Mediation can be a more cost and time-efficient method of resolving disputes outside of litigation and/or arbitration. Mediation also offers a more palatable solution to businesses seeking to resolve their disputes, whilst preserving important business relationships with an amicable and mutually agreed solution. The Ministry of Justice has estimated that commercial mediation could save businesses approximately £5.9 billion annually in management time, productivity, relationships and legal fees.

One of the most exciting stories in the UK mediation market surrounds the Ministry of Justice’s (“MoJ”) consultation on whether the UK should sign and ratify the Singapore Convention (“the Convention”). As discussed in an earlier post, the Convention is a non-reciprocal international convention which provides a harmonised framework for the enforcement of international settlement agreements resulting from cross-border mediations between parties attempting to resolve commercial disputes.

The consultation

The MoJ issued its second consultation on whether the UK should sign the Convention in February 2023. It has now published its response.

Twenty responses to the consultation were received from various bodies including professional associations, legal practitioners, and academics across the UK. The vast majority of respondents were in favour of the UK signing the Convention. The main reasons given for supporting the convention were that it would:

• enhance the UK’s reputation and status as an international dispute resolution hub;
• elevate the credibility of UK based mediators;
• promote the use of mediation as an internationally recognised option for commercial dispute resolution; and
• promote certainty on the enforceability of international commercial settlement agreements.

What has the UK government decided?

The government has announced its intention to sign the Convention “as soon as possible” and will now work to implement the necessary domestic framework to ratify and implement it.

The UK will be the 56th signatory and 11th ratification of the Convention, which is considered significant progress given the Convention only opened for signatures in August 2019.

However, it should be noted that implementation is unlikely to be as straightforward as it sounds, given there are several aspects of the Convention which are either ambiguously worded or are intentionally flexible (to permit enforcing courts a degree of flexibility to adopt different approaches), as detailed below.

Furthermore, the Convention will only come into force six months after the UK has deposited its ratification document with the UN Headquarters in New York. Consequently, the Convention is unlikely to enter into force until 2024 at the earliest.

Implementation

The UK Government will now put in place the domestic framework needed to implement the Convention. The majority of respondents to the consultation agreed the High Court is the most appropriate and competent authority to consider such applications. Implementation of the Convention will require the introduction of amended Civil Procedure Rules in England and Wales, the Session Rules in Scotland and the High Court Rules in Northern Ireland.

The UK Government has decided not to apply either of the two permissible reservations under Article 8 of the Convention. Parties will not therefore be required to “opt in” by including express wording that the Convention will apply in their settlement agreements (although it should be noted that the government does propose allowing parties to “opt out”, in accordance with Article 5(1)(d) of the Convention). The UK Government has also confirmed that disputes involving UK Government entities will not be excluded from the Convention.

There remains some unpredictability as to how the UK Government will choose to implement the Convention, including the extent to which an enforcing court will engage with disputes concerning the interpretation of settlement agreements. It is also unclear how settlement agreements will be treated where they arise from settlement discussions commenced in mediation but where the agreement is reached later. In the UK, it is quite common that settlement takes place after the mediation; in such circumstances, it is unclear whether enforcement may be challenged on the grounds that the settlement did not occur in mediation.

Those devising an appropriate domestic framework to implement the Convention will need to consider such issues and decide the extent to which it will be appropriate to interpret the Convention’s provisions, or to instead leave it to the UK courts to determine certain questions via individual enforcement decisions.

What effect will signing and ratifying the Convention have?

Once the UK has implemented the Convention, the UK Courts will directly enforce international settlement agreements reached as a result of a mediation, without the enforcing party needing to commence proceedings for breach of contract in respect of the paying party’s failure to comply with the settlement agreement.

The Convention may be a useful tool for claimants where the other party attempts to renege on the terms of an agreed settlement agreement resulting from mediation in circumstances where enforcement would otherwise be difficult, time-consuming and costly given the location of assets. That being said, the Convention is unlikely to have a dramatic impact as it is relatively rare for settlements reached through mediation to need enforcement at all and, when they do, mediation-friendly UK courts have already shown themselves willing to enforce such settlements (albeit through more cumbersome proceedings for breach of contract).

Nevertheless, signing and ratifying the Convention is an important signal to the international community that the UK is committed to mediation and will continue to be a leading hub for dispute resolution.

For more insights on the Singapore Convention, mediation, or ADR more generally, please get in touch with Rob Griffiths and Ross Keeble.

Content from the Deloitte Legal blog can now be sent direct to your inbox. Choose the topic and frequency by subscribing here.