UNCITRAL

The 65th session of the UNCITRAL Working Group II on arbitration and conciliation in Vienna has commenced. Many mediators have been keenly monitoring the Working Group’s deliberations and discussions concerning the enforcement of international commercial settlement agreements resulting from conciliations (iMSAs).

An unresolved but crucial question is the exact form that the final instrument should take. One option is a multilateral convention, analogous to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards for arbitral awards (New York Convention). Dispute resolution practitioners are rather divided on this move. The tendency, as in all conflicts, has been to be positional on either view on this matter.

Yet, all mediators will be aware of the need to dig deeper to understand the concerns underlying the debate. In this four-part series of posts – jointly written with Nadja Alexander and Anna Howard – we seek to crystallise the key concerns about the move towards a multilateral convention. We have grouped the concerns under four clusters:

1. the legitimacy of such a convention;
2. the impact of such a convention on the objectives of, and values underpinning, the mediation process;
3. the justifications for a convention; and
4. the application of an arbitration enforcement framework to iMSAs, particularly in light of recent trends in arbitration.

In this second post, we now focus on the impact of a convention on the objectives of mediation, a subject which will undoubtedly be close to many mediators’ hearts.

A convention which is meant to support the use of mediation ought to be consistent with the nature, underlying values and objectives of the mediation process. But challenges inevitably arise because of the confidential, consensual, flexible and informal nature of mediation, as well as its strong philosophical underpinnings of party autonomy and mediator neutrality. Can such a unique process ever be subject to strict rules of enforcement without losing its essential qualities? This is probably the most fundamental question that the Working Group and other dispute resolution practitioners have to address in order to arrive at a satisfactory outcome. Let us unpack the issue further.

(A) Concerns about mediation confidentiality

Confidentiality can be said to be a hallmark of the mediation process, one which distinguishes it from adjudicatory dispute resolution processes. Mediation confidentiality provides a safe space for disputants to candidly share their thoughts, with the assurance that all their discussions will be shielded from public scrutiny. Confidentiality is one of the key characteristics of mediation that makes it an attractive dispute resolution process.

A convention to enforce iMSAs is likely to introduce enforcement mechanisms, together with grounds to challenge enforcement. Once these grounds are raised, the mediation process will inevitably be scrutinised by the courts, resulting in an erosion of confidentiality.

The Working Group in its latest note for the current meeting acknowledged that disclosure during the enforcement process may be at odds with the confidential nature of the mediation process. For instance, one of the defences to enforcement in the proposed draft provision 8(e) states: “The conciliator failed to maintain fair treatment of the parties, or did not disclose circumstances likely to give rise to justifiable doubts as to its impartiality or independence.” An argument premised on this defence will certainly entail the disclosure of communications made during the mediation.

Nevertheless, this tension between enforcement and mediation confidentiality is not new. Many countries’ domestic jurisprudence have wrestled with these clashing needs and sought to strike a balance. Mediation confidentiality has never been upheld absolutely; various jurisdictions have carefully calibrated exceptions to mediation confidentiality.

For example, the UK common law allows for admissibility of “without prejudice” communications to determine whether a settlement was reached (for the purpose of enforcing the settlement), or to show that an apparent agreement should be set aside on the ground of misrepresentation, fraud or undue influence (Unilever Plc v The Procter & Gamble Co.  [2000] 1 WLR 2536). “Without prejudice” communications are generally understood to refer to discussions between parties aimed at negotiating a resolution to their conflict, and include communications made in a mediation setting. Section 4 of the USA Uniform Mediation Act  also contains a balancing test for the court to decide if the need for the evidence in advancing a defence substantially outweighs the interest in protecting mediation confidentiality.

The challenge in balancing these opposing needs lies in ensuring that mediation confidentiality is not undermined greatly in a wide range of situations. Drawing from some of these approaches, the Working Group could perhaps frame the defences to enforcements narrowly and allow exceptions to mediation confidentiality in very limited circumstances.

