The Effective Impact of the Singapore Convention on Mediation in India

By: Arun Nachiappan (Symbiosis Law School, Pune)


Introduction

UNCITRAL Working Group II completed talks on a convention and model law on the implementation of settlement agreements made through international commercial conciliation or mediation (Article 3 of the Convention) in February 2018 after three years of negotiations and deliberations in New York and Vienna. The UN General Assembly approved the Singapore Convention for signing on December 20th, 2018, after UNCITRAL finalised the instruments in Autumn 2018.

The intention of creating an international framework for mediation can be seen in the success and consequences of the New York Convention, which has increased the number of arbitrations. Prof. S.I. strongly investigated the effectiveness of an international framework for mediation in the context of Arbitration. The study found that an international convention on the enforcement of settlement agreements resulting from international mediation could expand mediation in their home countries.

The Singapore Convention establishes a framework for enforcement across national borders. Similar to New York Convention, it allows parties to seek enforcement of mediation in any state that has ratified and implemented it. The Singapore Convention may encourage mediation over arbitration or litigation to resolve cross-border commercial issues. An agreement to settle by mediation was not considered a contract until it was included in an arbitral or court decision. Before seeking enforcement of their judgement or decision, the disputing parties must first seek jurisdiction over the contract in question. As a result, mediation was rarely considered before arbitration or court action. The Singapore Convention and Model Law advocates making local laws on breach of contract disputes and settlement agreements more predictable for international businesses.

Analysis

Does the convention resolve the lack of public confidence in mediation in India?

Issues of Enforcement and Setting Aside of Settlements

Unlike other countries, India’s concept of mediation and conciliation is sufficiently distinct. According to Salem Advocate Bar Association v. Union of India,  conciliation is governed by the Arbitration & Conciliation Act,1996, and a third-party conciliator proposes and formulates settlement as per Section 67 and 73, respectively. Mediation, on the other hand, is governed by the Mediation Rules, 2003, wherein the mediator is a mere facilitator.

Even though the Arbitration and Conciliation Act, 1996, stipulates that mediation and conciliation would be handled equally and that it will be enforced as an arbitral award under Part III of the Act, its practical relevance for mediation settlements is still controversial. As recently stated in Anuradha SA Investments LLC & Anr. v. Parsvnath Developers Limited & Ors, Section 73 and Section 74 of the Arbitration and Conciliation Act, 1996, empower the conciliator to draw up binding settlement agreements and consider only such a settlement, an arbitral award. Due to the lack of presence of a conciliator, private mediation settlement agreements (MSAs) are not enforceable as conciliation under the act. For instance, in Shri Ravi Aggarwal v. Shri Anil Jagota, the party sought to enforce MSAs under Sections 30, 73, and 74 of the Arbitration and Conciliation Act, 1996. Still, the court declined, stating that Part III of the Act only applies to agreements reached through conciliation.

In India, the difficulty of executing MSA forces parties to choose conciliation over mediation. Domestic courts may also prohibit such agreements if they have been annulled/set aside at the “seat” of international mediation as per Article V(1)(e) of the New York Convention. The aforementioned reasons are used by domestic courts to invalidate settlement agreements. For instance, in the case of Maximov v. OJSC Novolipetsky Metallurgichesky Kombinat, the English court had set aside a settlement agreement between two parties because it had been thrown out in Russia, the hub of international mediation.              

4.1.2. Resolution under the convention

In such a scenario, it is significant to examine whether the issues of enforceability and setting aside MSAs are duly recognised and resolved under the Singapore Mediation Convention. As far as the enforcement is concerned, the earlier New York Convention that governed the enforcement requires the parties to the dispute resolution to mandatorily have an agreement to mediate and further proceed with the enforcement of MSAs. On the other hand, the Singapore Convention liberalises the process of enforcement as;

  1. Article 3(1) it mandates the contracting states to enforce the International Mediation Settlements Agreements (IMSAs) directly in their respective states.
  2. It provides autonomy to the parties in deciding the enforcement mode as long as the rules enumerated under the convention are satisfied.

Therefore, the dual-track approach followed and mandated by New York Convention is hereby eliminated, so the issue of enforceability of IMSAs is resolved.

Under Article 1 of the convention, it is mentioned explicitly that it delocalises the “seat” of international mediation, allowing parties to determine the method of enforcement, including electronic means of conflict resolution.  Furthermore, in the absence of the concept of “seat”, MSAs might be directly implemented in the country where they are intended to be enforced, excluding; domestic courts from setting them aside under Article V(1)(e) of the New York Convention.

4.1.3. Overall Effectiveness

To understand the overall effectiveness of the convention, it is essential to observe the ratio of a case adjudicated by the Singapore Court of Appeal. It is because the outcome of this case, is going to be the practical reality for the signatory nations that ratify the convention and therefore also explains the potential future of mediation in the Indian scenario.   

As mentioned earlier, the overall efficiency of the Singapore Convention was demonstrated in the Rakna Arakshaka Lanka Ltd (RALL) v. Avant Garde Maritime Services(AGMS), wherein AGMS had initiated arbitration procedures for breach against RALL, over a private-public collaboration, which was subsequently countersued by RALL before the court. However, the matter was subsequently settled amicably and the proceedings were withdrawn in October 2015. Despite that, AGMS filed an objection with the arbitral tribunal and won the award, which RALL contested in this case. The court held that a valid and binding settlement agreement terminates judicial and arbitral processes on the problems it addresses. It was further observed that unless and otherwise, the settlement agreement allows for reopening the case in court or arbitration, parties cannot take further action or make new submissions on the matter before any forum.

With mandatory enforcement and no “seat” of MSAs, only specified grounds such as public policy, fraud, and bad faith can be used to set them aside under the Singapore Convention. The convention’s enforcement would operate as a shield and sword in case of any additional judicial or arbitral actions by virtue of Article 3(2).

Recommendation

Contrary to Article 2.2 of the New York Convention, the provisions of the Singapore Convention do not require domestic courts to enforce written agreements to mediate. The issue is that standards vary across jurisdictions, making enforcement more difficult than enforcing an arbitral award. In certain cases, mediation agreements must be carefully drafted for them to be enforced. For instance, in the UK it has been observed in the case of Ohpen Operations UK Ltd v. Invesco Fund Managers Ltd that mediation agreements are enforceable on the condition that they have been appropriately drafted.

To avoid such a situation, signatory nations should follow the example of India, wherein under Section 12A of The Commercial Courts Act,2015 was passed and upheld by the Bombay High Court, which states that initiation of any suit that does not necessitate immediate relief to be provided, shall not be initiated by the parties unless they have “exhausted the remedy of pre-institution mediation”. Similarly in Singapore, the Singapore Mediation Bill, specifically clause 4(b), states that to enforce mediation agreements, a court application must be made, even though the convention does not require it.

Conclusion

The convention is unquestionably necessary, as it enhances the value of mediation settlements and provides a solid foundation for the resolution of international commercial disputes through mediation. From the above analysis, it can be concluded that the Singapore Convention will significantly increase public confidence in the enforceability of mediated settlements in India, as India had already signed the Convention in 2019 and will ratify it through The Mediation Bill,2021 even though, there are certain discussions in relation to its mandatory pre-litigation mediation. On the other hand, the Supreme Court in the case of Krishna Murthy v. New India Assurance Co. Ltd has stated that a separate legislation in relation to mediation is of utmost importance as “there is a dire need for deciding these cases without delays and within a reasonable period”.  Henceforth, the implementation of the Convention is strongly recommended by the judiciary to reduce the burden on the judiciary and gain confidence amongst the public.    

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