A boost to mediation, and Singapore as a premier dispute resolution destination

THE UN Convention on International Settlement Agreements Resulting from Mediation - otherwise known as the Singapore Convention - will be open for signatures on Aug 7, 2019, in Singapore. The city-state is expected to be among the first signatories of the Convention, signalling its commitment to cross-border investments and cementing its position on the world map for international dispute resolution.

Better enforceability of the mediated agreement

The Singapore Convention will provide an internationally uniform framework to recognise and enforce mediated settlement agreements, similar to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) for international arbitration awards. By providing a stronger enforcement mechanism for mediated settlement agreements, the Singapore Convention will elevate the importance and effectiveness of mediation globally and provide another attractive option for businesses in resolving international commercial disputes.

According to a 2019 study by Ipsos and Singapore Academy of Law, enforceability is the biggest factor for legal professionals in their choice of dispute resolution options. Without an effective enforcement mechanism, there is no assurance that either party will honour their side of the bargain or satisfy any judgment or award against them. Traditionally, settlement agreements are legally treated as contracts and a party must first sue for breach of contract in order to obtain an enforceable judgment/award. In Singapore, subject to requirements in the Mediation Act, parties can convert their mediated agreement immediately into an enforceable court order.

The New York Convention coupled with decades of jurisprudence has greatly promoted the use of international arbitration worldwide. A large majority of arbitral awards are complied with little need to resort to enforcement measures since the straightforward resort to enforcement is simply there. The New York Convention started with 24 signatories in 1958 and has since garnered 159 parties as of today. With the success of the New York Convention, the reception for the Singapore Convention certainly looks promising. The Singapore Convention will similarly grant a greater level of expectation and efficiency with regards to mediated settlement agreements.

Better for businesses and investments in Asia

With its non-adversarial and relationship-preserving process, mediation could very well be the alternative dispute resolution mechanism of choice for Asia. Considering the enabling legal framework put in place by the Singapore Convention, becoming a party to the Singapore Convention signifies a greater commitment to international trade and uniform best practices. A Singapore Convention signatory would be a good place to start for businesses looking to explore investment and business opportunities overseas.

A major issue for transnational businesses and investments is the unfamiliar and cumbersome cross-border dispute resolution process. The immediate problems include unpaid accounts, missed deadlines, and increased costs from rectification or changes. Unresolved disputes can also lead to the potential loss of profits from the breakdown of business relationships and the diversion of resources away from further business development.

A cumbersome process would involve high legal costs and expenses. An unfamiliar dispute resolution system will also deter businesses and investors from entering the country. If the dispute resolution process can be simplified, streamlined and made uniform across borders, the reduced costs required to resolve disputes would create a robust and more attractive business climate.

The Singapore Convention also complements Singapore's plans to accelerate business and infrastructure development in the region, such as through Enterprise Singapore's initiative Infrastructure Asia. The Asian Development Bank estimates that Asia requires US$1.7 trillion in investment into infrastructure annually. The Belt and Road Initiative involves infrastructure development across 152 countries, with various projects in ports, railways, highways, aviation, power and telecommunications. To promote infrastructure and other projects in Asia, there is a need to put in place a business-friendly legal and regulatory framework for public-private partnerships.

With so many ambitious and promising Asian projects on the horizon, the private sector will definitely have plenty of opportunities to get involved. To those mindful of the past Asian financial crisis, a strong international dispute resolution mechanism can allay the risk-averse and rebuild trust in the system. Ideally this should lead to better private sector funding and usher in a new age of economic development in the region.

Consistently ranked among the least corrupt countries in the Corruption Perceptions Index and the only Asian country within the top 10, Singapore is well poised to service businesses in the Asian region and beyond. Singapore law is well-established, commercially sensitive, has its roots in English law, and will be familiar to any common law practitioner. Singapore's unique position at the crossroads between the East and West, and its proficient dispute resolution institutions, make it the ideal location to base businesses and resolve disputes. The Singapore Convention will further reinforce Singapore as the premier hub for dispute resolution in Asia.