What happens if you are contracting with a party that is based in a different country?
We all know that when we have a dispute with a party in our own country there is no question about which country’s laws will apply in respect of the law of the contract, whose courts will apply when dealing with the supervision of a tribunal and whose courts will issue judgements or enforce decisions or awards reached by tribunals.
But what happens if you are contracting with a party that is based in a different country? The answers to these questions can be very different depending on what the underlying contract actually says. If there are any disputes over these sorts of issues, we have a framework of international laws to help us unravel these problems and provide access to international arbitration and the enforcement of awards (if your contract provides for arbitration) via the 1958 New York Convention, which over 160 countries are now signed up to.
The New York Convention is arguably the most successful international treaty of all time. It provides that Contracting States will recognise written arbitration agreements and, at the request of any party to those agreements, their courts will refer to arbitration any matter brought before them in respect of which there is a valid arbitration agreement. Signatories to the convention agree to recognise foreign arbitral awards as binding and to enforce them when asked to do so.
The costs of participating in international arbitration are substantial. Accordingly, it is not unusual for parties to mediate their disputes but up until now there have been problems with enforcing mediated settlements if the paying party has a change of mind. That is because, unless the mediated settlement agreement is confirmed in an arbitral award or court judgement, parties will first have to obtain an arbitral award or court judgement and then seek to enforce that award in the paying party’s own country. Not a quick, easy or inexpensive task!
The United Nations, recognising these difficulties, has produced the United Nations Convention on International Settlement Agreements resulting from Mediation (the “Singapore Convention”) which was opened up for signature in Singapore (hence its name) on 7 August 2019. Forty six countries signed the Singapore Convention on 7 August 2019 and although the UK and other EU countries have yet to sign up, this only because the EU is currently considering whether it can sign on behalf of all EU member states or whether each member state (including the UK after BREXIT) needs to sign the Singapore Convention.
Why International Mediation? I can do no better than quote directly from the preamble to the Convention which says:
“The Parties to this Convention,
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,
Have agreed as follows….. “
The Singapore Convention will only apply if the agreement is between parties from different countries, or the Parties are from countries that are different from the place of performance or the state with which the subject matter of the agreement is most closely connected.
The Singapore Convention does not apply to consumer transactions for personal, family or household purposes, or disputes relating to family, inheritance or employment law.
The central benefit and obligation placed on member states under the Singapore Convention is that signatories “shall enforce a settlement agreement in accordance with its rules of procedure and under the conditions laid down in the Convention”
With parties increasingly choosing to mediate disputes, the introduction of the Singapore Convention will undoubtedly bring confidence in International Mediation. A universal enforcement mechanism for enforcing mediated settlements is exactly what was needed to push mediation into centre stage on the international scene.
All we need now is for the UK Government to sign the convention or the EU to sign on our behalf and then the UK will be able to access the substantial benefits bestowed by the Singapore Convention on its signatories.
Peter Vinden is a practising Arbitrator, Adjudicator, Mediator and Expert. He is Chief Executive of Gateley Vinden and can be contacted by email at email@example.com.