Turkish Law Blog
Can the Singapore Convention and ODR “Rescue” International Businesses in Dire Times?
The world, as we know it, is going through a major change. It is in turmoil. Countries are completely “shutting up”. Businesses are in distress. In the coming days, traditional legal mechanisms may also start to fail. Already, some countries have temporarily suspended some court activities. Perhaps, the time has come to give priority to mediation in resolving matters related to international commercial transactions.
Unlike arbitrators in the arbitration proceedings, mediators do not have the authority to impose a solution to a dispute between the parties. The function of a mediator is to facilitate dialogue to help parties reach a desirable solution. As such, in dire times like the one we are facing now, a speedy and amicable resolution may be the “cure” to the current distress in international trade.
UNCITRAL, a subsidiary body of the United Nations engaged in helping to facilitate international trade, has adopted a Model Law on International Commercial Mediation and International Settlement Agreements (“Singapore Convention”) in 2018. As of today, over 40 countries have signed it; the United States and Turkey are amongst them. However, only a handful have ratified it. Nevertheless, with the ratification by Qatar in March 2020, the Singapore Convention will become effective as of September 12, 2020. [official text available at https://uncitral.un.org/sites/uncitral.un.org/files/singapore_convention_eng.pdf]
Within this framework, it is important to note that European countries have not yet signed the Singapore Convention. This may partially be due to the fact that there is a European Union Directive of 2008 on certain aspects of mediation in civil and commercial matters. [official text available at https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:136:0003:0008:En:PDF] The said Directive has a broader sphere of application than the Singapore Convention, however since it is a Directive, it is not absolutely uniform across Europe; there are differences to a certain extent in the adoption of the directive through national laws.
The purpose of the Singapore Convention is similar to the CISG because it aims to facilitate international trade. The Singapore Convention also promotes mediation in the resolution of cross- border commercial disputes. The Singapore Convention is applicable for disputes that are of international nature [Article 3(2) of the Singapore Convention]. However, a dispute is considered international (i) if the parties have their place of business in different signatory countries, (ii) if the place of performance is different than the place of business of the parties, or (iii) if the subject matter of the dispute is most closely connected to a jurisdiction which is different than that of the place of business of the parties. As can be seen, the sphere of application of the Singapore Convention is somewhat broad because the place of business of the parties may be the same country, while performance can be in another country or there may be another close link to another country. The Singapore Convention also gives the parties the option to “opt-in” to it, although it may not otherwise have been applicable.
The Singapore Convention is applicable to commercial disputes and explicitly excludes consumer transactions, family law matters, inheritance and employment disputes. It also does not apply to settlement agreements that have been approved by courts.
The Singapore Convention emphasizes that the mediation process will be confidential, which is also an important aspect of international commercial arbitration. However, the crucial provision of the Singapore Convention is related to enforceability. Article 15 of the Singapore Convention states that “if the parties conclude an agreement settling a dispute, that settlement agreement is binding and enforceable.” The Singapore Convention further foresees that the settlement agreement is to be enforced by the “competent authority” of the said country where enforcement is sought. This is an important step in mediation; the Singapore Convention provides for the party seeking enforcement to do so directly without the necessity of arbitration or court proceeding. However, the said settlement agreement should be executed in writing to do so.
Nevertheless, similar to the New York Convention, the Singapore Convention has also laid out grounds for when enforcement cannot be sought. Article 19 limits the grounds for denying enforcement to those mentioned therein: These grounds are mainly due to public policy violations or when the subject matter was not open to mediation under the laws of the country where enforcement is sought or when (i) one of the parties were incapacitated; (ii) the settlement agreement is null and void, incapable of being performed or inoperative; (iii) the obligations stated thereunder have already been performed, the terms of the settlement agreement have subsequently been modified or the terms are not clear; (iv) the mediator has seriously breached the standards applicable to the mediator; or (v) the mediator has not disclosed circumstances related to his/ her impartiality or independence that were relevant in nature to the extent that a party would not have entered into a settlement agreement if the mediator had not failed to make a disclosure thereof.
The Singapore Convention does not lay out detailed rules for the appointment of a mediator. However, it sets the default number as one mediator, unless the parties agree to appoint more mediators. It furthers states that assistance may be sought from institutions or persons to appoint a mediator, however, the recommending institutions or persons should consider impartiality and independence when making such recommendations, including nationality other than the nationalities of the parties. The Singapore Convention imposes the obligation to ensure impartiality and independence on the mediator itself as well.
In relation to mediation, online dispute resolution (“ODR”) is also an avenue to consider in dire times as these days. There are not many international dispute resolution institutions that have adopted online dispute resolution in their regular practice, however, the landscape may change in the days to come. UNCITRAL has already published Technical Notes on Online Dispute Resolution in 2016 (“Technical Notes”). The said notes emphasize that ODR can provide significant opportunities for resolution of disputes arising from international commercial transactions; furthermore, it can assist in resolving disputes in a simple, fast, flexible and secure manner. These Technical Notes are not binding in nature, however, in order to promote uniformity, due consideration may be given by parties, ODR administrators and mediators. The Technical Notes embody principles to reflect transparency, fairness, due process, and accountability. It is targeted at international, low- value e-commerce transactions. However, as physical mediation may not be likely in the coming days, especially when cross- border international transactions are at stake, I believe that these rules could be taken into consideration by dispute resolution administrators, parties or neutral mediators themselves.
These days, we are already “fighting” a battle against a common “enemy”- the virus. Therefore, instead of fighting another battle with the otherwise commercial partners, mediation can be an easing solution to resolve international commercial disputes. Thus, I encourage Turkey and other signatory countries to give priority in ratifying the Singapore Convention. Also, I encourage parties to consider online mediation. It presents a wonderful opportunity to connect and reach a mutual understanding, which is amicable to all those parties concerned.