The UN Convention to encourage mediation as an “alternative and effective” method of resolving trade disputes has been signed by 46 UN members today (August 7) in Singapore, including sparring partners China and the US.
The Convention marks a key point in international mediation as it offers a new legal framework for cross-border disputes. A priority of the Singapore Convention on Mediation is to keep international disagreements out of local courts, where legal action can prove costly, lengthy and potentially bias.
With tariffs being slapped on goods and tit-for-tat trade disputes escalating between the US and China, and South Korea and Japan, mediation could offer another route for companies to solve the technical barriers that arise from trade tiffs.
GTR speaks to Kohe Hasan, partner at global law firm Reed Smith in alliance with Resource Law, to understand how the Convention could resolve current trade disputes, the short and long-term impacts, and why it is a significant step.
GTR: What’s new about how mediation will be carried out?
Hasan: The Convention does not directly affect the way in which mediation is carried out. Rather, the Convention makes the mutually agreed upon outcomes from a mediation enforceable in a court of law.
The Convention provides preconditions to the enforcement of a settlement agreement, rather than prescribing a specific mode of enforcement. The courts of a contracting party will either enforce an international settlement agreement within the scope of the Convention, or allow a party to invoke the settlement agreement in order to prove that the matter has already been resolved, in accordance with its rules of procedure, and under the conditions laid down in the Convention.
It would also be possible for the courts to refuse to grant relief on specified grounds laid down in the Convention.
GTR: What are the short and long-term impacts?
Hasan: Participating countries in the signing of the Convention would enjoy both short-term and long-term benefits in terms of their business development.
In the short term, becoming a signatory to the Convention could allow countries to attract more business opportunities.
Longer term, firms would also have greater confidence that mediation can be depended on to settle commercial disputes as mediated settlement agreements can be better enforced by courts of countries that are parties to the Convention. Over time, and given the inherent advantages of mediation, it could be the most preferred mode of dispute resolution.
GTR: What will it mean for trade disputes going forward?
Hasan: The Convention seeks to address the lack of enforceability of mediation in trade disputes resolution. In recent years, an increasing number of cross-border trade disputes have turned to mediation in order to preserve party relations and promote the consensual disposition of disputes.
However, the acceptance of mediation as an effective dispute resolution tool has not been as widespread because of the lack of enforceability of mediated settlement agreements in courts when parties fail to fulfil their obligation.
With the Convention, enforcement will be made possible for settlements achieved from mediations conducted in foreign jurisdictions. This will give greater confidence to businesses to resolve international trade disputes through mediation rather than formal processes such as litigation or arbitration which could be costly and lengthy.
GTR: How will it impact the current trade war?
Hasan: The Convention has the potential to encourage more stakeholders involved in, and entities affected by, the trade war to resolve commercial conflicts through mediation as an alternative to litigation or arbitration.
When disagreement arises between parties due to the tariffs or other technical barriers caused by the trade war, the reconciliatory and reliable framework that the Convention offers could be an ideal means by which disputes can be settled.
GTR: Do you believe the Convention is significant?
Hasan: The signing of the Convention is of unquestionable significance, but it is also only the beginning of a long journey. Signatories to the Convention will need time to adopt its terms and to adjust the method of application according to their own situations.
Businesses will also take time to warm to the idea of utilising mediation as the preferred mode of dispute resolution. As things stand, most contracts between commercial parties do not include or even merely pay lip service to mediation as a step which parties must take to resolve disputes. It is hoped that over time, the Convention will encourage parties to take mediation seriously and view it as a legitimate method of dispute resolution.