Australia has signed the Singapore Convention on Mediation

What you need to know

• The Australian Government says that it has "reinforced its commitment to mediation as a method of international commercial dispute resolution with the signing of the United Nations Convention on International Settlement Agreements Resulting from Mediation, also known as the Singapore Convention."
• The Singapore Convention establishes a framework for the enforcement of settlement agreements resulting from mediations in international commercial disputes (like the successful structure provided by the "New York Convention" for enforcement of international arbitration awards).
• The Australian Government still needs to ratify the Singapore Convention and implement it as domestic law before it applies in Australia. However, there a number of key issues that Australian businesses can consider now to ensure that they can take advantage of the benefits of the Singapore Convention once it enters into force.
• The main benefits of the Singapore Convention include that it enhances the enforceability of settlement agreements and encourages the use of mediation in international commercial disputes.

What you need to do

• As more countries ratify and implement the Singapore Convention, monitor whether it is potentially applicable to your company's cross-border disputes.
• Discuss with your legal team how the Singapore Convention may affect the drafting of relevant documents such as mediation and settlement agreements.

Australia has signed the Singapore Convention

On 30 September 2021, the Australian Government announced that it had signed the Singapore Convention.

Attorney-General Michaelia Cash said that the signing was a significant milestone for Australia in the development of its international dispute resolution framework and in increasing access to justice in commercial disputes:

"Access to enforceable and effective mediation should reduce the time and cost of dispute resolution, thereby enhancing access to justice for individuals and businesses in Australia."

Minister for Foreign Affairs Marise Payne said that the Singapore Convention will facilitate international trade and promote mediation as an alternative dispute resolution option in international disputes:

"The Singapore Convention ensures that privately mediated settlement agreements are able to be readily recognised by law… Signing the Convention demonstrates Australia’s support for enhanced simplicity, certainty and autonomy for parties in commercial disputes."

What is the Singapore Convention?

The Singapore Convention is a multilateral treaty that establishes a uniform framework for the enforcement of settlement agreements resulting from mediations in international commercial disputes.

55 countries have signed the Singapore Convention since it opened for signature on 7 August 2019, including 7 of Australia's 10 largest trading partners.

How does the Singapore Convention work?

The Singapore Convention requires the authorities of the countries who have signed it to enforce settlement agreements resulting from mediations in international commercial disputes, subject only to a limited number of potential grounds for refusing to do so and country-specific reservations.

For example, in Singapore (where the Singapore Convention has already entered into force as domestic law), a party may apply to the High Court for an order enforcing or invoking a settlement agreement to which the Singapore Convention applies. The settlement agreement may then be relied on as if it is an order or judgment of the High Court.

We outlined the key Articles of the Singapore Convention in our previous update here .

In summary:

1. Article 1 provides the types of mediations and settlement agreements to which the Singapore Convention applies. Importantly, the application of the Singapore Convention is limited to mediations and settlement agreements in international commercial disputes (i.e. where the parties are in different countries, etc). Domestic and non-commercial mediations and settlement agreements are excluded, such settlement agreements approved by a domestic court; arising from transactions engaged in by one of the parties for personal, family or household purposes; and relating to family, inheritance or employment law. Arbitration awards are also excluded.
2. Article 2(3) provides a broad definition of mediation: "a process… whereby the parties attempt to reach 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". As long as the settlement process falls within this definition, the Singapore Convention applies regardless of whether the process of settlement is called a "mediation". Equally, there is no requirement that the mediation be administered by a mediation institution or conducted by an accredited mediator.
3. Article 4(1) provides the formalities that must be fulfilled before relief can be granted in reliance on a settlement agreement under the Singapore Convention. The requirements are: (a) the settlement agreement must be signed by the parties; and (b) there must be evidence that the settlement agreement resulted from a mediation. A range of options are provided to evidence that the settlement agreement resulted from mediation, including that the settlement agreement be signed by the mediator or be accompanied by a statement by a mediation institution.
4. Article 5 provides a limited number of potential grounds for refusing to enforce a settlement agreement under the Singapore Convention. A number of general grounds broadly resemble the grounds for refusing to enforce an arbitration award contained in the New York Convention, including where: a party to the settlement agreement was under incapacity; granting relief would be contrary to public policy; or the subject matter of dispute is not capable of settlement by mediation. Other grounds for refusing to enforce a settlement agreement are more specific, including where: the settlement agreement is null and void, inoperative or incapable of being performed under the law to which it is subject; the settlement agreement is not binding or is not final according to its terms; or the settlement agreement is not clear or comprehensible. Others grounds focus on the conduct of the mediator, including where: there is a serious breach by the mediator of standards applicable to the mediator or the mediation; and there is a failure by the mediator to disclose circumstances relevant to the mediator's impartiality or independence.
5. Article 5(1) also importantly provides that the potential grounds for refusing to enforce a settlement agreement include where to do so would be contrary to the terms of the settlement agreement. This may allow parties to "opt-out" of the Singapore Convention applying to their settlement agreement.
6. Article 8 provides that signatory countries may make "reservations" such that the Singapore Convention: (a) will not apply to government contracts; and/or (b) will apply only to the extent that the parties have agreed for it to apply (i.e. potentially a reservation requiring parties to "opt-in" to the Singapore Convention applying to their settlement agreement).

