As we previously reported, the UK government is currently consulting on whether the UK should sign the UN Convention on International Settlement Agreements Resulting from Mediation, more commonly known as the Singapore Convention. The consultation closes on 1 April 2022.
The Convention establishes a framework under which Member States agree to recognise and enforce settlements of international commercial disputes resulting from mediations conducted anywhere in the world (if they fall within scope). It currently has 55 signatories, including nine full Member States.
Since it came into force in September 2020, the Convention has been available to enforce settlement agreements resulting from mediations held in the UK (or anywhere else) in the Convention’s Member States. However, it is only now that many are turning to consider the detail of how the Convention impacts UK-mediated settlements being enforced abroad and vice versa – and what difference it will make if the UK joins the Convention. Those issues are not straightforward, and extend beyond the Convention’s technical legal operation.
In our view, the key considerations are as summarised below. Taken together, we believe they support a view that the UK:
- should sign and ratify the Convention; and
- should develop a supporting framework of domestic rules to clarify how the Convention will be applied in a number of areas where there is scope for different approaches. Doing so would not only be appropriate for domestic purposes but could allow the UK to play a leading role in the development of global law and practice regarding the Convention.
1. The absence of an enforcement regime has not held back UK mediation
We have previously observed that, in practice, it is in fact quite uncommon for commercial parties to fail to honour settlements they have reached through mediation. The consultation document notes that that view is echoed by many others. Accordingly, the number of cases where the Convention will actually need to be relied upon may be relatively small.
Further, we do not believe that the role of mediation in international commercial disputes in the UK has been held back to any significant degree by the lack of a global enforcement regime. As has been repeatedly recognised in various reviews and surveys in recent years, the uptake of mediation in substantial commercial claims is generally regarded as satisfactory. The majority of such cases in the UK are mediated at least once and, where they are not, the reasons are more likely to do with the prospects of achieving a settlement than concerns about whether it could be enforced.
That is not to say that the Convention could not be potentially relevant to some UK litigants’ decision-making around whether to mediate. However, within the system as a whole, the Convention cannot be said to be solving any real existing problem or be likely to substantially increase the proportion of commercial claims that are mediated (as distinct from the potential wider benefit of supporting the UK’s attractiveness as a forum to bring such claims, as noted below).
2. The UK joining the Convention would be unlikely to make more settlements enforceable – but impressions may be more important
In terms of technical legal impact, the UK signing the Convention is unlikely to significantly alter the substantive position as to whether or not any particular mediated settlement agreement (being brought to or from the UK) is likely to be enforced. That is because:
- Foreign jurisdictions that have ratified the Convention will continue to be obliged to enforce relevant settlements resulting from UK mediations regardless of whether the UK is a Member State
- The UK courts applying local law would already be likely to enforce a settlement agreement (domestic or foreign) that met the criteria in the Convention – albeit via the indirect route of enforcing a judgment for breach of contract. So, with regard to enforcement in the UK, the impact of the UK becoming a Member State would in most cases be limited to a procedural rather than substantive change.
Of course, that procedural advantage may be viewed as valuable by many commercial parties, both domestically and abroad.
Perhaps more importantly, the above legal position is not widely appreciated. That is no doubt partly because it is wrongly assumed that the Convention only operates reciprocally amongst its Member States, as is the case with most other legal enforcement treaties. Given that, the UK becoming a Member State could result in a general impression that a settlement resulting from a UK mediation will be more readily enforced internationally than one from a mediation in a non-Convention state. Or, more accurately, joining could avoid an unfounded impression that UK-mediated agreements are at a disadvantage globally.
3. Wider benefits for mediation
As the consultation document recognises, the potential benefits of the Convention extend beyond its technical legal operation in individual cases. Those benefits should not be underestimated.
While mediation is well established within the commercial disputes landscape in the UK, there remains much variability in the understanding and use of it globally. The data collected from international participants at the Global Pound Conference series in 2016-17 identified a clear overall view that an international enforcement regime for settlements would be one of the most beneficial developments for commercial dispute resolution in the future. Regardless of whether that view was based on actual enforcement difficulties encountered or simply concerns as to a lack of regulation and certainty, there are good grounds to expect that the Convention, if widely adopted, will go a long way to assuaging such concerns and boosting the status of mediation. That will be particularly the case in jurisdictions where commercial parties are currently less familiar with the process.
Of course, even within the UK, a very substantial proportion of parties in the commercial courts hail from jurisdictions where mediation is less well known. The UK having ratified the Convention could assist legal representatives in persuading such clients of the benefits of mediation and of the mainstream role it has in the UK commercial courts.
Accordingly, even though joining the Convention is likely to have only a modest impact on the UK in a technical legal sense, it is arguably important for the UK as a leading disputes hub to do so. Supporting the Convention would convey globally:
- a formal recognition of mediation as a credible and reliable option for resolving international commercial disputes, alongside litigation and arbitration;
- further reassurance to foreign parties that the UK courts are “mediation friendly” and willing to enforce mediated settlements (domestic or foreign); and
- encouragement to other jurisdictions to join the Convention (bearing in mind that the scope for disputants in the UK to take advantage of it will depend on how widely it is adopted globally).
