• Brain Booster Articles

MEDIATION- A STEP TOWARDS RESOLVING TRADE DISPUTES

Author: Muskan Pipania, Post graduate, Trinity a College Dublin, Ireland.

Co-author: Prakhyat Gargasya, Associate, Kings & Alliance LLP, New Delhi


Over the past decade, Mediation has gained momentum as a means of International Commercial Dispute Resolution Mechanism. Not only regional models such as the European Mediation Directive, but also international standards like the UNICITRAL Model Law on International Commercial Mediation started facilitating frameworks for a greater use of the process, earlier this decade.


However, the advent of the United Nations Convention on International Settlement Agreements Resulting from Mediation, known as the ‘Singapore Convention on Mediation’ (hereinafter, referred to as the ‘Convention’) has broken new ground by elevating international mediated settlement agreements to a new status that can be recognised and enforced within the framework of private international law[i], thus raising the international profile of the commercial mediation process, giving it increased credibility and visibility as well as the promise of greater regulatory robustness.[ii]


Therefore, since the Convention paves way for settlements reached by mediation to be recognised internationally, it is believed to be an important step towards promoting mediation as an alternative dispute resolution tool for settling cross-border disputes.


As for the Convention, it was officially opened for signature on August 7, 2019, and since then 10 countries have ratified the convention including Singapore, Fiji, Qatar, Belarus, Ecuador, Turkey, Saudi Arabia, Kazakhstan, Georgia and Honduras, whereas, as of September 20, 2022, 55 countries have signed the Convention, India being one of them, including the world’s two largest economies- the United States and China.


The Singapore Convention (the “SCM”)

Since its introduction, the Singapore Convention on Mediation (hereinunder referred to as ‘the Convention’), applies to the international settlement agreements resulting from mediation by providing a harmonised framework by ensuring that an international mediated settlement agreement reached by the parties becomes binding and enforceable under a simplified and streamlined procedure. That is, parties who choose to resolve their dispute amicably through Mediation would not have to use any other alternative dispute resolution solely for the purposes of receiving the same legal enforcement status as an arbitral award.


From the policy perspective, the Convention is believed to promote certainty and stability in the field of International Commercial Mediation since many modern commercial contracts have started incorporating escalation mechanisms, i.e., parties to the contract have started incorporating Mediation, Conciliation[iii] or Negotiation as a pre-condition under the dispute resolution clause with the aim of reaching an amicable result.


Enforceability of the Convention

The Convention can be enforced only on international commercial settlement agreements resulting from mediation as indicated under Article 1 of the Convention. This Article dictates the scope as it states that the mediation settlement agreement must be commercial and be international in character, excluding the disputes arising from transactions by consumers for, firstly personal, family or household purposes and lastly, the settlement agreements that are enforceable as a judgement or arbitral award, as according to this article.

Furthermore, the language of the Convention portrays that a settlement agreement must be concluded “in writing” and signed by the parties and the mediator (Article 4)so as to be useable for subsequent reference”.


Where Article 4 of the convention provides the requirements for reliance on settlement agreement, Article 5 sets out the grounds for refusing relief. Under this article, the party against whom relief is sought needs to prove one of the following conditions:

  1. A party to the settlement agreement was incompetent [Article 5.1 (a)]

  2. The settlement agreement sought to be relied upon is either inoperative and incapable of being performed or null and void [Article 5.1 (b)(i)]

  3. The settlement agreement sought is not final or binding [Article 5.1 (b)(ii)]

  4. The obligations in the settlement agreement have either been performed or are not clear and comprehensible [Article 5.1 (c)]

  5. Granting relief would be either contrary to terms of the settlement agreement [Article 5.1 (d)] or be contrary to Law [Article 5.2]

  6. If there was any serious breach by the Mediator [Article 5.1 (e) and (f)]

Even though, the articles laid down in the convention extensively attempts to address all the future issues that the parties to the mediation might face, there are situations that might arise if the parties to the dispute are not careful while drafting their settlement agreements.


For example, even though Article 5 of the Convention while providing grounds on which an agreement can be refused includes a breach by the Mediation, but in order to challenge the enforceability of the agreement, proof of serious breach against the Mediator needs to be established. But it is highly unclear as to what would constitute as a serious breach. Therefore, this essay is an attempt to understand such possible issues that might occur after a mediated settlement agreement is achieved.


Language

As mentioned in the previous section, an obvious step for ensuring that the mediated settlement is enforced is to make sure that the agreement is in writing and signed by the parties or their authorised signatories. Therefore, with the aim of preventing any future conflict, the parties to the agreement are highly recommended that the agreement clearly states the issue in question and provide that the parties to the contract agree to the terms, that are being settled, and finally they understand that the terms are binding and can be judicially enforced.


