The convention will increase investor confidence

Interview/ K. Shanmugam, minister, home affairs and law, Singapore


ON OCTOBER 16, the Kishore Biyani-led Future group’s plan to sell its retail business to Reliance got an unexpected blow when rival and minority investor Amazon got a stay on the proposed sale from the Singapore International Arbitration Centre. Around the same time, the Indian government was reportedly looking to overturn a Singapore-based Permanent Court of Arbitration award in the infamous Vodafone tax case, which said the Centre broke a bilateral agreement with the Netherlands by levying tax on the telco.

Ironically, if Singapore has its way, future business disputes would get sorted more amicably, through mediation rather than cantankerous arbitration or litigation. That is the ambitious goal behind the Singapore Convention on Mediation, or the United Nations Convention on International Settlement Agreements Resulting from Mediation.

The convention which came into force in September, aims to mediate and solve commercial disputes between companies or parties who are based in different countries. India has signed on, and as an official statement said, “Businesses in India and around the world will now have greater certainty in resolving cross-border disputes through mediation, as the convention provides a more effective means for mediated outcomes to be enforced.”

India is among the 53 signatories, along with the US and China, but the convention will be implemented only six months later, once the government ratifies it.

“By ensuring that a settlement reached by two or more international businesses becomes binding, the convention facilitates international commerce and the promotion of mediation as an alternative and effective method of resolving trade disputes,”explains K. Shanmugam, Singapore’s minister for home affairs and law, in an exclusive interview to THE WEEK. Excerpts:

Q/How is the Singapore Convention on Mediation a turning point in international business? How does it resolve disputes better, as compared to earlier?

A/Previously, when disputes arose, businesses had to enforce the mediated settlement agreement as a contract in accordance with each country’s domestic mechanism. With the Singapore convention now in effect, businesses can seek enforcement of a mediated settlement more readily by applying directly to the courts of countries that are parties to the treaty. This will support the development of international commercial mediation and encourage businesses to seriously consider mediation as an option.

Q/How is this treaty different from pre-existing international conventions on this subject, including the New York Convention?

A/The Singapore Convention (mediation) is the missing third piece that completes the international dispute resolution enforcement framework, joining existing instruments such as (arbitration) New York Convention for arbitration, and (litigation) the Hague Convention on Choice of Court Agreements for litigation. It has the potential to be for mediation what the New York Convention is for arbitration.

Q/In cases where mediation fails, parties can still go for a court proceeding in their domestic territory, right? How does that pan out?

A/If parties are not able to come to a settlement through mediation, they still have the option of turning to arbitration or litigation. The relevant processes for each mode of dispute resolution will apply.

(But) if parties have reached a mediated settlement agreement on an international commercial dispute and one party subsequently feels dissatisfied and initiates court proceedings on the same matter, the mechanism in the Singapore Convention may not allow the matter to be re-litigated if the other party invokes the agreement to prove that the matter has been resolved.

Q/Has the treaty come into force in India? Also, while the US and China are signatories, the EU (as well as the UK), a significant trading partner of India, is yet to become one.

A/India has signed the Singapore convention and we look forward to India’s ratification—the convention takes effect six months after a country has ratified it.

Indian businesses and their trading partners (including in the EU) are free to enforce their international commercial mediated settlement agreements in any country that is a party to the Singapore convention. We hope that more states will see value in the benefits that the Singapore convention will bring for mediation and international commerce, and look forward to welcoming more countries on board in the near future.

Q/In what way does the convention help India’s standing on the ‘ease of doing business’ index?

A/When India becomes a party to the Singapore convention, businesses will have a more effective way of enforcing their mediated settlement agreements on commercial cross-border disputes. It will increase investor confidence.

Q/Would the convention apply to conflicts between companies that are global in nature, with multiple wings present in multiple countries? How does the law apply in such cases?

A/Yes, it would. If a company is global in nature and has more than one place of business, the Singapore convention provides that the relevant place of business is that which has the closest relationship to the dispute.

Q/What has been Singapore’s role in getting this convention in place?

A/Singapore was involved in the convention from its early days. A Singaporean chaired the United Nations Commission on International Trade Law Working Group II on dispute resolution. Singapore played a key role in negotiating the texts of the Singapore convention and the Model Law at WGII. In August last year, Singapore hosted the convention’s signing ceremony and welcomed delegations from 70 countries.

Q/What would be the next logical step, after this convention?

A/We certainly hope to have more (countries) come on board to sign and ratify the Singapore convention. This will benefit international businesses, and will facilitate international trade.

We also encourage businesses to consider mediation as an option when they face an international commercial dispute, now with the Singapore convention providing an efficient framework to enforce a mediated settlement.