Singapore Convention on Mediation- Is it a Win-Win for India?- September 2019, B.C. Thiruvengadam, Advocate, International Arbitrator and Mediator
On August 6, 2019, Singapore had a festive look with politicians, diplomats, judges, lawyers and mediators from all over the world converged to witness the signing ceremony of the Convention on International Settlement Agreements Resulting from Mediation. This author had the privileged of being invited by the United Nations Commission on International Trade Law (UNCITRAL) to witness the ceremony and other related events. The Singapore Convention deals with enforcement of settlement arrived out of cross border mediation in the event of a breach of the terms of settlement by a party to the settlement agreement who resides in a foreign country.
Cross-Border Mediation
For the benefit of those who are not aware as to what mediation is – structured mediation is a voluntary and confidential conflict resolution process between two or more parties, with the help of a neutral called mediator, who is independent by not being interested directly or indirectly with the parties at conflict or not being interested in the subject matter of the conflict. He/she acts as a facilitator, remains non-evaluative, refrains from imposing personal views and helps the parties arrive to arrive at a mutually agreeable settlement. When the parties to mediation reside or have their place of business in different countries, the mediation is said to be a cross border mediation and the settlement agreement is called a Cross-border Settlement.
International Conventions
Before proceeding further, let me also share an idea as to what international conventions are.
They are treaties or agreements between countries to have uniform law among them. The treaties are signed either of private international law or public international law. Treaties can be either general or specific in nature. Treaties and Conventions are interchangeable terms. The United Nations constituted UNCITRAL to promote international trade and commerce and iron out differences in law between member nations. Treaties between member nations were necessary to enforce a decree obtained in a foreign country concerning a cross-border dispute by a person of one state against a person of another state. Similarly, uniform law was required to enforce Awards passed by an Arbitration Tribunal concerning a cross border commercial dispute.
Article 38(1)(a) of the International Court of Justice defines conventions as follows:
“International conventions, whether general or particular, establishing rules expressly recognized by the contesting state”
The International Conventions are treated to be directly the source of International Law. Pacta sunt servanda Meaning: “The agreement must survive”. Every signatory state to a convention is bound to abide by the terms and conditions of the treaty and Is expected to adopt the treaty terms as law. However, treaties should not be in violation of general principles of international law, should not contradict the existing international law and should receive the support of the maximum number of nations, failing which it cannot become a source of International Law. Conventions between two states are called bilateral treaties; conventions between a small number of states (but more than two) are called plurilateral treaties and conventions between a large number of states are called multilateral treaties
As this article pertains to the Singapore Convention concerning private parties, it is termed as a Private International Law. Private International Law exists to have uniform international law to enforce a foreign decree in a State; uniform international law to enforce foreign arbitral awards in a State and now, uniform international law to enforce settlement reached in cross border mediation in a State. As the Singapore Convention addresses enforcement of cross border settlement agreement in a foreign country. It is also essential to understand the following information about foreign judgments, foreign courts, and foreign decrees.
Foreign Judgment, Court and Decree
‘Foreign judgment’ is defined under section 2 (6) of the Civil Procedure Code (CPC) as
“A judgment of a foreign court”.
A foreign court is defined under section 2(5) of CPC, means
“a court situated outside India and not established or continued by the authority of the Central Government”.
A foreign decree is defined in Explanation II to section 44A of the CPC as,
“Decree with reference to a superior court means any decree or judgment of such court under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty, but shall in no case include an arbitral award, even if such an award is enforceable as a decree or judgment”.
When and how can a foreign judgment/ decree be enforced in India?
Even though there exists the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters 1971, not many countries including are parties to this treaty. India has entered into bilateral treaties with several countries.
A foreign judgment decree should be conclusive as to any matter adjudicated by it. The test for conclusiveness is laid down in section 13 of the CPC.
Foreign judgment shall be conclusive unless:
- It has not been pronounced by a court of competent jurisdiction.
- It has not been given on the merits of the case.
- It appears, on the face of the proceedings, to be founded on an incorrect view of international law or a refusal to recognize the law of India in cases in which such law is applicable;
- The proceedings in which the judgment was obtained are opposed to natural justice;
- It has been obtained by fraud;
- It sustains a claim founded on a breach of any law in force in India.
New York Convention
As said earlier, in order to have a uniform law among member nations for cross-border arbitral awards. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention,
- Adopted by the United Nations on 10 June 1958 and came into force on 7 June 1959.
- The Convention requires courts of contracting states to give effect to private agreements to arbitrate and to recognize and enforce and enforce arbitration awards made in other contracting states.
- It applies to arbitrations that are not considered as domestic awards in the state where recognition and enforcement is sought.
- Arbitration laws based on the UNCITRAL Model Law on International Commercial Arbitration.
- 160 Countries are signatories to it – India is a signatory
- India’s Arbitration and Conciliation Act 1996 is based on UNCITRAL model law.
Hague Convention 2019
As the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, 1971 had a very insipid response a new treaty was ushered in, and was Signed on 2 July 2019. India is not a signatory to this treaty either. This treaty is called the 2019 Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters. Its objectives are
- To reduce transactional & litigation costs in cross-border dealings
- To promote effective access to justice for all.
