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The Singapore Convention can change the game

The work has been done to create the architecture necessary for mediation so that parties in disputes can begin to work out a compromise acceptable to all sides.

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PM Lee and Law minister S. Shanmugam at the opening of the Singapore Convention.

The UN Convention on International Settlement Agreements Resulting from Mediation, also known as the Singapore Convention, was signed on Wednesday in Singapore by a host of countries, including the United States, China and India. It comes at a pivotal time when the world's powerhouses threaten to take the wheels off international trade and investment.

This week, broadsheets and Web sites have been filled with sweeping enthusiasm for the Singapore Convention. Most point to the cross-border enforcement of mediated settlements facilitated by the Singapore Convention as being a game changer.

But having witnessed enforcement exercises over the years, it appears that the Convention holds its greatest potential not for its facilitation of enforcement at the end of a dispute resolution process, but at the start, by creating the environment for mediation to flourish.

COURTS, ARBITRATION AND MEDIATION

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The Singapore Convention turns the spotlight, and rightly so, on the lesser-known mechanism of mediation to resolve cross-border disputes. To give the choices context, alternative dispute resolution mechanisms came to prominence with the surge of international investments across the globe. With concerns over the partiality of certain national courts, arbitration became the mechanism of choice at the turn of the millennium to deal with international disputes. Unlike the laggard nature of some courts in the region at the time, arbitration offered the promise of being quicker, cheaper and nimbler.

Its hallmark was its ability to enforce an arbitration award across more than 100 signatory states that were a part of another convention, known as the New York Convention in shorthand.

Mediation as the cousin of the dispute resolution family has always been around, but in our common law system of adversarial resolutions, was regularly consigned to the background. Nonetheless, mediation has been quietly doing its job in the commercial sector, either independently, within or alongside the arbitration mechanism.

Why does mediation hold such great potential? The answer is quite simple: The experience and outcomes of mediated exercises provide a compromise that is consistent with the expectations of both parties. While not all disputes are suitable for mediation, a good number will benefit from its key differences from arbitration. Having sat in courtrooms, arbitration rooms and mediation rooms over the past decade, let me share my observations.

Mediation addresses the human psychology behind most disputes. Unlike arbitrators, who are concerned with establishing facts to support legal cases, mediators - as facilitators of negotiation - do the most important of services. They listen. It is the cathartic process of voicing your grievance to a neutral third party that sets the stage for resolution and closure.

Arbitrations, however, offer a completely different experience to the user; a cross-examination may feel more like a crucifixion than a catharsis. This is why a good number of arbitration cases settle just before or on the first day of the hearing. Nobody likes being grilled by a lawyer.

Another fundamental distinction is that mediation is voluntary. There is generally no arm twisting or compulsion to attend. Parties will attend when they feel ready - the difficulty is that it may not always happen at the same time.

The third distinction is the role of a mediator. Unlike an arbitrator, a mediator does not decide anything. His or her job is a highly-skilled one, to guide and ultimately let both parties come to an agreement in line with their expectations. It is their agreement. That is the winning formula for mediation - the outcome can only be what the users agree.

If these three distinctions are not enough to make mediation attractive, consider the time and costs savings. What would have taken a year or two in arbitration and cost hundreds of thousands of dollars in legal fees, could be done in a matter of days or a week and at a fraction of the costs.

Yes, perhaps arbitration lawyers like myself will be involved in fewer arbitration hearings, but we get to engage in the highest form of our service in mediation - taking away pain from clients.

That said, arbitration and mediation are not exclusive, and my experience has shown that there may be a role for both mechanisms in a single dispute, sometimes to get to a point where both parties are ready to mediate. To that end, the Singapore Convention aims to put mediation on better footing with other dispute resolution mechanisms by addressing head-on, the biggest challenge in any dispute resolution mechanism - enforcement of the outcome.

To take a step back, an arbitration award or a mediated settlement agreement is only as good as the paper it is written on - unless it can be enforced. To enforce any document, be it an arbitration award or settlement, would invariably entail a local court processing this document into methods of enforcement available under local laws such as seizing and selling assets.

Therefore, while arbitration and mediation are two very different creatures, experiences in the region enforcing arbitration awards may be useful in identifying real practical problems that parties looking to rely on the Singapore Convention may stumble upon.

Both arbitration and mediation mechanisms now have a convention underpinning them, but experiences in the arbitration world will show that being a convention signatory may not be sufficient to get effective relief. Around the turn of the millennium and with the boom of arbitration in Asia, provincial courts in the region struggled with the concept of arbitration and the New York Convention, despite being signatories to it.

Some judges found it astounding to be told that a foreign arbitrator had decided the case and a judge could not overrule an arbitration award he didn't agree with. Others were just altogether unfamiliar with the concept of arbitration. A combination of nationalist rhetoric and fear of usurpation of a court's sovereignty led to the many early struggles of enforcing arbitration awards in this region.

Arbitration has since come a long way, but it is still not uncommon to hear of challenges to enforcement on nebulous grounds of public policy, particularly when it comes to the mining and exploration of a country's resources such as oil and minerals.

Many countries in the region are signatories to the New York Convention. Yet enforcement can sometimes hit a roadblock under the guise of public policy. This ground for refusal of enforcement under the New York Convention unsurprisingly finds itself in the Singapore Convention as well. However, the challenges we saw in enforcing arbitration awards is unlikely to translate to the mediation world.

The reason arbitration awards have at times proven difficult to convert to dollars and cents boils down to the psychology of the unsuccessful party. Some simply never intended to honour an arbitrator's findings, some feel that their views were not fully considered, or others simply did not agree with the final outcome.

These dynamics, as I have highlighted above, actually work in the opposite direction in a mediation process. Parties invest their time and emotion into attending a mediation and the mediated outcome will only represent a compromise that they willingly accept.

In this context, the risks of a party reneging on a mediated settlement agreement such that enforcement is needed may not be as acute as with a disgruntled participant in arbitration. This is simply because a mediated settlement, unlike an arbitration award, should generally represent the expectations of both parties. This is where the Singapore Convention sets itself apart.

WHAT IS NEEDED FROM NOW

The Convention sets the right tone for the future of dispute resolution, particularly in Asian culture. While it is hoped that enforcement of a mediated settlement may not be necessary given the different dynamics involved in a mediation, signatory countries should proactively take steps to understand their Convention obligations and implement robust local legislation. The experiences in the arbitration world would provide valuable lessons to ensure the effectiveness of the Convention.

There is a fair amount for signatory governments to do in the months ahead. The real value, however, has already been delivered by Singapore this week - by its having created the architecture needed for parties to even walk into a mediation room in the first place.

  • The writer is a specialist arbitration lawyer and managing director of Blackstone & Gold LLC, an energy and commodities law firm in Singapore