlement agreement have agreed to the application of the convention . With these advancements, Mediation will be a well-practiced alternative dispute resolution for the International Commercial Disputes.
-  Definition given by the United States Institute of Peace (USIP).
-  Deceleration on the Recognition and Enforcement of Foreign Arbitral Awards, U.N. Doc E/CONF.26/8/Rev.1 (1958) (hereafter New York deceleration)
-  United Nations Convention on International Settlement Agreements Resulting from Mediation (New York, 2018) (the “Singapore Convention on Mediation”), UNITED NATIONS
- COMMISSION ON INTERNATIONAL TRADE.
-  Art. 1, United Nations Convention on International Settlement Agreements resulting from Mediation, also known as “Singapore Convention on Mediation”.
-  Article 3, United Nations Convention on International Settlement Agreements resulting from Mediation, also known as “Singapore Convention on Mediation”.
-  Article 5, United Nations Convention on International Settlement Agreements resulting from Mediation, also known as “Singapore Convention on Mediation”.
-  Article 5(2), United Nations Convention on International Settlement Agreements resulting from Mediation, also known as “Singapore Convention on Mediation”.
-  Article 2(3), United Nations Convention on International Settlement Agreements resulting from Mediation, also known as “Singapore Convention on Mediation”.
-  United Nations, General Assembly, Report of Working Group II (Arbitration and Conciliation) on the work of its sixty-fourth session, A/CN.9/867 (1-5 February 2016) see ~ https://undocs.org/A/CN.9/867 (visited on 08/07/2020).
-  Article 8, United Nations Convention on International Settlement Agreements resulting from Mediation, also known as “Singapore Convention on Mediation”.