- To facilitate rule-based multilateral trade and investment.
What is the Singapore Convention?
This history of the Singapore Convention dates back to the late 1970s; UNCITRAL after several years of working sessions adopted on 23 July 1980, the UNCITRAL Conciliation Rules provide a comprehensive set of procedural rules upon which parties may agree for the conduct of conciliation proceedings arising out of their commercial relationship. The Rules cover all aspects of the conciliation process, providing a model conciliation clause, defining when conciliation is deemed to have commenced and terminated and addressing procedural aspects relating to the appointment and role of conciliators and the general conduct of proceedings. The Rules also address issues such as confidentiality, admissibility of evidence in other proceedings and limits to the right of parties to undertake judicial or arbitral proceedings whilst the conciliation is in progress.[1] It does sound similar to the modern mediation concept. Part III of the Indian Arbitration and Conciliation Act 1996 has been structured as an alternative dispute mechanism. The UNCTRAL Model Law 1980 on Conciliation was model law was replaced by the model law on conciliation of 2002. The difference between the 1980 law and 2002, (a) there was no reference to the word mediation in the earlier one and latter equates conciliation and mediation and (b) the 1980 law allows the conciliator to suggest a proposal for settlement but the 2002 law prohibits the any proposal from the conciliator. Even though the 2002 law equates conciliation and mediation, the term mediation became more popular in usage. Mediation was being widely used in many parts of the world. Singapore introduced mediation in the mid 1990s and ever since then it gained the favour of the courts and the government. Singapore being an international city became an international hub for arbitration in the Eastern part of the globe. Singapore saw an opportunity to promote international mediation and in November 2014 established Singapore International Mediation Centre. Singapore spearheaded the efforts to have the Mediation Convention in place. In December 2018, after several rounds of meeting by the working group, UN General Assembly approved the draft convention. As stated earlier, on August 6, 2019 the Convention was signed by 46 countries, including India.
Brief Analysis of the Singapore Convention.
Preamble
- Recognizing the value for international trade of mediation as a method for settling commercial disputes in which the parties in dispute request a third person or persons to assist them in their attempt to settle the dispute amicably,
- Noting that mediation is increasingly used in international and domestic commercial practice as an alternative to litigation,
- Considering that the use of mediation results in significant benefits, such as reducing the instances where a dispute leads to the termination of a commercial relationship, facilitating the administration of international transactions by commercial parties and producing savings in the administration of justice by States,
- Convinced that the establishment of a framework for international settlement agreements resulting from mediation that is acceptable to States with different legal, social and economic systems would contribute to the development of harmonious international economic relations,
Article 1 Scope
This Convention applies to an agreement resulting from mediation and concluded in writing by parties to resolve a commercial dispute (“settlement agreement”) which, at the time of its conclusion, is international in that:
- At least two parties to the settlement agreement have their places of business in different States; or
- The State in which the parties to the settlement agreement have their places of business is different from either
(a) The State in which a substantial part of the obligations under the settlement agreement is performed; or
(b) The State with which the subject matter of the settlement agreement is most closely connected.
The preamble does recognise the spread of Mediation around the world especially in the commercial world and intends to cover commercial disputes. However, the exclusion of certain types of disputes is disappointing.
Articles 2 and 3 Exclusions
This Convention does not apply to
(a) Settlement Agreements if
(i) one of the parties is a consumer for personal, family or household purposes;
(ii) Relating to family, inheritance or employment law.
(b) That have been approved by a court or concluded in the course of proceedings before a court and are enforceable as a judgment in the State of that court;
( c) Settlement agreements that have been recorded and are enforceable as an arbitral award.
The above article, in the Indian context, misses out on many opportunities to resolve cross border family business enterprises disputes. The Real Estate sector in India is controlled by Indian families. There are millions of migrant Indians settled abroad, either working for someone or owning a business. This express exclusion of family disputes is a major setback for mediation. Moreover, in these days of e-commerce personal cross border transactions occur involving individuals. In the event of a dispute, mediation would have been the appropriate option for the resolution of such disputes.
In India, court-annexed mediations are drawn as a decree. Private mediations settlements are enforceable as a ‘Consent Award’ under the Arbitration and Conciliation Act 1996 and are deemed to be decreed. Hence a cross border mediation in India cannot be enforced as it is deemed to be an award. The above anomalies need to be rectified.
Further, the Convention has not taken into consideration hybrid ADR process like Med-Arb, Arb-Med, Med-Arb-Med, Arb-Med=Arb etc.
Definition of Mediation, in my opinion, could have been better. According to the Convention:
Mediation” means a process, irrespective of the expression used or the basis upon which the process is carried out, whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person or persons (“the mediator”) lacking the authority to impose a solution upon the parties to the dispute.
The qualification of a mediator is missing. A mediator has to be trained and accredited and needs to be independent and neutral.