(B) Concerns about self-determination, mediator neutrality and “fairness”

Party autonomy and mediator neutrality are two other tenets of the mediation process. The final outcome within a mediation hinges on the disputants’ joint decision, and not the mediator’s determination of the underlying issues. The disputants decide on whether to settle, and how to settle. Party autonomy or self-determination is one of the significant philosophical underpinnings of the mediation process. Mediator neutrality – a related concept – means that the mediator should remain impartial throughout the mediation and not side with any one disputant. Because the mediator respects the parties’ autonomy, he or she refrains from imposing personal views on them, as long as they have freely consented to the outcome.

Because mediation is a consensual process, the concept of “fairness” has been generally understood to be vastly different from “fairness” in an adjudicative process. Some commentators have pointed out, in this regard, that procedural fairness in mediation is associated with the parties’ perceptions on whether they were treated fairly by the mediator, rather than procedural rules. Similarly, the substantive fairness of a mediated settlement is linked to the disputants’ views on whether the mediation outcome met all their concerns, instead of being determined by existing law.

We can see how difficulties will abound once we apply the adjudicative meaning of “fairness” within the New York Convention to mediation. Such an understanding of fairness is simply incongruous with the mediation process. Art. V of the New York Convention  allows for a review of the arbitral award based on the lack of due process or procedural fairness. Likewise, Art V (1)(b) contains a due process defence of the party being unable to present his case. Is such a defence applicable to mediation, which is not premised on the adversarial process of presenting arguments and obtaining a decision? This is yet another defence in the New York Convention that sits awkwardly with the mediation process.

It is evident that the New York Convention cannot be easily transposed to the mediation context (and we will elaborate more on this in our fourth and final post). At a fundamental level, we may have to question whether “fairness” and “due process” are suitable concepts for the mediation process, or whether they have to be replaced with more appropriate standards. And if the concept of procedural fairness is to be used as a defence to enforcement of iMSAs, we have to articulate what this concept entails in a mediation setting. Several commentators, who have provided guidance on determining procedural fairness within mediation, have been careful to steer clear from notions associated with adjudication. As an illustration, researchers have referred to standards such as the opportunity to express one’s views and even-handedness in the mediator’s dealing with the parties.

(C) Concerns about creativity and flexibility within the mediation process

Mediation, being an informal and interest-based approach, can often bring about creative and future-oriented solutions, such as an apology or the fulfilment of a future condition. It has been noted that such solutions may not necessarily be “legally” enforceable as court orders or arbitral awards. How can a multilateral instrument accommodate the creative outcomes of mediation?

If enforcement is only allowed in very limited circumstances, disputants may craft their iMSAs narrowly to suit these restrictions. Some commentators have warned that iMSAs will then be deprived of the depth and creativity that could have been possible absent the convention. The convention may end up stifling, instead of accommodating, the creativity that is inherent in the mediation process.

The flexible nature of mediation is also at risk of being undermined. Many common law jurisdictions have been reluctant to regulate aspects of mediation, probably because of the belief that mediation as a flexible and informal process is not amenable to excessive regulation. Indeed, as observed by Nadja Alexander in International and Comparative Mediation (Kluwer Law International, 2009)  “an enforceability regime could reproduce the very legalities which parties have eschewed in the mediation.” Too many rules about what kind of mediation is enforceable and defences to enforcement may well frustrate the malleable nature of mediation.

It appears that these issues have not been fully resolved at the Working Group level. In an earlier2015 meeting, these concerns were alluded to in the following two passages:

(i) “It was said that the type of obligations stipulated in a settlement agreement might be broad. Elements of complexities pertaining to settlement agreements were mentioned, such as reciprocal obligations, or conditions for the implementation of obligations that would render enforcement more complex. It was also stated that settlement agreements usually contained dispute settlement clauses to resolve disputes arising from the agreement.” (para 34)

(ii) “It was mentioned that the introduction of an enforcement mechanism for settlement agreements could blur the distinction that currently existed between arbitration and conciliation by adding more formal requirements to conciliation.” (para 30)

The existing legal challenges in enforcing unusual iMSAs may well be an issue that cannot be resolved at this juncture. Even the current domestic laws are unable to accommodate enforcement of unusual MSA terms such as an apology. Disputants have already been crafting their settlement agreements to suit the present legal challenges relating to enforcement. Member states are unlikely to agree to create new enforcement methods that their own domestic laws do not provide for.

