Legally Bound

Jordan ... our industry is generally sceptical of the value of sitting down with outsiders.

Jordan ... our industry is generally sceptical of the value of sitting down with outsiders.

Convention to give impetus to mediation

STUART JORDAN* discusses mediation and the prospects for the newly introduced Singapore Convention on Mediation, which has been ratified by two GCC countries – Saudi Arabia and Qatar.

November 2020

As an industry, we are all fully in favour of mediation – until we are in a dispute. At that point, we are sure that there is nothing to discuss before we get into arbitration or litigation. The other party is fully aware of our strong position and we have heard their poor excuses too many times already. A proposal to mediate now would just be an attempt to slow our path to victory.

This is an extreme representation of a point of view, but our industry is generally sceptical of the value of sitting down with outsiders, in the hope that they can unlock a settlement that has eluded the parties themselves. Apart from anything else, the mediator starts from a long way behind the parties in their knowledge of the dispute, the project, the contracts and maybe construction in general. We’ll resolve our own disputes, thank you, or die trying!

One recent development might boost the take-up of mediation. This is Uncitral’s snappily-titled “United Nations Convention on International Settlement Agreements Resulting from Mediation” (or the Singapore Convention on Mediation) which came into force on September 12, 2020. Any settlement of a dispute is simply a new contract, replacing liabilities under the original contract with new responsibilities to pay or to do something under the settlement. If the promisor then fails to fulfil the settlement terms, the other party has to issue new proceedings to obtain an enforceable order.     

The Singapore Convention aims to effect the automatic recognition and enforcement of mediated settlements in signatory countries. It is effectively a shortcut in which courts in a signatory country can be asked to take the settlement agreement as proof that the underlying dispute has been properly settled on those terms, and to enforce it accordingly. 

At the time of writing, 53 countries have signed up including the US and China. In the Gulf, only Saudi Arabia and Qatar have signed up and both have also ratified it.       

This only applies to international disputes – where the parties (or at least two of them) are based in different countries or they are based in a different country from the principal country in which the settlement agreement (not the original contract) is performed – or different from the country most closely connected with the subject matter of the settlement agreement.

The convention defines 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 (“the mediator”) lacking the authority to impose a solution upon the parties to the dispute”. This definition could describe (for instance) an agreement to settle following a non-binding expert determination or a dispute review board; but recognition under the convention requires evidence (for instance, a copy of the settlement signed by the parties and the mediator, or a statement from the  mediation body) that the third party has shepherded the parties to the conclusion of their dispute.

Recognition and enforcement are not entirely automatic – there are several grounds for resisting enforcement including:

  • The settlement agreement is not binding, is null and void, inoperable or incapable of being performed, is not comprehensible or its obligations have been performed; or
  • There was a serious breach by the mediator of the standards applicable to the mediator or the mediation – or failure to disclose something which raises justifiable doubts about the impartiality of the mediator – in each case such that the party (resisting enforcement) would not have entered into the settlement agreement.  

In my view, both the wide definition of mediation and these extensive grounds to resist enforcement are in recognition of the fact that Uncitral cannot give blanket endorsement of a process that is so variable in its execution. Even if we allow always for professional, good-faith mediators, there are no procedural ground rules and, in many places, no regulation of mediation or mediators.

You will have spotted that the Singapore Convention aims to fulfil a similar role in mediation as the New York Convention (the Convention on the Recognition and Enforcement of Foreign Arbitral Awards) fulfils in arbitration, by providing for mutual recognition and enforcement of arbitral awards. The New York Convention has been very helpful (maybe decisive) in establishing arbitration as the preferred means of disputes resolution in international construction projects, and Uncitral will hope that the Singapore Convention will do the same for mediation.   

I’m not sure this will make much difference. International enforcement is a real problem, but I don’t see it as particularly associated with settlement agreements, still less those which are mediated. A party willing to go use mediation to settle a dispute is not an obvious candidate for then reneging on it and resisting enforcement.

 

* Stuart Jordan is a partner in the Global Projects group of Baker Botts, a leading international law firm. Jordan’s practice focuses on the oil, gas, power, transport, petrochemical, nuclear and construction industries. He has extensive experience in the Middle East, Russia and the UK.  




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