Articles 2 (2), and 4 indicate the Convention recognises digital communication and there is tremendous scope for the development of online mediation. Expecting the mediator to authenticate the settlement agreement may lead to the mediator being dragged into litigation by unscrupulous parties who may challenge the settlement.
ARTICLE 2 (2)
- A settlement agreement is “in writing” if its content is recorded in any form.
- The requirement that a settlement agreement be in writing is met by an electronic communication
- If the information contained in the electronic communication is accessible so as to be useable for subsequent reference.
- Article 4. Requirements for reliance on settlement agreements
- 1. A party relying on a settlement agreement under this Convention shall supply to the competent authority of the Party to the Convention where relief is sought:
(a) The settlement agreement signed by the parties;
b) Evidence that the settlement agreement resulted from mediation, such as:
(i) The mediator’s signature on the settlement agreement.
(ii) A document signed by the mediator indicating that the mediation was carried out;
(iii) An attestation by the institution that administered the mediation; or
(iv) In the absence of (i), (ii) or (iii), any other evidence acceptable to the competent authority.
The Requirement of Signatures will be met if:
(a) A method is used to identify the parties or the mediator and to indicate the parties’ or mediator’s intention in respect of the information contained in the electronic communication; and
(b) The method used is either:
(i) As reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in the light of all the circumstances, including any relevant agreement; or
(ii) Proven in fact to have fulfilled the functions described in subparagraph (a) above, by itself or together with further evidence.
Another area of concern is that the Competent Authority (Court)can refuse enforcement as detailed in Article 5.
Article 5 Grounds for refusing to grant relief
1. The competent authority of the Party to the Convention where relief is sought under article 4 may refuse to grant relief at the request of the party against whom the relief is sought only if that party furnishes to the competent authority proof that:
(a) A party to the settlement agreement was under some incapacity;
(b) The settlement agreement sought to be relied upon:
(i) Is null and void, inoperative or incapable of being performed under the law to which the parties have validly subjected it or, failing any indication thereon, under the law deemed applicable by the competent authority of the Party to the Convention where relief is sought under article 4;
(ii)Is not binding, or is not final, according to its terms; or
(iii)Has been subsequently modified;
(c) The obligations in the settlement agreement:
(i) Have been performed; or
(ii) Are not clear or comprehensible;
- Granting relief would be contrary to the terms of the settlement agreement.
- There was a serious breach by the mediator of standards applicable to the mediator or the mediation without which breach that party would not have entered into the settlement agreement; or
- There was a failure by the mediator to disclose to the parties circumstances that raise justifiable doubts as to the mediator’s impartiality or independence and such failure to disclose had a material impact or undue influence on a party without which failure that party would not have entered into the settlement agreement.
2.The competent authority of the Party to the Convention where relief is sought under Article 4 may also refuse to grant relief if it finds that:
(a) Granting relief would be contrary to the public policy of that Party; or
(b) The subject matter of the dispute is not capable of settlement by mediation under the law of that Party
From the above, it is seen that the Competent Authority has not suo-moto power to reject a request for enforcement and such a rejection will be considered only at the behest of a party. The concern is that collusive and fraudulent settlement agreement may be enforced which can encourage money laundering of various kinds.
Allegations of serious breach of standards applicable to the mediator is a grey area, and the convention is silent on the standards. As stated supra, the convention does not talk about the universal standard of mediation training, qualification and ethics. In the absence of immunity, a foreign mediator faces the risk of either being summoned to a court of a different country or face criminal prosecution or even damages. This will act as a deterrent to mediators to accept cross border mediation. The convention should address these issues and grant immunity and protection to mediators.
To summarise, the Convention is a great step to promote mediation, however, Cross-border mediation is not a low-hanging fruit. However, this may change in the near future due to delays in litigation and arbitration continuing to be a white elephant. The positive are many to mention a few.
The positives are many:
- Provide Cross border mediation
- Less risk of litigation
- Cost of ADR will be reasonably low
- Expeditious disposal of disputes
- Not-for-profit Institutional Mediation will be encouraged
- Co-mediation will be on the rise with Mediators drawn from International Panel
- Seat of Mediation can be anywhere in the world
- Increased Co-operation between various ADR Centres around the world.
- Mutual referrals to Mediators in international panes
- Uniform standards in training, ethics and rules.
- Opportunity for Lawyers and Enforcement of Settlements can be challenged
The Government of India needs to examine the following concerns before the Convention is ratified.
- Mediation is not clearly defined
- Ousts family business and e-commerce B to C disputes
- Conflict with settlement under section 73 of the Arbitration and Conciliation Act 1996 and Sec 89 CPC Settlement
- Hybrid ADR like ARB-MED, MED-ARB ignored
- Mediator’s roles not clearly defined
- Mediator’s immunity – does not exist
- Confidentiality not discussed
- Collusive settlement agreement between parties results in collusive enforcement proceedings
- Illegal /unlawful acts may get blessed by collusive settlement.
- Non-collusive settlement enforcement proceedings can be challenged in courts
- Arb-Med settlements do not fall within the scope
- Cross border consumer mediation not enforceable
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[1]https://uncitral.un.org/en/texts/mediation/contractualtexts/conciliation