Why might the Singapore Convention be important to your business?

The Singapore Convention is likely to be important to all Australian businesses resolving international commercial disputes. The main benefits of the Singapore Convention include that it enhances the enforceability of settlement agreements and encourages the use of mediation.

As to the enforceability of settlement agreements, until now one of the challenges in resolving international disputes by mediation (or alternative dispute resolution) was the lack of an efficient and harmonized framework for the cross-border enforcement of settlement agreements. Parties could only previously rely on the ordinary and inconsistent domestic court processes in each jurisdiction to enforce a settlement agreement as if it were a normal contract. Otherwise, if a settlement agreement was supported by a domestic court order or judgment, it would have to be enforced as a foreign order or judgment in another jurisdiction. In this regard, the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (otherwise known as the "Hague Judgments Convention") has received very little international support and has only a few signatories (although Australia is a party to a number of bilateral treaties in relation to the enforcement of foreign judgments).This challenge will be resolved for parties and their counterparts whose countries have signed the Singapore Convention. In practical terms, for them this means that their settlement agreements may be more readily enforced across the world, thereby improving the prospects of enforcement, expediting it and reducing the associated legal costs.

As to encouraging the use of mediation in international commercial disputes, this will flow from the enhanced enforceability of settlement agreements. A survey of in-house counsel, senior corporate managers, and others by the International Mediation Institute found that over 93 per cent of respondents would be more likely to mediate a dispute with a party from another country if that country had ratified a convention on the enforcement of mediated settlement agreements. Mediation and other alternative dispute resolution methods will almost always provide parties with an opportunity to settle their commercial disputes more efficiently and effectively than international arbitration or litigation, and engaging in mediation or alternative dispute resolution may now become even more attractive if the Singapore Convention results in the enforcement of settlement agreements being more assured.

What now?

The Singapore Convention entered into force internationally on 12 September 2020. As more countries ratify and implement the Singapore Convention, it will become increasingly relevant for Australian business resolving international disputes.

The Australian Government still needs to ratify the Singapore Convention and implement it as domestic law before it applies in Australia. No timetable has been provided for this to occur, but the Australian Government says that it has already begun "work on implementing the Covention in Australia."  It remains to be seen whether the Australian Government will make a reservation in accordance with Article 8 such that the Singapore Convention will apply only to the extent that the parties have agreed for it to apply.

In the meantime , there are a number of key issues that Australian businesses can consider to ensure that they can take advantage of the benefits of the Singapore Convention once it enters into force in Australia, or to avoid it applying to their settlement agreements. These broadly relate to the drafting of dispute resolution clauses, and mediation and settlement agreements, and other practical issues arising from the Articles of the Singapore Convention.

It may be important for Australian businesses to consider these issues now because any dispute resolution clauses that are currently being negotiated and drafted may ultimately be in operation and subject to the Singapore Convention once it enters in to force. Similarly, early consideration will mean that Australian businesses can appropriately and quickly incorporate the necessary amendments into any mediation and settlement agreements which are entered into once the Singapore Convention enters into force.

Key considerations

First, Australian businesses should consider in any dispute resolution clauses that are being drafted now whether they might be minded to "opt-in" (in case Australia adopts the "opt-in" reservation) or "opt-out" of the Singapore Convention applying to their settlement agreements once it enters into force. When deciding whether to "opt-in" or "opt-out" of the Singapore Convention applying, Australian businesses should consider the place of business of the other party, where the other party's assets are (including whether they are in a country that has signed the Singapore Convention), and the time and costs associated with enforcing the settlement agreement through the existing domestic court processes. Australian businesses might also be minded to "opt-out" of the Singapore Convention applying to their settlement agreements if, for example, it would only be for the benefit of their counterpart because they are not from a country that has signed the Singapore Convention (and so the Australian business could not rely on the Singapore Convention to enforce any settlement agreement).

Secondly, when drafting any relevant mediation agreement to which the Singapore Convention may apply, care should be taken to ensure that the resulting settlement agreement will not be subject to any of the limited grounds for refusing enforcement. For example, it may be appropriate to identify any standards applicable to the mediator in the mediation agreement and include detailed terms of reference setting out the expectations for the mediator/mediation.

Thirdly, if an Australian business decides to "opt-in" to the Singapore Convention applying to its settlement agreements, then it should ensure that all of the formalities required by the Singapore Convention are complied with when entering into its settlement agreements. These include that the settlement agreements must be signed by the parties and that there must be evidence that the settlement agreements resulted from a mediation. The terms of any settlement agreement should also be final and stated clearly, precisely and comprehensively.

Finally, Australian business should consider training in relation to the operation of the Singapore Convention or mediation and alternative dispute resolution more generally. The Singapore Convention gives rise to a number of issues that Australian businesses now need to consider when resolving their disputes by mediation and it is important that businesses understand those issues once the Singapore Convention enters into force.

Authors: Georgia Quick, Partner and Luke Carbon, Senior Associate.