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Does Mediation need a version of the New York Convention?

by Luke Lofthouse on 13 Apr 2017

international mediated settlement agreements iMSAs enforcement

Mediation is inherently informal, flexible and extra-judicial. Does it require an enforcement convention?

Commercial mediation in 2017 might reasonably be characterised as a common law and domestic phenomenon. Parties from many countries have benefited from mediation, but tend only to do so when litigating in foreign or international courts. Greater use of mediation would undoubtedly address widespread concerns over cost and time in international arbitration, so what is holding the process back?

For some, the issue is enforcement. International mediated settlement agreements (known as "iMSAs") are agreements reached between parties, through mediation, that have a cross-border element. Issues of enforcement arise, normally, when a party located in a jurisdiction other than the host state (where the mediation is settled) wishes to enforce the settlement agreement in said foreign state. 

Currently, parties seeking enforcement as described above (i.e. in a cross-border manner) have a number of options should problems present following a mediated settlement agreement (MSA).

Current enforcement position

The current position in respect of enforcing mediation agreements is a checkerboard of different legal modalities. The EU - via the 2008 Mediation Directive - grants mediated settlement agreements cross-recognition between Member States. Elsewhere, no such mechanisms exist, and parties must fall back on private international law principles. Neither is as comprehensive as ubiquitous or attractive as the New York Convention is for arbitration.

Private international law

Private international law comprises a framework for ensuring consistency across jurisdictions that seeks to reflect the contractual agreements between parties. Invoking these principles is nevertheless expensive and unpredictable. Typically parties must go through a court-based, litigious process that invariably becomes technical and protracted.

Hybrid alternative dispute resolution

Alternatively, parties have been known to employ hybrid dispute resolution processes (arb-med-arb, for example) to exploit the enforcement mechanism in the New York Convention (NYC) for the purposes of an MSA dispute. It is well established that during the course of international arbitration disputing parties might resort to mediation (arb-med) to ‘beat’ the arbitration by achieving their own consensual settlement. In arb-med-arb the parties commence an arbitration with the intention of converting it into a mediation soon after its commencement. If the mediation produces an MSA the arbitrator converts it into a consent award and it will thus, prima facie, be enforceable under the NYC.

It remains to be seen if entering into an arbitration for the sole purpose of obtaining an enforceable iMSA, almost as a legal fiction, would attract the benefits of enforcement under the NYC. However, where both parties fully intend at the outset to submit to the arbitration and then come to a settlement later, it is, at the very least, a way of ensuring cross-border enforcement of an MSA.

Existing enforcement mechanisms

Finally, it is pertinent to consider existing enforcement mechanisms, through which iMSAs will acquire broader recognition over and above the principles of private international law. Naturally this is location-specific, but a good example is the EU’s Mediation Directive. The Directive will apply when at least one of the parties is domiciled - or habitually resident - in a Member State different to that of the other party when the parties agreed to use mediation. Moreover, the Directive obliges Member States to set up a mechanism by which agreements resulting from mediation can be rendered enforceable if both parties request.

Under English law prior to the Directive’s implementation, an MSA was only enforceable as a contract, so parties needed to go to court. For cross-EU disputes the Directive has improved things, especially in the realm of enforcement. However, it is of little help for disputes that have an extra-EU element.  

As it stands, in 2015 UNCITRAL resolved that its Working Group II would report in future sessions on the feasibility of an instrument (convention) for the cross-border enforcement of IMSAs. To date (its 66th session was between 6-10 February 2017), the Working Group has put forward a draft convention and has resolved to develop a model law in parallel. The idea is that every state can select the best approach for its needs.

Arguments against a new convention for iMSA enforcement

While a convention for mediated settlements is attractive on a number of levels, there are policy and ideological arguments against such a move. 

Inhibiting settlement creativity

One of the key ideological points against the implementation of an international convention is that it might inhibit the creative – and often non-monetary – outcomes which mediation regularly produces; for example, apologies. Specific performance is traditionally a remedy that is carefully weighed in judicial terms - it would be impossible from a practical point of view to enforce an apology settlement term – for example – once the convention had been engaged.

Additionally, there is a broader conceptual point that goes to the heart of mediation: that is, that enforcement under any conditions might detract from the qualities of mediation and the values of MSAs as voluntarily-accepted settlements nuanced towards business and not legalistic imperatives.

Would iMSA enforcement undermine autonomy?

A second consideration is that any move towards the legalisation and judicialisation of mediation could undermine confidentiality and self-determination. In relation to self-determination, party autonomy has long been held as one of the central tenets of the mediation process, and parties’ ideas of fairness flow from the principle of self-determination. The substantive fairness of a mediated settlement is linked to the disputants’ views on whether the mediated outcome has met their concerns – it is decided upon by them and for them and is not imposed, unlike in arbitration. Were we to impose a convention, this broad idea of fairness may be replaced by a much narrower, procedural definition that could detract from the process as a whole.

It is difficult to be clear when identifying what parties find ‘fair’ about the mediation process, however, an overly interventionist convention could weaken the concept of fairness that mediation is based on. For example, cultural differences present a massive obstacle when one tries to think about homogenising procedural aspects relating to mediation – it can’t be done in a general way that keeps fairness for all intact. One way to ameliorate this pitfall would be to clearly delineate the reach of the convention in relation to how much it could actually interfere with these aspects of mediation.

Erosion of confidentiality

In the context of confidentiality – again, another foundation of the mediation process – one of the key fears is that once any enforcement mechanism is introduced, corresponding grounds to challenge the enforcement will follow. It is these grounds that, once raised, would lead to an examination of the mediation process itself by the court - the consequence of which would be an erosion of confidentiality through mandated disclosure.

How different jurisdictions deal with this varies. In the English context, the case of Unilever Plc v Proctor & Gamble Co. [2000] established that ‘without prejudice’ communications made during the mediation (i.e. basically all of them as the mediation is in itself a bona fide attempt at settlement) are admissible to establish whether the settlement should be set aside on the grounds of misrepresentation, fraud or undue influence.

Contrastingly, Section 4 of the USA Uniform Mediation Act contains a balancing test that enables the court to decide if the need for evidence in advancing a defence substantially outweighs the interest in protecting mediation confidentiality. It is submitted that, for any final draft of the convention, defences to enforcements of settlements are framed extremely narrowly, so as to preserve this important principle.

See our next post for the rationale for a new convention for iMSA enforcement

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Topics: Mediation

Luke Lofthouse

Written by Luke Lofthouse