From a global business perspective, today’s laws do not reflect the need for certainty and predictability of sound risk management. It is therefore a core objective for internationally acting businesses to find a dispute resolution model that can provide predictability and efficiency, granted that negotiated results are easily enforceable. Naturally the mechanism of mediation comes to mind, which is a process by which parties come to the table with the assistance of a third party neutral, the mediator, who assists them resolve their disputes.
This voluntary, self-determined process of mediation marks a sharp distinction from the usual, adversarial dispute resolution mechanisms including arbitration. Parties can utilize the mediation process to explore opportunities to resolve their dispute without the finality of a decision imposed to them by a third party. Mediation is an efficient tool to safeguard resources, costs and time, in addition to preservation of valuable business relationships in a way that an adversarial process is not designed to do.
To increase the effectiveness of mediation in international business disputes, it is a core challenge to ensure the universal enforcement of agreements reached during such settlement processes. Policy plays a pivotal role in creating the framework to satisfy this need. For example, the wide acceptance of arbitration for resolving international business disputes is by and large credited to the Convention of Recognition and Enforcement of Awards, also known as the New York Convention, which has been adopted by over 179 countries. This Convention enabled the parties to enforce the awards granted around the globe. Mediation settlement agreements require the same attention. Currently, a party finding itself in the situation that the opposing party does not honor the result of the mediated agreement, is forced to (re-)litigate the matter in the domestic courts in the country where the opposing party is located. Since the international business community is increasingly embracing the opportunity to resolve their disputes through mediation, policy discussions are taking place to explore manners in which mediated settlement agreements can be enforced on a global level.
Over the last two years the United Nations has been trying to create a mechanism on how mediated settlements agreements can be enforced around the world. Part of this work began in 2002 when the U.N. adopted model laws for countries to utilize in their national framework. It was the beginning of a development which has now evolved into a greater discussion in 2016 resulting from the expansion and demand for mediation usage from the global business community.
Center of the discussion of the UNCITRAL Working Group II is development of a universal mechanism to enforce mediated settlement agreements. This project began with a proposal in 2015 by the United States proposing a convention enforcement mechanism for settlement agreements somewhat similar to a New York Convention on arbitral awards. Although a number of issues have been raised during the deliberations to date, at the core is the debate over creating such a new treaty which countries can adopt ultimately having the same level of global recognition the arbitration award retains.
One difficulty in achieving such mechanism is the different level of national implementation of mediation around the world. However it is the aim to develop a universal mechanism that is simple, clear, flexible, and provides the efficiency and self- determination that international business expects and needs to consider mediation as dispute resolution procedure. Another core objective is to provide as much flexibility and optionality to the parties in the mediation process rather than limiting their ability to find creative solutions. If the international community were able to create such an instrument, it would be a game changer in the field of international business mediation providing assurance that parties to agreements will have certainty in the enforcement and recognition of such agreements around the world. While this global initiative is debated, other organizations have taken charge to address enforcement when parties reach finality through mediation.
The establishment of the so called “Arb-Med Clause” by the SIAC and SIMC in Singapore creates a framework for parties to open an arbitration and conduct a mediation and if the mediation successfully reaches a settlement, an arbitrator enters the agreement as an award under the arbitration. This framework allows the parties to produce an enforceable agreement so long as they are willing to formally open the arbitration proceedings. In other forums, statutory laws are being considered to address problematic matters of enforcement. This is the case in the State of New Jersey in the United States. In New Jersey, a law is currently being considered which would have similar characteristics. It provides for enforcement through an award process but does not require the mediating parties to open an arbitration proceeding at the commencement of the process. The proposed law which has recently passed the New Jersey Senate and is now being deliberated by the New Jersey Assembly will enable parties to conduct the mediation and then opt into a process whereby they can open an arbitration for the limited purpose of entering the settlement reached as an award. This approach to better serve the international business community will act to provide enforcement and recognition in many legal systems around the globe. Parties will be able to utilize this mechanism without having to first commence an arbitration to determine if settlement is reached; then parties can decide how they want to enforce such settlement either by retaining the mediation elements or converting their agreement to an award by opening an arbitration for the sole purpose of converting the agreement into an award taking the benefits internationally recognized by an award under the New York Convention. This statute is a powerful tool as it is not an adopted procedure but rather gives the heighten scrutiny of a legislative intent to assist businesses to self-determination and finality of enforcement and recognition of their mediation processes. However, neither model is as efficient as a universal mechanism to address enforcement and recognition of international settlement agreements reached. These progressive policies merely provide a temporary bridge to an established and generally accepted methodology of enforcing international awards. This “conversion process” for the time being is the best option the business community has to obtain an enforceable agreement when conducting international business mediation to resolve their disputes.
David S. Weiss, Esq. is the Founder & Director of the New Jersey City University School of Business Institute For Dispute Resolution and appointed Visiting Scholar. He has served as an observed for the International Mediation Institute (IMI) at The United Nations Commission on International Trade Law (UNCITRAL) for proposed mediation rules on enforcement of cross border agreements. Mr. Weiss is founding partner of the Weiss Law Group, LLC and focuses his law practice on dispute resolution and international trade. He is also the founder of the newly formed International Mediation Center based in Jersey City , New Jersey.
Christiane Rosenbaum works at Gibbons P.C., New York, NY as an International Legal Consultant. She has advised German clients on general corporate matters in connection with U.S.-acquisitions, including corporate governance issues, S.E.C. filings and prepared various commercial agreements. She has drafted various memoranda for international clients on several U.C.C. issues in German and Spanish. She has also drafted shareholder purchase and operating agreements associated with M&A transactions.