Singapore Convention: A Step Forward

Lawtitude

Singapore Convention:
A Step Forward

Alternative Dispute Mechanisms (“ADRs”) started having a huge influence in today’s world, thanks to Liberalisation, Privatisation and Globalisation (“LPG”) and its related commercial transactions. Historically, the world functioned only on Negotiations and mutual Settlements. With more involvement of money, property and rights, people started preferring objective court proceedings to counter the subjectivity created between parties and authority. Again, to meet the delay and unnecessary technicalities embedded in litigation, we once again revert back to ADRs.

The Convention under discussion is the United Nations Convention on International Settlement Agreements Resulting from Mediation (“Singapore Convention”). The Convention was signed by 46 countries in Singapore on 7th August 2019. The object of the Convention is to enforce the Settlement agreements that result from Mediation, like the recognition and enforcement of foreign Arbitral Awards under the New York Convention1.

Moving forward, This article merely tries to throw light on what the special features of the Singapore Convention are and why there is a need for the same.

Mediation and Settlement Agreements

Mediation is defined in the preamble to the Convention as a method for settling the commercial Disputes in which the parties involved request a third person or persons (mediators) to assist them in reaching an amicable Settlement.2 The distinctive point to be noted is that the Convention recognises only the commercial Disputes but not all and the mediator is having the power only to help the parties reach an equilibrium point but have not been given the power to impose any condition or, regulate the process by way of force or anything that enforces the Settlement so come out of the Mediation.

As the name says, Settlement agreement is the agreement or the Settlement resultant from the Mediation process. The Settlement agreement is not defined in general but is presented with a condition that the content must be recorded in writing (can be electronically recorded also) to be a Settlement agreement.3 Since the object of the Convention is only to enforce the solution resultant from Mediation, it becomes necessary to contain the information in an accessible manner which can be used or referred at a later point in time. Subsequently, Mediation will be a preferred mode of Dispute resolution in par with Arbitration.

Importance of the Convention

Mediation is quite different from other ADRs because of its simplicity and involvement of less cost. Though other ADRs serve the same purpose, Mediation gives more personal touch to the parties by encouraging a heart to heart discussion on any point. We can understand the importance of the Convention in three folds:

Recognition

Mediation was less preferred due to its non-enforceability but with the Convention, Mediation is recognised as a proper means of settling Disputes. Moreover, Mediation will be a preferred option when the companies having cordial relationships are troubled by a Single Disputed Transaction. Through Mediation, the companies can settle the Dispute without constraining the relationship or the existing contracts in place. Whereas in case of other ADRs like Arbitration, with more legal and technical introductions like place of Arbitration, law relating to Arbitration, it is slowly gaining the shape of litigation and it is not very far from being burdened with legal technicalities as in litigation.

Effective

COST: Commercially, Mediation is the best option for any commercial Dispute. The cost involved in the Mediation will be very less as only the appointment of mediator involves money but the subsequent steps are completed through wilfully. Since the agreement entered is accepted by the parties involved, there will not be any appeal contesting the agreement. Moreover, unlike other ADRs there is no need for the Court’s involvement to enforce the agreement so settled. Whereas in other Dispute Mechanisms, there will be some pressure from the third parties which might create turbulence with the parties’ claims, making the aggrieved parties’ appeals inevitable.

TIME: Since the discussion will be pertaining to the parties who work in same field and who are well aware of the Dispute will easily bargain and reach a plateau in short time than educating the intermediary and reaching a common point. Since the decision so made is mutually agreed one, there will not be any appeal which again eliminates the need for appeals against trivial issues.

International Relations

The Convention creates a uniform process for enforcement and procedure to conduct Mediation. With this, countries with different legal, social and economic systems will engage in international trade. With uniformity, the trust and confidence among the States will develop not keeping in mind the market conditions, ultimately it should contribute to the harmonious international economic relations.

