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A New Legal Framework for the Enforcement of Settlement Agreements Reached through International Mediation: UNCITRAL Concludes Negotiations on Convention and Draft Model Law

Published on March 26, 2018        Author:  and

Introduction

On February 9, 2018, the United Nations Commission on International Trade Law’s (“UNCITRAL”) Working Group II concluded negotiations on a convention and model law on the enforcement of settlement agreements reached through international commercial conciliation or mediation. Although the instruments still need to be finalized by UNCITRAL and then ratified by States, the completion of the drafting stage marks an important development in international commercial dispute resolution.

Given the debate regarding the increasing costs and time involved in international arbitration, greater attention has been paid to mediation as a method of dispute resolution. The flexibility involved in mediation eliminates many of the hurdles of arbitration, including bypassing disclosure. However, once a mediated agreement is reached, there is no comprehensive legal framework for the enforcement of international settlement agreements. The result is that parties are forced to attempt to enforce such agreements in domestic courts, typically as an ordinary breach of contract claim.

As a result, when a party to a mediated settlement agreement reneges on its obligations or otherwise refuses to uphold the terms of the agreement, the other party has had to commence separate proceedings in court or through arbitration to enforce the agreement. This has essentially meant initiating a new dispute after resolving the underlying one, adding increased costs and delay.

Through the creation of clear and uniform framework for the recognition of settlement agreements resulting from mediation – akin to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (“New York Convention”) – the new draft convention and the draft amended model will increase the predictability of settlements achieved through international mediation.

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