Author: Sabrina LIM Su Ping, SMU X International Mediation Law and Practice Course 2018. This blog has been published with the author’s permission.
Over the years, many jurisdictions have recognised the effectiveness of mediation as a dispute resolution mechanism. However, to make mediation a more attractive alternative mechanism to litigation and arbitration, there needs to be greater certainty that mediation settlement agreements (“MSAs”) will be enforced. To address this enforcement issue, several jurisdictions have turned to arbitration frameworks. Some have implemented an ‘arbitration-mediation-arbitration protocol’ to record MSAs within arbitral awards. Others have legislated for MSAs to be recorded in the form or given the status of arbitral awards.
This blog explores the suitability of using arbitration frameworks to enforce MSAs. It assesses how such arbitral awards are enforced in some jurisdictions and examines the uncertainties that result. The blog then evaluates the effectiveness of enforcing MSAs (recorded or given the status of arbitral awards) through the UN Singapore Convention on Mediation (Singapore Convention or Convention) and concludes with recommendations to ameliorate these uncertainties.
Enforcing MSAs as arbitral awards and its uncertainties
As Edna Sussman noted in The New York Convention Through a Mediation Prism, MSAs recorded as or given the status of arbitral awards may not be recognised in certain jurisdictions. While California, USA and Korea allow for MSAs to be recorded as arbitral awards through an appointed arbitrator or arbitral tribunal, it is uncertain whether such an appointment will be effective due to the definition of an ‘arbitration agreement’. Arbitration agreements stipulate that any dispute arising between the parties will be submitted to arbitration. Generally, this only refers to a present or future dispute. However, if parties to a mediation enter into a MSA covering all matters in dispute, it follows that the dispute has been settled. This then begs the question as to whether the appointment of an arbitrator may be legally recognised and whether such arbitral awards are nonetheless enforceable?
That said, there are ways to avoid such problems from arising. Sussman notes that this obstacle may be circumvented by the parties specifying that the MSA is governed by a jurisdiction that permits the appointment of an arbitrator after the dispute is settled. Nevertheless, this approach to enforcing MSAs is still subject to the uncertainty of whether courts will determine that such arbitral awards have legal effect or are enforceable under the New York Convention which, arguably, has an broader definition of what an enforceable arbitral award entails.
Uncertainties in enforcing arbitral awards through the Singapore Convention
In light of the adoption of the Singapore Convention in December 2018 and its coming opening for signature in August 2019, one may now wonder if this issue of the enforceability of MSAs as arbitral awards is addressed by the Convention?
Article 1(3)(b) of the Singapore Convention states that it does not cover MSAs that are recorded and enforceable as arbitral awards. The aim of the article is to “address the gap that might arise from the non-enforceability of settlement agreements recorded in the form of awards in certain jurisdictions” (A/CN.9/929, para. 25). This article should also mean that, if an arbitral award recording a MSA is not enforceable, the MSA itself may still be enforced under the Convention.
However, new uncertainties arise regarding determining if the MSA recorded as an arbitral award is enforceable as an arbitral award (and not covered by the Singapore Convention) or a MSA (which is covered):
- Should enforceability be determined by the place of arbitration or where enforcement of the MSA is being sought? The Convention leaves the decision to the competent authority and the domestic rules of procedure (A/CN.9/934, para. 24). Some jurisdictions such as Texas, USA give MSAs the “same force and effect” as arbitral award without the arbitration process having to be followed, which might lead to difficulties in enforcement when domestic law calls for the competent authority to refer to the place of arbitration.
- Secondly, the laws governing mediation in certain jurisdictions may be incongruent with the wording of the Convention, causing uncertainty as to whether MSAs are excluded from the Convention. Texan procedural law only contemplates the enforceability of MSAs as arbitral awards, so they do not need to be recorded as arbitral awards. Does this mean that they can be enforced under the Convention, without having to determine their enforceability?
- Lastly, having the competent authority determine enforceability by the place of arbitration may incur additional costs to the mediation if the authority must inquire about the enforceability at the State where the MSA was approved or court proceeding concluded.
In conclusion, the uncertainties as to whether MSAs recorded in the form of arbitral awards are enforceable still remain despite the introduction of the Singapore Convention. They highlight the inappropriateness of using the arbitration framework to enforce MSAs. However, the Convention now ensures enforceability of MSAs that are not otherwise enforceable as arbitral awards. If parties still need to enforce MSAs as arbitral awards, they can choose to enforce their arbitral awards in jurisdictions that have domestic laws that will allow enforcement. If jurisdictions do not, these jurisdictions might want to provide clarity regarding the MSA enforcement means so parties have the option of enforcing MSAs per se or MSAs as arbitral awards.