Nonetheless, the difficulty may not necessarily be as insurmountable as it seems. Mediators would be familiar with research showing high compliance rates for iMSAs, probably because of the parties voluntarily crafting and agreeing to the terms of settlement. In my personal experience as a mediator, the disputants arrived at creative and novel settlements usually when there is a high degree of trust and confidence in each other’s commitment to compliance. In such circumstances, breaches of the unconventional terms of settlement seldom arises after the mediation. Is this the same situation for international iMSAs, and can it be concluded that there is no pressing need to create specific enforcement mechanisms for creative iMSAs? This is where more detailed empirical research may inform and assist the Working Group.

We have highlighted but a few potential effects of a multilateral convention on the mediation process, in the hope of conveying the importance of maintaining the essence of the mediation process. Difficult but significant questions have to be explored concerning the nature of mediation, the current enforcement processes and how enforcement can be tailored to fit the exact contours of the mediation process. The UNCITRAL Working Group has no easy task of facilitating these discussions and mediating between the opposing perspectives. But we trust that such conversations on the deep-seated concerns underlying the debate will eventually bear fruit and result in workable solutions for all.

As the 65th session of the UNCITRAL Working Group II on arbitration and conciliation nears, it seems timely to reflect on the issues likely to be discussed and debated in Vienna this week.

In this post, I focus on the legitimacy of a proposed multilateral convention on the recognition and enforceability of international mediated settlement agreements (iMSAs) outlining some concerns in this regard and constructive responses to them. But first some background for the benefit of the uninitiated.

As many readers will be aware the Working Group has turned its attention to the settlement of commercial disputes and in particular on the preparation of an instrument on the enforcement of international commercial settlement agreements resulting from conciliation . (Note that in UNCITRAL speak, the term ‘conciliation’ is used interchangeably with ‘mediation’. ) In terms of the type of instrument, the Working Group is considering the possibility of a convention, model provisions or guidance text. Draft provisions have been prepared without prejudice to the form of the final instrument but on the assumption that the instrument would be a stand-alone legislative text.

Previously —more than a decade ago now— the Working Group in drafting the UNCITRAL Model Law on International Commercial Conciliation (2002) was not able to agree on a uniform way forward for the enforcement of iMSAs. This has been one of the main criticisms of the Model Law. So it is perhaps not surprising that the issue remains controversial.

This is the first in a series of posts — written with Anna Howard and Dorcas Quek— to highlight the core concerns about the move towards a multilateral convention and the responses or counterarguments to those concerns. We focus on the legal form of a convention rather than a model law or guidance text as this focus allows us to be more specific in our comments. Moreover the notion of a multilateral convention as the instrument of choice has captured the imagination of many and seems to have encouraged the most spirited debate. If enacted it would also have the most direct impact in establishing a uniform approach to this issue.

We have placed what seem to be the main concerns about the drive towards a convention into four categories, namely concerns relating to:
1. the legitimacy of such a convention;
2. the impact of such a convention on the objectives of, and values underpinning, the mediation process;
3. the justifications for such a convention;
4. the application of an arbitration enforcement framework to iMSAs particularly in light of recent trends in arbitration.

Let me now turn to the first category of concerns, which will be the focus of the rest of this post: legitimacy of a proposed multilateral convention on the recognition and enforceability of iMSAs. It compromises two issues. The first is whether iMSAs should as a matter of principle, be accorded priority or special status vis-à-vis ordinary contracts. The second issue is whether the proposed convention compromises access to justice.

Priority being accorded to iMSAs over contracts?

The concern:
To what extent is it legitimate to grant iMSAs preferential treatment compared to other traditional contracts and unassisted negotiated agreements?

A Response:
Mediation is clearly distinguishable from unassisted negotiation as a matter of practice and of law. It is a definable and recognizable structured dispute resolution process involving an impartial third party who assists parties to:
• communicate with one another
• identify the issues in dispute between them
• explore the terrain of those issues
• generate options for resolution of the dispute
• reach an agreement in respect of the whole of, or part of, the dispute.

