Business Law

SETTLEMENT OF INTERNATIONAL COMMERCIAL DISPUTES BY MEDIATION: THE SINGAPORE CONVENTION

The United Nations Convention on International Settlement Agreements as a Result of Mediation (“Singapore Convention”) signed in Singapore on 7 August 2019 on behalf of the Republic of Turkey and validated by Law No. 7282, was approved by Presidential Decree No. 9 on 22 April 2021; It entered into force on 11.04.2022 in line with the decision numbered 5235 published in the Official Gazette dated 25 February 2022 and issued no. 31761.

The aim of the Singapore Convention is to popularize mediation in the resolution of international commercial disputes and to accelerate commercial processes. In order to fulfil these objectives, an international legal effect should be given to the mediation agreement document. With the entry into force of the Convention, the settlement agreements made at the end of the mediation process will be able to be executed in the international arena.

Does the Convention find application area for which “Settlement Agreements”?

The Convention finds application area for international and commercial written agreements made at the end of the mediation process. Conditions of an international nature are specified in Article 1/1 of the Convention, and which disputes will be considered within the commercial scope is not clearly included in the text of the Convention. Therefore, it is necessary to dwell on what should be understood from a commercial dispute.

Definitions regarding the commercial element are included in the International Commercial Mediation Model Law adopted by UNCITRAL in 2002. In annotation (1) of the relevant law, it is mentioned that commercialism should cover all the problems arising from commercial relations, whether contractual or not, and a non-limited counting was made as an example. Supply or exchange of goods or services, distribution agreements, commercial representation or agency, leasing, factoring, insurance, business, engineering, investment, banking, consulting or concession agreements; Transportation of goods or passengers through joint ventures and other forms of industrial or commercial cooperation are examples in the text of Model Law. However, there are also opinions that the disputes between the State and the investor regarding the construction and extraction of natural resources should be considered as commercial disputes.

However, settlement agreements outside the scope of the Convention’s application are clearly defined in terms of subject and legal nature, unlike the “commercial” factor;

– Settlement agreements regarding to the transactions that has made for personal or family made by one of the parties (as a consumer) and settlement agreements regarding to the family, inheritance and labor law are not within the scope of the Convention.

-Settlement agreements recorded and fulfilled as arbitral awards, settlement agreements approved by the court or made during court proceedings and executed as a court decision in the state where the court is located are not within the scope of application the Convention in terms of legal characteristic.

The essential conditions regarding the international nature are included in Article 1/1 of the Convention. For international qualification, the workplaces of at least two parties to the settlement agreement must be in different states, or the state in which the parties to the settlement agreement have their workplaces must be different from (i) the state in which a substantial part of the debt arising from the settlement agreement will be fulfilled, or (ii) the state with which the subject of the settlement agreement is most closely related.

In order for the settlement agreement to be considered within the scope of the Convention, it is necessary to provide the written form requirement. Recording the agreement in any way was deemed sufficient to meet the requirement of being written. On the other hand, settlement agreements arranged electronically will provide the requirement of being written in case the information in the content of the agreement can be accessed later.

How does the Convention’s enforceability mechanism work?

The party that wants to rely on the settlement agreement for enforceability must submit the settlement agreement signed by the parties and evidence showing that the settlement agreement was concluded through mediation to the competent authority of the other State which it has taken to legal action.

Although the evidence showing that the settlement agreement was concluded through mediation is mentioned in the text of the Convention, this count is non limited. 

The Competent Authority has the right to demand any document it deems necessary confirming the fulfilment of the conditions set forth in the Convention, from the party applying for a legal procedure based on the settlement agreement. In the 4th article of the text of the convention; It is stated that the authority examining the legal remedy applied will act in an expeditious manner. “To act in an expeditious manner” is perfectly in line with the purpose of effectiveness aimed by the Convention and mediation.

However, if the settlement agreement is not in the official language of the State party in whose territory legal action is taken, the competent authority of the State party is eligible to request that the settlement agreement be translated into its own language.

In which cases is the enforceability request rejected?

The legal grounds for the rejection of the enforceability request are explained in Article 5 of the Convention. The reasons for rejection can come to the fore in two ways;

In the event that a party takes legal action for enforceability, and upon the request of the party against which legal action is taken, one of the factors in Article 5 of the text of the Convention can be proved and the enforceability request may be rejected. The reasons for rejection in this context are as follows;

  • One of the parties to the settlement agreement is legally incompetent,
  • The settlement agreement is null and void or not operational or unenforceable according to the law to which the parties are subject or, if there is no law subject to it, the law of the state to which the competent authority to which the request is made belongs.
  • Non-binding or final, or subsequently amended, in accordance with the provisions of the settlement agreement,
  • The debt subject to the settlement agreement has been fulfilled or is not clear or understandable,
  • The acceptance of the request is contrary to the provisions of the settlement agreement,
  • Serious violation by the mediator of standards applicable to the mediator or mediation, and that the party as mentioned would not have entered into the settlement agreement but for the breach,
  • The mediator’s failure to disclose to the parties the situations that would raise justifiable doubts regarding the mediator’s impartiality or independence, and the failure of the mediator to disclose would have a material or unfair effect on the party, such that the said party would not have entered into the settlement agreement if this defect did not exist.

-The competent authority of the contracting state where the legal procedure is applied has the right to reject the request without the need for any request, in case one of the elements in the 5th article of the text of the Convention is detected. The reasons for rejection in this context are as follows;

  • In case the request is against the public order of the State where the application made or
  • In case the subject of the dispute is not suitable for resolution through mediation in accordance with the law of the State where the application made

The entry into force of the Singapore Convention on April 11, 2022 is a final and important step towards resolving international commercial disputes. The successful results of the New York Convention, which has found application for arbitration, are also targeted for the Singapore Convention. While seeing the concrete legal consequences of the Convention and witnessing the development of international law is extremely exciting, the economic consequences that may occur are also evocatory.

 

Türküm Türkmen, Attorney at Law

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