Mediation Settlement Enforcement

UNCITRAL and the enforceability of mediated settlements

A commentary by Dr Karl Mackie CBE in February 2017 on the sixty-sixth session of the United Nations Commission on International Trade Law (UNCITRAL) Working Group II (Dispute Settlement) at the United Nations Headquarters, New York, which continues its discussions over a possible instrument on enforcement of international settlement agreements resulting from mediation.

Both the falling snow and the speed with which it was being cleared in New York this month were impressive. Yet, by contrast, for the interesting work currently undertaken by UNCITRAL on mediation, ‘rapid action’ is not perhaps the phrase I would use to describe what is happening.  It is reviewing as part of its remit, whether there should be a mechanism in international trade law which ensures standard legal enforceability across borders for mediated settlement agreements.  The Working Group has now been meeting twice a year for two years alternating between Vienna and New York UN offices.  I attended this session in New York as an Observer with the International Mediation Institute.

Of course, it is not entirely fair to expect rapid action when the outcome of such proceedings has to work long-term and not be capable of melting easily under the heat generated in potential future contentious legal proceedings.  The discussions are indeed thoughtful and impressive to observe as numerous national delegations debate the drafting minutiae as well as principle for what might be an appropriate legal framework for recognition and enforceability of mediated settlements.

The heart of this debate is whether mediated outcomes should have a similar status given to arbitral awards under the longstanding UNCITRAL Convention which allows countries to sign up to the recognition and enforceability of international arbitral awards.  The logic is obvious for arbitration at one level – ‘final’ resolution in an international commercial  dispute, would be much less appealing if one could not guarantee that outcomes would be recognised by different national courts (and there are still some major jurisdictions where this is a major headache for companies operating across borders).  A lack of finality undermines the rule of law and in turn international trade.  Some 153 countries have signed up to the ‘New York Convention’ which sets out the legal framework by which this recognition and enforceability happens for arbitral awards.

Seeking to apply this same logic to mediated settlement agreements, raises a raft of points of principle and detail.  Is an instrument necessary? What kind of legal instrument? What happens if a settlement occurs just after a mediation and who certifies that a mediation has taken place?  When can one argue that a settlement is not a genuine settlement or one induced by inappropriate mediator behaviour?  What rule applies if a mediated settlement has been already converted into a consent arbitration award or consent court order in one jurisdiction?  What is the scope of the instrument and the definition of commercial mediation?  The latter issue already is a prelude to an international language anomaly, as traditional UNCITRAL instruments refer to ‘Conciliation’ rather than ‘Mediation’ and this is likely to work through to any new UNCITRAL instrument despite the dominance of the word ‘mediation’ now.

Key issues that will call for a consensual conclusion in future UNCITRAL meetings, include:
(1) Whether the legal instrument that derives from discussions should be a Model Law (guidelines for nations to consider and adopt or not, with or without their own modifications) or a Convention (a legal framework that countries just choose to adopt in full like the New York (Convention on arbitration) or possibly both.  And are parties in mediation to be asked to opt in or opt out of any convention or model rules?
(2) Who certifies that an agreement is the outcome of a mediation, and what happens with partial agreements or ‘non-commercial’ outcomes?
(3) How will any instrument deal with agreements that find their way into court or arbitral consent orders?
(4) A particularly sensitive area is the wording around the area of possible challenges by parties to recognition and enforcement, where the challenge is based on the (mis-)conduct of the mediator such as failure to disclose conflicts of interest or inappropriate pressure on a party to settle.

Observing the debate, it is obvious that a great deal of care and attention is being put into the process by the many national delegations who are mainly from ministries of justice though include some mediators.  It is equally apparent that many jurisdictions have found the drive for a legal instrument somewhat bemusing as their countries are still relatively new to mediation compared to arbitration and some struggle with in-depth understanding of the process (I took part in a joint panel made up of UNCITRAL and IMI to discuss mediator practice experience, although for diplomatic reasons we did not comment on specific heated debates that are taking place in the formal drafting sessions).

And finally some in the mediation world might query whether any instrument is necessary given that most mediated settlements are reached and implemented by consent, making mediation very different from imposed arbitral awards.  However the contrary case is that all commercial parties want their hard-fought outcomes to be legally binding and would normally be concerned if it was otherwise.  Furthermore an international instrument recognising the legal status of mediation is yet another foundation stone in the credibility and acceptance of mediation in the international order just as courts or arbitration.

The result of the 66th meeting was that this group would continue its work to develop both a convention and a model law for enforcement in parallel, with the potential outcome being that every state would be able to select the approach that best suits their own requirements. Overall therefore this process has to be seen as another building block in the road to mediation becoming mainstream and Main Street.

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