Update: The Singapore Mediation Convention and Enforcement of Settlement Agreements in India

The Singapore Mediation Convention, formally known as the United Nations Convention on International Settlement Agreements Resulting from Mediation, came into force on 12 September 2020.  The Convention provides a uniform, efficient framework for the recognition and enforcement of mediated settlement agreements that resolve international, commercial disputes – akin to the framework provided by the 1958 New York Convention for arbitral awards.[1]  As of 12 September 2020, the Convention has 53 signatories including the United States, China and India.

The primary goal of the Singapore Mediation Convention is to promote the use of mediation for the resolution of cross-border commercial disputes, as mediation is generally a faster, less expensive form of dispute resolution which is also more likely to preserve on-going commercial relationships.  The need for the Singapore Mediation Convention arose from the lack of a cross-border mechanism for giving legal effect to mediated settlement agreements.  A significant amount of time and energy goes into reaching a mediated settlement, and if the other party fails to perform, the company seeking compliance has little enforcement choices other than commencing litigation or arbitration.[2]

The official press release notes: “[w]ith the Convention in force, businesses seeking enforcement of a mediated settlement agreement across borders can do so by applying directly to the courts of countries that have signed and ratified the treaty, instead of having to enforce the settlement agreement as a contract in accordance with each country’s domestic process.”

For more details on the Singapore Mediation Convention and its application generally please see our previous articles here and here.

Enforcement of mediated or conciliated settlement agreements in India and the impact of the Singapore Mediation Convention

While the Singapore Mediation Convention does not insist upon the use of the word ‘mediation’ in describing how a settlement maybe be concluded (since mediation and conciliation are used interchangeably in several jurisdictions), Indian law distinguishes mediation and conciliation. For instance:

• Section 30 of the Indian Arbitration and Conciliation Act, 1996 (Arbitration Act) empowers an arbitrator to “encourage settlement of the dispute and, with the agreement of the parties, the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement”;
• Section 89 (1) of the Code of Civil Procedure, 1908, provides that where the court finds elements of a settlement acceptable to the parties, the court may refer the parties to arbitration, conciliation, judicial settlement though Lok Adalat or mediation; and
• the Civil Procedure Alternative Dispute Resolution and Mediation Rules, 2006, framed by the Bombay High Court, provide for both ‘settlement by conciliation’ and ‘settlement by mediation’.

Further, Part III of the Arbitration Act, exclusively deals with ‘conciliation’ of disputes arising out of a legal relationship between parties, whether contractual or not.[3] A settlement agreement arrived at through conciliation is akin to an arbitral award on agreed terms and is recognised and enforceable similar to a court decree.[4]

The Arbitration Act does not restrict its scope to conciliations that take place only in India. As such it is arguable that a settlement agreement arrived at through conciliation, though executed offshore, maybe enforceable in India on the same basis, subject to meeting other conditions in Part III.

Accordingly, prior to the entry into force of the Singapore Mediation Convention, while settlement agreements arrived at through ‘conciliation’ were likely enforceable in India in accordance with Part III of the Arbitration Act, agreements arrived at through mediation could only be enforced as contracts.  This legal vacuum has now been addressed with India’s ratification of the Singapore Mediation Convention which provides for the enforcement of settlement agreements arrived through mediation.

India is expected to roll out appropriate domestic legislation in pursuance of its ratification of the Singapore Mediation Convention shortly. News reports state that the Supreme Court of India has established a panel to firm up draft legislation (an Indian Mediation Act) to give legal sanctity to disputes settled through mediation.

Concluding remarks

The Government of India has been proactively taking steps to improve ease of doing business in India. Improvement in the ability to resolve disputes is imperative for the ease of doing business and signing the Singapore Mediation Convention assures foreign investors of India’s commitment to international practice on alternative dispute resolution. ‘An Indian Mediation Act’ as suggested by the Supreme Court of India is a promising proposition. Such legislation would give mediation - clarity, credibility, recognition and legitimacy. The authors will report further developments on the expected legislation in due course.

Additionally, the Singapore Mediation Convention is of particular outbound significance for corporate India as Singapore functions as a gateway for Indian companies expanding their trade and investment into the ASEAN region. In a recent interview, Singapore’s Law Minister, Mr. K Shanmugam underscored the importance of mediation as an effective form of dispute resolution and specifically noted that the Singapore Convention will enhance Singapore’s value proposition to Indian companies and lawyers.

Please contact the authors or your DLA Piper relationship lawyers should you have any questions concerning these requirements and their implications.