Conditions for enforcing the Settlement agreements

It it is pertinent to note that the Mediation regulated under the Convention is not applicable to all Disputes. The Settlement agreements are enforceable only when they satisfy the following conditions:

  • The Settlement agreement so created must be in writing.
  • Parties must have different places of business in different States i.e., (a) At the time of conclusion at least two parties to the Convention must have different places of business in different States or (b) The parties can be from the same State but the State must be different from the State where (i) substantial part of the obligations under the Settlement agreement is performed or (ii) the subject matter of the Settlement agreement is closely connected.4
  • The agreement must not be a Dispute pertaining to transactions where one of the parties is a consumer for personal, family or household purposes.5
  • The Settlement agreements must not relate to family, inheritance or employment law. 6
  • The Settlement agreements must not be an instrument of the court (approved by court, concluded in Court proceedings or enforceable as a judgment in the State where the Court is located/ having jurisdiction) 7
  • The Settlement agreements must not be recorded and enforceable as Arbitral Award.
  • The Convention will have prospective effect and shall be applicable only to the Settlement agreements concluded after the date when the Convention, reservation or withdrawal comes into force for the concerned party.
  • The relief may be refused when:
    (i) A party is under incapacity,
    (ii) Settlement agreement is null and void or not binding or subsequently modified or obligations are performed or unclear to perform,
    (iii) Relief would be contrary to the terms of the Settlement agreement,
    (iv) Mediator breaches his standards or circumstances where mediator’s character and credibility is questioned,
    (v) When the relief would be against the public policy or
    (vi) The subject matter of the Dispute cannot be settled by Mediation.

Special points to be given consideration

Here are some unique points to be appreciated in the Convention:

  1. A Regional Economic Integration Organization can sign, ratify, accept, approve or
    accede to this Convention and can be treated as a party to the Convention. 8
  2. If a party has more than one territorial unit where different systems of law are applicable,
    then the party can declare to what extent the Convention can extend to those territorial
    units. 9 These declarations are to be notified in a depository and the concerned party can
    refer the law or procedure of the State, place of business and competent authority of the
    State.
  3. The Secretary General of the United Nations is the depository under the Convention. 10
  4. The parties are allowed for reservation of the Convention, where the parties can declare
    that the resolution is not totally applicable to them or applicable only to the extent agreed
    by the parties. This option when given to parties will encourage the parties to adopt the
    Convention in contrary. 11

Conclusion - In India?

So, what will be the position of the Convention in India? Since the Convention is an International instrument, it becomes an obligation on the part of India to update and move at a pace in par with other countries. India is bound to create laws to fulfil the international obligations which are necessary to strengthen ties with other countries. 12 Moreover, India is not having a separate law for Mediation which further emphasises the need for Mediation laws in India which is surprisingly similar to the Singapore Convention.

B. Pragash and K.K. Balu
A.K. Mylsamy and Associates LLP

1 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958)
2 Preamble, United Nations Convention on International Settlement Agreements Resulting from Mediation; Article 2 (3), United Nations Convention on International Settlement Agreements Resulting from Mediation.
3 Article 1, United Nations Convention on International Settlement Agreements Resulting from Mediation.
4 Article 1 (1) United Nations Convention on International Settlement Agreements Resulting from Mediation.
5 Article 1 (2) (a), United Nations Convention on International Settlement Agreements Resulting from Mediation.
6 Article 1 (2) (b), United Nations Convention on International Settlement Agreements Resulting from Mediation.
7 Article 1 (3) (a), United Nations Convention on International Settlement Agreements Resulting from Mediation.
8 Article 12, United Nations Convention on International Settlement Agreements Resulting from Mediation.
9 Article 13, United Nations Convention on International Settlement Agreements Resulting from Mediation.
10 Article 10, United Nations Convention on International Settlement Agreements Resulting from Mediation.
11 Article 8, United Nations Convention on International Settlement Agreements Resulting from Mediation.
12 Art 253, INDIA CONST.

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