For that reason, the language of the settlement should be precise, clear, and certain, incorporating all of the material terms that can be easily interpretated and understood. Moreover, the agreement should also mention any kind of required performance by the parties or compensation either monetary or otherwise, including the governing law and jurisdiction of the settled agreement.

And, in case the settlement is predicated on material representations, such representations shall be incorporated into settlement agreement stating that the reflected representations are the one on which the parties relied.


Additionally, the Convention being international in Character, there might arise a situation when the language of parties is different. Therefore, to avoid any confusion while translation, it is suggested that a certified translation is provided for the parties to sign, after being well read to them. This step would also help in avoiding inconsistencies while interpreting. Thus, the mediated settlement agreement is required to be in more than one language so as to assist the parties


Oral Agreements

The Convention defined “Mediation” as ‘a process whereby the parties attempt to reach an amicable settlement of their dispute with the assistance of a third person or persons lacking the authority to impose a solution upon them.’


Here, putting emphasis on the word ‘amicable’, as compared to Arbitration, Mediation is a process which provides more flexibility to the parties, as they themselves attempts to resolve the dispute or any difference. Thus, many a times, mediation proceedings would tend to end with an oral agreement and a commitment made by one of the parties to another.


However, in lieu of a completed and signed written settlement, an oral agreement might lead to enforcement difficulties. To amend this, the parties should make sure to materialise their settled agreement, duly signed and executed by them or their authorised representative; providing that the settled agreement would be admissible as evidence in any proceedings to enforce its terms.[iv]


What if the parties accept their mistake and apologise?

Due to the amicable nature of the process, history suggests that an apology can occur in a mediation procedure which can have a major impact on proceedings, on the condition that the apology made is perceived as ‘sincere’ by the mediator and the other party. Due to the increased practice of apologising, some domestic jurisdictions, such as, Hong Kong, explicitly recognised and further encourages the use of apologies during mediation process.


In 2017, Hong Kong enacted the ‘Apology Ordinance’, covering all apologies made at any stage between the parties in dispute, with the aim of encouraging apologies being used during mediation proceedings. While, it promotes resolving the disputes in good faith, the ordinance also states when an apology can’t be taken into consideration. The texts read as –

“An apology must not be taken into account while determining fault of liability or any issue in connection with the matter to the prejudice of the person, unless in exceptional circumstances it would be just and equitable to do so.”


Taking apologies into consideration while settling a dispute or a difference is a great example of resolving the issue amicably and in good faith. Apologies portray that a party at fault realise their mistakes with the intention of amending them while maintaining the good relations of the parties.


Keeping this in mind, it is highly suggested that the parties to the agreement be careful while agreeing on the terms during the process of drafting the agreement.


Seat of Mediation?

In addition to the terms talked about in this essay, the parties should also make it a point to settle on the seat of Mediation. Unlike Arbitration, the Singapore Convention has been described as being non-reciprocal, that is, under the Convention, any state party to the Convention can enforce an International Mediated Settlement Agreement irrespective of where it emanates from, as long as, the settlement agreement to is International in nature and comes from a Mediation.


To avoid future inconsistencies, while settling the parties shall beforehand settle on a seat(s) that would have the jurisdiction(s) to either enforce or revoke the agreement.


Conclusion

With the rise in the ‘multi-tiered dispute resolution’, it is evident that use of alternative dispute resolution mechanisms is steadily increasing with the aim of resolving the disputes amicably in good faith and it will continue to increase in the future as this is directly proportional to the increase in international trade and transactions.


Finally, the Singapore Convention will help to reshape perceptions of the commercial mediation process and support a cultural shift.[v] Mediation being an informal process, it provides confidentiality and flexibility to the parties along with it being cost-effective. Therefore, naturally in advent to the Convention, businesses are more likely to invest their time and resources in resolving the disputes amicably, as now, the settled agreements can be accepted and enforced internationally – placing Mediation on the equal footing with Arbitration.


However, the parties are required to be careful while drafting their settlement agreements so as to avoid any inconsistencies which might arise. The parties to the commercial contracts are highly recommended to make sure that the language used in the agreement is clear, concise, and understandable, and acknowledging all the material ancillary documents, used during the proceedings.


While, Mediation is considered to be the future of disputes; the introduction of the Convention was an important step towards making the methods of resolving disputes more flexible in the absence of court proceedings.

[i] Ronan Feehily, 'A Land Imagined' [2022] Law Society Gazette, Ireland. [ii] Ibid. [iii] For the purposes of the Convention, the terms ‘mediation’ and ‘conciliation’ can be taken interchangeable. [iv] Supra Note 1 [v] Supra Note 1