S'pore Convention on Mediation timely and critical to businesses, trade
OVER the weekend, an international agreement that aims to help businesses resolve cross-border disputes and facilitate international trade took effect with little fanfare.
But the Singapore Convention on Mediation - formally known as the United Nations (UN) Convention on International Settlement Agreements Resulting from Mediation - is a significant piece of news. It is a major step forward for mediation in the global arena, and critical in the development of a mature, rules-based global commercial system.
The convention - the first UN treaty to be named after Singapore - will provide businesses with a full suite of options to resolve their cross-border disputes, whether through litigation, arbitration or mediation. It comes into effect at a time when there is growing momentum around mediation as more businesses look to alternative means of resolving disputes, given that court processes have been hampered by lockdowns.
Through mediation, parties in a cross-border dispute can attempt to negotiate a new deal, facilitated by a neutral third-party mediator, to salvage a commercial relationship which would otherwise disintegrate if the litigation or arbitration routes were taken. Previously, a settlement agreement made in one country has no legal force in another. A party seeking to enforce a mediated settlement agreement in another country or multiple countries will have to commence legal proceedings in each country.
With the convention, businesses seeking enforcement of a mediated settlement agreement across borders can do so by applying directly to the courts of countries that have signed and ratified the treaty, instead of having to enforce the settlement agreement of a contract in accordance with each country's domestic process.
As of Sept 1, 53 countries including the United States, China and India, have signed the convention. Ecuador is the most recent country to ratify the convention, joining Singapore, Fiji, Qatar, Saudi Arabia and Belarus, and bringing the number of countries that have ratified it to six.
The harmonised and simplified enforcement framework under the convention translates to savings in time and legal costs. This is especially important for businesses in times of uncertainty, such as during the current Covid-19 pandemic. The pandemic has brought much disruption to businesses worldwide, upending supply chains, weakening consumer and business confidence, and leading to unfulfilled contractual obligations, inevitable disputes, and more. With the convention, businesses can rely on mediation as a dispute resolution option for their cross-border transactions. More importantly, they can do so with greater certainty and assurance that their mediated outcomes are binding and enforceable.
Hopefully, more countries will soon come on board. With more ratifying parties, the more effective the convention will be in opening the door for swift enforcement across a number of jurisdictions. Ultimately, the convention provides a more stable environment for businesses. It allows them to cultivate long-term relationships, without resorting to litigation. And during this period of uncertainty, it allows businesses to conserve and direct their resources to more pressing needs, such as recovery and restructuring.
