In international arbitration, one of the biggest issues is enforcement. This is not surprising, because when a dispute involves different jurisdictions things can get very messy very fast.
Obtaining an arbitration award is one thing, but if this award cannot be enforced effectively the whole ordeal may have been for nothing. One of the main characteristics that makes international arbitration so attractive is that it provides a neutral forum for parties from different states, minimising the risk of national bias.
Enforcement of an arbitration award however requires the cooperation of national courts, this is governed by the framework of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention), to which 154 of the 193 United Nations member states are parties.
The New York Convention covers a wide range of states and requires domestic courts of contracting states to give effect to private agreements to arbitrate and to recognise and enforce arbitration awards. Other states, such as Taiwan - which are not party to the New York Convention generally enforce arbitral awards in line with the Convention. Such a legal instrument is essential in building trust in a system that operates across borders, but with mediation things are a little less clear.
A New York Convention on Mediation?
For parties to have faith in the dispute resolution process there must be sufficient certainty that an award can be enforced. Typically, mediation has been seen as a process which is voluntary and as a consensual mechanism it is also seen as less rigid but also less regulated than for example, arbitration.
However, there has been much talk about enforcement in relation to mediation in recent years and as mediation gains ground as a commercial dispute resolution mechanism, there has event been a movement to draw up a similar international legal framework for mediation agreements.
The United Nations Commission on International Trade Law (UNCITRAL) Working Group II has been focusing on the settlement of commercial disputes, in particular on the preparation of a legal instrument on the enforcement of international commercial settlement agreements resulting from conciliation/mediation (please note that UNCITRAL uses the term ‘conciliation’ interchangeably with ‘mediation’). During its 47th session, UNCITRAL proposed that a framework for enforcement of mediation agreements could be modelled on the existing New York Convention.
This in itself was quite remarkable as it suggested the growing use of international commercial mediation is already raising demand for increased legal certainty and security in the process. A framework similar to the New York Convention could build credibility and greater clarity for parties looking to use the mediation process at a global level.
Enforceability, enforcement and consistency for mediation
Like in other areas of dispute resolution, ensuring enforceability is the first step. Enforcing an agreement to mediate requires the clause to be structured clearly and succinctly much like other dispute resolution methods - and must include setting out the dispute to be resolved and the mechanism to be used, costs, the selection of third-party neutral, as well as the timeline and the binding nature of the mechanism. [Standard mediation clause language is available here.]
Recent research by Maryam Salehijam from the University of Ghent, in the area of enforceability has indicated a worrying approach by some courts across different jurisdictions. She found that where minor details, for example in relation to the selection process of the neutral, are lacking, there is a risk that a court will find a clause unenforceable - suggesting a resistance towards enforcement. By applying such a high threshold, the courts appear to be going against the intentions of the parties to the agreement.
Despite some reluctant players, the enforcement of agreements to mediate is becoming more common at a global level, both through legislation and national courts.
The UNCITRAL Model Law on International Conciliation and the ICC Mediation Rules set out that effect must be given to an agreement to mediate as a precondition to arbitration or litigation. Some countries, such as Singapore, have a lead in in regulating the enforceability of agreements to mediate. However, there have also been setbacks, with the Dutch Supreme Court rejecting the enforceability of agreements to mediate in 2006, relying instead on the voluntary nature of mediation.
Although mediation is becoming a more viable dispute resolution tool, it is worth noting that the approach towards enforcement greatly varies from state to state. There is no doubt that mediation and other consensual dispute resolution methods come with a wide range of benefits, but inconsistencies and the lack of an international legal framework may have held many parties back, especially when dealing with international commercial disputes.
Perhaps now is the time for greater guidance on properly enforcing mediation agreements to provide more clarity on ensuring an agreement to mediate is enforceable in practice.