Around the world, regulatory regimes differentiate mediation from negotiation and other dispute resolution processes. In many jurisdictions, mediators are subject to ethical requirements, standards and accreditation. Accreditation standards are progressively international in coverage (e.g. IMI mediation certification). Furthermore, mediation is increasingly used in combination with arbitration in hybrid processes such as Singapore’s arb-med-arb.

The growth of mediation as a dispute resolution process with its discrete procedures and standards warrants a creation of a customised cross-border enforcement regime.

Access to justice compromised?

The Concern:
The granting of special status to iMSAs in relation to their recognition and enforceability may compromise fundamental rights associated with access to justice and access to the courts.

A Response:
This concern seems to have echoes of the oft-cited and misinterpreted English case of Halsey v Milton Keynes General NHS Trust. The case has been cited as authority for the principle that for the State to order mediation is a breach of the right to a public trial conferred by Article 6 of the European Convention on Human Rights. As Tony Allen points out, not only is this inaccurate but it has hampered the development of mediation practice and regulation as with each new regulatory initiative, such as UNCITRAL’s current talks, we are repeatedly taken down the rabbit hole of the now infamous Halsey judicial comments. The statements of the Court of Appeal in relation to this point were non-binding opinion or obiter dicta. Moreover, as Allen points out, Lord Dyson, who gave the judgement of the court in Halsey subsequently acknowledged that ordering parties to mediate in and of itself does not infringe their Article 6 rights.

How is this relevant to the current UNCITRAL deliberations? While UNCITRAL’s Working Group II is dealing primarily with the enforceability of iMSAs, it is relevant for two reasons.

1. Recognition and enforceability of agreements to mediate and mediation clauses
The Working Group did consider whether the topic of recognition and enforceability of ‘an agreement to submit a dispute to conciliation’ should also be addressed in the proposed international instrument. The dominant view of Working Group members as reflected in the official reports seems to be that this topic is not needed, especially given the diverse pathways to mediation via mediation clauses, stand-alone agreements and court referrals. These comments do not provide a reason for the exclusion of agreements to mediate in a possible convention or other instrument; rather they suggest that including them might fall into the “too hard” basket. One wonders whether the misinformed legacy of Halsey was also hanging heavily in the UNCITRAL meeting rooms in relation to this point — at least for some members. For others, any type of incentive or requirement to mediate, is considered to be an anathema to the voluntariness of mediation. For some civil law European jurisdictions, this is a matter of a fundamental mediation principle. For example, in Austria the extent to which the law supports the enforceability of mediation and MDR clauses is unclear and academic commentaries are divided on this point. It seems that parties to mediation clauses cannot prima facie enforce such contractual provisions, that is have a court order issued to the other party to require it to attend a mediation meeting.

To my mind such an approach fails to differentiate the different parts of mediation to which voluntariness can attach:
1. turning up at mediation;
2. participating in mediation;
3. reaching an agreement to resolve the dispute in mediation.

While voluntariness seems important for points 2 and 3 above, there are many examples of successful mediation practices and schemes where parties have been effectively required to turn up to mediation as a result of recognition of a mediation clause or a court referral. Even in relation to point 2 (participation in mediation) contractual provisions, institutional and legislative rules increasingly require good faith participation in mediation, a requirement which would seem to set some boundaries for voluntariness in its fullest sense.

In summary, parties do not forfeit their legal rights by entering into the mediation process. A contractual obligation to mediate typically takes the form of a condition precedent to litigation and as such parties do not lose their right to access the courts. In addition numerous statutes and institutional rules, such as Article 13 of the UNCITRAL Model Law on International Commercial Conciliation, expressly recognise that parties may need to initiate legal proceedings while mediation is on foot.

If the objective behind a convention is to promote cross-border mediation, it seems worthwhile to also examine the ways in which parties enter the mediation process, rather than confine the discussion to how parties conclude the mediation process. For instance, Maud Piers from the University of Ghent suggests that the EU might promote better access to justice by adopting uniform rules on the legal status of an ADR clause under which parties consent to try to resolve their dispute through ADR.