4. While there is some unpredictability, it cannot be avoided by the UK not joining the Convention – and can be better mitigated from within the ‘club’
The Convention’s drafting has been kept deliberately ‘high-level’, allowing a degree of flexibility within Member States as to how they will apply the provisions. There are several aspects of the Convention where that flexibility gives rise to some unpredictability for mediating parties, particularly given that a foreign enforcing court may be approaching the issue from fundamentally different legal and public policy norms.
Differences in legal systems and norms are of course inherent in the operation of any international enforcement treaty. However, the position under the Singapore Convention is unusual in that the foreign enforcing court will be considering and enforcing the parties’ settlement agreement directly, rather than enforcing the judgment of a court which has considered the agreement under its governing law – sometimes after argument from the parties – and made a formal decision and order as to the enforceable obligations.
There is therefore arguably an enhanced risk here that a foreign court could adopt an approach under the Convention that would be contrary to the current expectations of parties who mediate in the UK.
A discussion of the issues where that might be a particular concern is beyond the scope of this post. However, they include:
(i) Interpretation of complex agreements: Given that the purpose of the Convention is to enable a settlement agreement to be enforced via a streamlined procedure without the need to sue on it as a contract, it is not clear how it will operate in cases where an enforcing court is faced with party disagreement over how the terms of the agreement should be interpreted. Disputes as to interpretation could arise where the court was considering one of the grounds for refusal of relief (eg. the agreement is not operative or binding on its terms) or whether the obligations sought to be enforced had in fact arisen under the agreement. Under Article 5, a court may refuse relief if the obligations “are not clear or comprehensible”, but even reaching that conclusion could require it to assess the parties’ competing contractual construction arguments.
Contracting States, including the UK, may need to address this in their implementing rules. It may be appropriate to draw a distinction between straightforward settlement obligations (such as simple monetary payments or transfers) and those that would require a substantive interpretation of the agreement (which could arise in more complex resolutions such as the restructuring of a commercial relationship or the staged unwinding of a complex structure).
(ii) Confidentiality /without prejudice: There are various issues an enforcing court could need to determine under the Convention on which it might be invited or inclined to admit evidence of what occurred in the mediation (eg. alleged party or mediator misconduct and whether that influenced the settlement, or the meaning of a term of the agreement). Given that the approach to mediation confidentiality and admissibility is not consistent globally, this could pose a risk of the veil of confidentiality being lifted by foreign enforcing courts beyond the very limited circumstances in which an English court would do so.
Even with regard to enforcement within the UK, the fact that the without prejudice protection is mostly a creature of case law rather than codified might support an argument that the UK implementing legislation/rules should specifically address how the protection will operate in the context of a court applying the Convention (consistent with existing English law). That would limit the risk of inconsistent decisions by English enforcing judges and could also give greater assurance to both domestic and foreign parties.
Mitigating the uncertainty
Given the relatively small number of cases that will require enforcement under the Convention, and that such problematic issues will arise in only a subset of those cases, the unpredictability around foreign courts’ approaches might be viewed as inconsequential in the context of deciding whether the UK should join the Convention.
However, the more important point is that any such issues will exist regardless of whether the UK decides to join. Given that UK-mediated agreements will continue to be enforceable in Convention Member States in any case, any perceived risks or concerns in this regard will not be able to be avoided by the UK electing not to sign.
At individual case level, mediating parties who have particular concerns could seek to avoid any perceived risk by including in their settlement agreement an express opt-out from the Convention (if that can be agreed). Such contractual opt-outs could be expected to be respected by enforcing courts – although this would not be under any express opt-out provision in the Convention and would presumably need to rely on the enforcing court exercising its Article 5 discretion to refuse relief where it would be contrary to the terms of the settlement agreement.
However, with regard to the current consultation, given that the unpredictability cannot be avoided by the UK remaining outside the Convention, there may be force in a suggestion that it can best be mitigated by the UK becoming a Convention Member State so that it can potentially influence how the Convention’s provisions are interpreted and applied. It could seek to do so by articulating a considered approach to the relevant provisions through the implementing legislation/rules and, to a lesser extent, through English courts’ enforcement decisions (although the expected small number of enforcement actions might in practice limit the body of case law).
Such articulation of the English position would be potentially useful for UK mediating parties if a foreign enforcing court was asked to enforce their agreement and needed to take into account the English context for the purpose of determining an issue under the Convention – such as whether the mediator had breached standards applicable them in the UK, or whether the form of the settlement agreement would be enforceable as a court judgment in the UK and therefore out of scope under Article 3.
More broadly, the articulation of the UK’s approach could potentially influence other jurisdictions when formulating their domestic rules or in individual enforcement decisions. An alternative source that jurisdictions could look to as a guide in this regard is the UN Model Mediation Law / Mediation Rules, which have been updated to sit alongside the Convention. However, as those model provisions are necessarily drafted from a global perspective, there are some respects in which we consider they differ from the position that parties mediating in the UK would expect – particularly around mediation confidentiality.
In any event, the above approach would see the UK taking an active lead in the global development of law and practice around the Convention, as opposed to UK mediations being simply subject to that law developed on an ad hoc basis in other jurisdictions. Such a role would align with the UK government’s vision that joining the Convention would confirm and bolster the UK’s status as a world leading dispute resolution centre.
Jan O’Neill, Herbert Smith Freehills