The advent of the Singapore Convention has broken new ground by elevating international mediated settlement agreements to a new status that can be recognised and enforced within the framework of private international law.
This new international framework for enforcement will serve to raise the international profile of the commercial mediation process, giving it increased credibility and visibility, and the promise of greater regulatory robustness.
Several elements can help in limiting difficulties arising during the mediation process and the consequent likelihood that parties would want to rescind mediated settlement agreements.
These include effective training and accreditation of mediators, the observance of mediation standards, and the presence at mediation of legal advisors educated about the mediation process.
The mediator and legal advisors to the parties can take practical steps to avoid subsequent enforcement difficulties.
While each commercial dispute is unique and may demand specific requirements for its own form of settlement agreement, the following steps have been gleaned from jurisprudence across various jurisdictions, covering many types of disputes.
Writing and signature
Ensuring that the agreement is in writing and signed by the parties or authorised signatories may seem an obvious step, but many mediations end with an oral agreement and a commitment by one of the parties to prepare the necessary documents. This can give rise to enforcement difficulties if a completed and signed written settlement does not materialise.
The settlement agreement should be signed by the parties or authorised representatives and provide that it is admissible in evidence in any proceedings to enforce its terms. The parties should consider incorporating a provision that mediation confidentiality is waived if any issue arises regarding enforcement of the settlement.
It is a good practice to keep a record of what has been agreed during the course of the mediation, and then verify this again when completing the settlement agreement.
When preparing for the mediation, some mediators ask the parties to provide a sample settlement agreement that can be modified in the course of the mediation as issues are agreed. This enhances the goal of ensuring that no one leaves the mediation until the settlement terms are reduced to writing and signed by the parties.
Material terms
The settlement should incorporate all of the material terms, use language that is certain enough to be understood and to require performance, and confirm, where it is agreed, that the parties intend the agreement to be binding and enforceable. Careful language should be used for follow-up documents that implement the settlement terms.
For example, the agreement should not be made ‘subject to’ follow-up documents or ‘effective only upon’ the execution of further documents, unless it is agreed and required.
It is important that, if the document is stated to be a ‘full and final settlement’, it resolves all outstanding issues and that the dispute settled is clearly defined in the agreement. If a party wants to preserve their right to sue on other causes of action, they should expressly reserve that right in the settlement agreement.
Clear and certain language is also important where a party may need to seek relief to enforce a mediated settlement in a foreign court where English is not the first language of the judiciary.
If the parties are using different languages and the mediated settlement agreement is required in more than one language, a certified translation should be provided for the parties to sign, to avoid inconsistency in meaning.
Material representations
If settlement is predicated on material representations, these should be incorporated into the settlement agreement, and the agreement should unequivocally state that they reflect all the representations on which the parties relied.
This should make it unnecessary to breach the confidentiality of the mediation process to obtain such evidence if the settlement agreement is challenged.
Material ancillary documents, such as an apology or release, should also be agreed to, and the detail finalised during the mediation process to prevent later disputes over such docu-ments.
Experience from the USA suggests that, when an apology occurs in a mediation that is perceived as sincere, it can have a major impact. Some jurisdictions explicitly encour-age the use of apologies during mediation.
For example, Hong Kong enacted the Apology Ordinance in 2017 to encourage mediated settlements. It covers all apologies made at any stage between parties in dispute and provides that an apology does not constitute an admission of fault or liability.
An apology must not be taken into account in determining fault or liability or any issue in connection with the matterto the prejudice of the person, unless in exceptional circum-stances it would be just and equitable to do so.
Competence and judgement
As many commercial disputes involve sophisticated parties and legal representation, confirming the parties’ competence and independent judgement may seem excessive or superfluous.
