Thailand2 judge Sorawit Limparangsri

Challenges in Leveling ADR Playing Field:

International Enforcement of Mediated Settlement Agreement

Sorawit Limparangsri

Judge of Office of the President of the Supreme Court, Thailand

Mediated or conciliation has been one of the effective and efficient tools for settling international commercial disputes for years. It helps many disputing parties to overcome their animosity, and resume their ordinary course of business without much hassle. Unfortunately, the progress and the adoption of mediation or conciliation have still not been at the level that we would like it to be, especially when compared to the achievement of arbitration, another ADR mechanism.

The environment in which arbitration has enjoyed for more than half of a century quite differs from those in which conciliation has operated. The obvious difference is the enforcement mechanism for the products of the two processes. Arbitration has the New York Convention to enforce arbitral awards since 1958. Currently, there are 156 signatory countries, or virtually all over the world.

However, for mediation, there is no widely-adopted international framework for enforcement of mediated settlement agreements at all. This situation has placed mediation as an inferior means of dispute settlement mechanism, compared to arbitration. To create a similar mechanism for mediation, there are quite a number of issues to be ponder, and we also have to take into consideration the different domestic laws of various countries that may wish to join in the mechanism.

One of the issues that we have to consider is whether the mechanism should govern any kind of dispute, or it should concentrate on some particular kind of dispute, for example, disputes of commercial nature. Next issue that comes up is whether the enforcement should govern any kind of obligations under settlement agreements, or it should cover only some kind of obligation such as a monetary one. The obligations stated in settlement agreements can be varied. Some form of such obligations may be difficult to be enforced, especially those beyond monetary obligation. Laws of several countries may limit the enforcement of non-monetary obligation, such as countries using the efficient breach model. Moreover, some obligation may occur only after the other party has also fulfilled some reciprocal obligation.

The thorniest issues going forward at the moment are probably about defenses that the party resisting enforcement may raise. If we look into the regime of the New York Convention, the success of the regime depends in large part on the limitation of the grounds that the resisting party may raise, and the uniformity of the grounds that courts in various countries apply when enforcement is sought in those countries. The problem about enforcement of settlement agreements is that by nature they are still a kind of contracts. Even though they may extinguish the previous contractual obligations between the parties, they just create new contractual obligations to replace the old ones. Therefore, there is an obvious temptation to introduce many defenses found in contract law into the new instrument. So, you can imagine, if all defenses under the law of contract can come into play under this new regime, the enforcement procedure under this new regime won’t be different from an ordinary lawsuit where the parties are free to raise any defense they please. Then, the benefit of the new enforcement procedure will be greatly limited.

Last, but by no means the least, is the issue about the form of the new instrument. There is still a wide difference in opinions about what form the instrument should take. Should it be another model law, guidelines, a technical note or a new convention?

A model law on enforcement of mediated settlement agreement might be possible to accommodate the various concerns of many countries, but its success may be very limited, and leave a lot to be desired. If we look into the essence of various issues being discussed, we can see that they need something that has a force of law to be successful, particularly the binding obligation on the courts of member countries to honor and enforce conciliated settlement agreements. We also need the regime to be coherent among various countries participating in international trade. Otherwise, parties will struggle to frame their settlement agreements to satisfy various legal regimes in which they may seek enforcement. Therefore, a new convention may be a better route.

Such new convention will definitely send an unequivocal signal to parties in international commercial disputes that mediation or conciliation will be another viable choice that they should consider, and take advantage of, because not only it can provide them the opportunity to set their own terms, but also the terms they choose will be legally enforceable across borders.