2. Recognition and enforceability of iMSAs
The second reason why the legacy of Halsey may be relevant to the current UNCITRAL discussions relates to how Working Group members view Article 6 of the European Convention on Human Rights (ECHR) and similar legal rights instruments. I have heard it argued during many a spirited discussion that a convention recognising and enforcing iMSAs threatens to compromise a party’s fundamental right to access the courts under the ECHR.

How can this be the case? Does this mean that numerous national laws all over the world —including within the EU— that recognise and enforce MSAs are invalid on the basis that they potentially prevent parties accessing their fundamental right of access to justice in the form of a court trial in relation to the original dispute? No, of course not.

MSAs are prima facie enforceable as ordinary contracts. In addition in many countries they can take different legal forms, which offer different levels of enforceability — a practice giving expression to mediation’s flexibility and party autonomy by encouraging choice and flexibility in relation to the legal form of mediated outcomes.

Thus, depending on the jurisdiction, MSAs may take the form of ordinary contracts, settlement deeds, special mediation deeds, consent arbitral awards and/or court orders. In some jurisdictions parties may have different procedural paths to enforceability open to them.

The nature and extent of review available for MSAs depends largely on the legal form and status of the instrument containing the MSA. The grounds for challenging mediated settlements are generally more extensive in relation to standard contracts than settlement forms which involve review and ratification by professional dispute resolution practitioners such as lawyers, notaries, mediators, arbitrators and judges. This type of regulatory policy recognises that parties who seek a mediated outcome with an expedited enforcement mechanism waive the right to challenge the agreement as if it were an ordinary contract. Moreover such settlement forms are typically subject to review before they are ratified and it is arguably at this point that potential problems with, or potential challenges to, the mediated agreement should be addressed. In the absence of statutory provisions requiring a cooling- off period or ratification by a third party, contract law will prima facie recognise and enforce such MSAs.

So back to the current UNCITRAL meetings of Working Group II. A convention to recognise and enforce iMSAs that comply with criteria set out in the convention itself would extend to international MSAs the type of regulatory provisions that already exist for domestic MSAs in many countries. Parties to an iMSA would still be able to challenge an iMSA. The relevant defences available would depend on the legal form of the iMSA and the terms of the convention.

If, as the ECHR concern suggests, parties to an iMSA would be able to litigate the original dispute about which they mediated, there would be no point at all in having a convention. It would mean, for example, that if I have a dispute with my publisher about delivery of a manuscript, and we settle the dispute using mediation, I could later have second thoughts, for no reason other than a whim, and choose to litigate the dispute. This simply goes against mediation practice and regulatory developments around the world. It also makes a farce of party autonomy as a principle that gives parties the freedom to take on contractual obligations with others, provided they do not breach public policy. Now of course if there was an allegation of fraud, misleading and deceptive conduct or another substantive contract defence to challenge the validity and legitimacy of the iMSA, then a convention should provide for the iMSA in question to be challenged in a court of law. Such an approach is in line with best practice.

Finally, it is worth noting that many countries are signatories to the NY Convention on The Recognition and Enforcement of Foreign Arbitral Awards. Accordingly these jurisdictions seem to recognize agreements to arbitrate and arbitral awards, which can only be challenged in court in limited circumstances. While arbitration is a very different process to mediation, I wonder about the reasons for effectively treating mediation less favourably.

So where to from here?

The UNCITRAL Working Group II meeting taking place during these two weeks (12-23 September) will set firm parameters for the negotiations that will inevitably follow over the coming months. Whatever choices are made, it is imperative that they are informed decisions based on solid and accurate arguments. We need something more convincing than the ECHR argument for the purposes of the UNCITRAL discussions, especially given the enormous UN and national resources from participating countries that have poured into this proposal.

The members of UNCITRAL’s Working Group II have a choice to make. Design the type of regulatory regime we want for the enforcement of cross-border mediated outcomes. Or let the current regulatory jungle continue to develop in a piecemal and unmanaged way.

We can take charge of regulation or it can take charge of us. There is no getting away from it for there is no such thing as a regulatory vacuum.

The UNCITRAL discussions offer an an opportunity for those involved to shape the future of our field and make a difference. If we don’t take this chance, it may be a while before it comes around again.