However, for the avoidance of doubt, it may prove helpful to provide in the settlement agreement that the parties agree to the terms and understand them, including:
- They understand that the terms are binding and can be judicially enforced,
- They agree that all material representations made to them during the mediation were incorporated into the settlement agreement,
- They understand that neither the mediator nor the opposing party or the opposing party’s advisors were under any positive obligation to furnish them with information,
- They were not suffering from any physical impairment that adversely affected their ability to exercise their judgement in approving the settlement,
- There were opportunities to consult their lawyers regarding the settlement terms,
- They acted voluntarily and exercised independent judgement throughout the process, including the decision to settle, and
- They have authority to legally bind the party that they represented in the mediation.
Litigation considerations
The settlement should clearly state whether the agreement or fulfilment of the agreement settles the dispute that is the subject of litigation. In most cases it will be the former, such that rights will be based on the settlement agreement, not on underlying causes of action. It should also clearly state the dispute that is being settled.
Where proceedings have issued, this can be done by reference to the ‘disputes the subject-matter of the pro-ceedings’ between the parties. This can be widened to include claims and causes of action, present or future, that relate in some way to the dispute in the proceedings. It can also be widened to include any other disputes between the parties that they wish to resolve.
Claims and counter-claims in the relevant proceedings will have to be withdrawn, and costs must be reflected in the settlement. Some jurisdictions do not automatically assume that costs are included. Settlement agreements will often provide that the claims are withdrawn, with the parties covering their own costs.
Where monetary compensation is involved, the agreement must reflect how much is being paid, and by whom, to settle the claims. An interest provision may be appropriate for late payments.
Confidentiality, and the basis upon which it can be waived, should be reflected in the agreement. The governing law and jurisdiction of the agreement should also be included.
Other terms may need to reflect an ongoing business relationship, where intellectual or other rights must be considered, or where goods or securities must be delivered or returned.
Converting the agreement
If the dispute is being litigated, the terms of the settlement could be incorporated into the final judgment, or the settlement could provide for the court to retain jurisdiction over the matter for enforcement purposes.
If the matter is not being litigated, it may be possible to request that the mediator act as an arbitrator to effectively make an arbitral award reflecting the mediated settlement agreement, providing the possible recog-nition of such an award under the New York Convention.
However, not all jurisdictions permit a mediator to step into the role of arbitrator. Some jurisdictions expressly provide for such a procedure, while, in a number of jurisdictions, the settlement agreement may also be deemed to have the same force and effect as an arbitral award.
From the perspective of a commercial relationship and amicable dispute resolution, a mediated settlement can be viewed as the ideal outcome of any arbitration. Indeed, the use of mediation during arbitral proceedings is steadily increasing.
Alternative option
The Singapore Convention offers an alternative enforcement option to converting the settlement into an arbitral award or court judgment. From a policy perspective, parties who elect to mediate their disputes should not have to use an additional form of alternative dispute resolution solely to receive the same legal enforcement status as an arbitral award.
It may also be indelicate, for business relations, for one party to raise the issue of enhanced enforcement protection with another party that they hope to reach an amicable settlement with.
In mediation, the parties have given up contractual rights in settling, and agreed to both the process and the outcome. This justifies the settlement having a more privileged status than a ‘mere’ contract.
Indeed, it seems ironic that mediated settlements have had a lower legal enforcement status than awards from arbitration – where parties agreed to the process, but not the outcome.
Time will tell whether the Singapore Convention becomes to mediated settlement agreements what the New York Convention is to arbitral awards. The fact that the Singapore Convention began with 46 signatories augurs well for its future.
The New York Convention, which has been in force for over 60 years, has over 160 contracting states and continues to attract new signatories, but it began with just ten signatories.
Putting mediation on an equal footing with arbitration will help to reshape perceptions of the commercial mediation process and support a cultural shift. Business also will likely be more willing to invest time and resources in the process where there is an international framework for enforcement.
However, experience with international commercial arbitration suggests that it will take some time for the cultural shift that will make the process a primary player in the international dispute-resolution arena.
It is to be hoped that courts, when requested to apply the convention, will adopt a robust interpretative approach similar to that generally applied in the arbitral context.
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