The Singapore Convention cements the Lion City’s reputation as a dispute resolution hub, making mediation easier to enforce globally.

Clients who come to see me about commercial disputes often ask for the same thing: fast resolution. I tell them that there are two tried-and-tested ways to resolve financial claims. First, you can litigate in court and have a judge make a legal ruling on the dispute, in the full gaze of the public. Or you can go to arbitration, and have an arbitrator do the same, behind closed doors.

However, companies (especially Asian ones) traditionally dislike both options. For one thing, whichever route you choose, you lose control of the outcome. For another, whatever the result, the two disputing companies are unlikely to resume a commercial relationship.

Over the years, lawyers have been exploring a third way: mediation. Mediation is a process where the two disputing parties sit in a closed room, with an independent party called a mediator. Unlike the judge or arbitrator, the mediator doesn’t make any rulings. The mediator simply facilitates discussions, using techniques and strategies to bring the two sides closer together. The disputing parties are in charge.

In fact, mediation may be a lawyer-free zone, because the whole point of mediation is to put aside the law and focus on the commercial solutions. It’s not so much a fight as it is a negotiation. It’s a kinder, gentler (and faster and cheaper) way to settle disputes – get everyone in a room, let them vent, rant, talk it out, and then emerge with a new deal.

Feuding companies that manage to thrash out a deal in mediation are quite likely to continue doing business in future. And for Asian companies, sometimes, winning a court case is cold comfort if it also means that they lose a long-term relationship.

Lacking teeth?

Global surveys show that over 80 per cent of cases that undergo mediation are settled on the same day, with many more being settled thereafter. However, in my experience clients have shunned having their disputes resolved through mediation because of the difficulty in cross-border enforcement.

Picture this: a supplier from the fictitious country of Manufacturia has a dispute with a customer from the equally made-up country of Costa Lotta. The customer signed a contract with the supplier, but doesn’t want to pay the supplier in accordance with the contract. They both come to Singapore to mediate (because this is a neutral ground). After a day at the Singapore Mediation Centre, they negotiate a deal. They sign a settlement agreement. Then they return home.

A month later, the folks from Costa Lotta decide that they simply don’t want to honour the settlement agreement. The settlement agreement doesn’t have any legal force in Costa Lotta, or in Manufacturia. Unfortunately, all that the Manufacturians can do is to sue the Costa Lotta over the original contract.

It’s back to square one.

So that’s the main reason clients drag their feet about going to mediation: uncertainty over cross-border enforcement.

A new solution: teeth!

The UN Commission on International Trade Law now has a fix for this problem, with a new international treaty which allows settlement agreements that arise from mediation to be enforced internationally, in any of the countries that ratify the treaty.

As Law and Home Affairs Minister K. Shanmugam puts it, the treaty fills a “missing piece” in the international dispute resolution enforcement framework, which currently includes the New York Convention for arbitration as well as the Hague Convention on Choice of Court Agreements. This treaty will short-cut the legal process involved, so that parties to such settlement agreements will be able to have them recognised in the domestic courts of those countries.

What does this mean, in practical terms?

Let’s go back to our example involving the Manufacturia supplier and the Costa Lotta customer. Let’s assume that the countries of Manufacturia and Costa Lotta sign the new international treaty. Then, the Manufacturia supplier can (under the new treaty) sue the Costa Lotta customer in Costa Lotta (or in fact in any country that has signed the new treaty) to enforce the settlement agreement that they signed in Singapore. It’s cross-border dispute resolution with teeth and truly a historic milestone for dispute resolution.

The official name of the treaty is the “UN Convention on International Settlement Agreements Resulting from Mediation”, alternatively known as the “Singapore Convention on Mediation”. This is the first treaty concluded under the auspices of the UN to be named after our city-state. The Singapore Convention will take its place among the more famous treaties named after other cities, such as the Geneva Conventions (on human rights), the Vienna Convention (on diplomatic relations) and the Paris Agreement (on climate change).

Singapore, one-stop dispute resolution hub

Naming the treaty after Singapore is quite apt. Internationally, countries recognise that Singapore leads the way in promoting this friendlier and kinder way of dispute resolution. For example, we have set up the Singapore International Mediation Centre to facilitate cross-border disputes and the Singapore International Mediation Institute to train and set standards for mediators in the region.

This is on top of Singapore’s growing reputation as a holistic dispute resolution hub, whether the process involves litigation, arbitration or mediation. In a poll commissioned by the Singapore Academy of Law and conducted by research firm Ipsos published in April 2019, 63 per cent of the 606 legal practitioners and in-house counsel engaging in cross-border transactions in Asia picked the Lion City as their preferred venue to resolve disputes. This is 11 percentage points more than in 2015.

The Singapore International Arbitration Centre handles one of the world’s largest administered caseloads, receiving more than 400 cases in 2018, compared to the London Court of International Arbitration’s 317. And earlier this year, Singapore and China inked a deal to establish an international mediation panel here to resolve disputes arising from projects under China’s Belt and Road Initiative.

The signing ceremony for the Singapore Convention will take place here in Singapore on 7 August 2019, just a couple of days before National Day. This is quite a sweet birthday gift from the UN member states for our Bicentennial and goes a long way in recognising this little island’s big voice in calling for international disputes to be settled according to the law.