Dispute Resolution in an Uncertain World

7th December 2020 Commercial Litigation

It is not a commonly advertised part of a lawyers role but a great deal of what they do is about creating certainty. Dispute resolution is no different and a large part of its aim is to achieve certainty out of a dispute with an uncertain outcome. This is the reason that a great deal of time and effort often goes into consent orders, which are used to compromise proceedings, so that they are clear and do not create more disputes themselves.

However, the UK is heading into a time of uncertainty. We have the economic uncertainty caused by Covid-19 and the further economic uncertainty of Brexit. But Brexit also creates legal uncertainty as to which laws will apply and how. This is no different from a dispute resolution perspective as new uncertainties are created, especially in the area of international enforcement.

Previously the UK could rely on a network, of mostly EU brokered arrangements, to deal with the enforcement of court judgements abroad. However, these will no longer exist after Brexit. However, there are arrangements that we can join (or in fact re-join) such as the Hague and Lugano conventions. The UK government has prepared itself for this by passing the Private International Law (Implementation of Agreements) Bill [HL] 2019-21 which is now just awaiting its Royal Assent. This Bill on its face incorporates the various Hague Conventions on the enforcement of judgements into UK law. However, its final version also allows ministers to incorporate other international agreements on international law and its enforcement into UK law simply by making an appropriate regulation. This was removed by the House of Lords from the Bill initially, with them describing it as a form of international Henry VIII power, but was promptly put back in by the Commons.

There are a number of potential international agreements that could be inserted by these provisions but, as someone with a keen interest in ADR and especially mediation, the one that I consider most interesting is the Singapore Convention on the enforcement of mediation settlements

The Singapore Convention is now in effect although it has still only been ratified by five countries (Singapore, Fiji, Qatar, Saudi Arabia, Belarus and Ecuador). The UK and EU did not even sign the convention (although 46 other countries did) but that was more because of uncertainty about whether they could rather than because they did not agree with it. However, what makes the Singapore Convention interesting is that countries that have ratified the Convention are bound to enforce mediation agreements made in any other country, even ones that have not ratified the Convention. This means that a mediation settlement agreement made in the UK is now enforceable in Singapore or Fiji. This is a step up from the New York convention on enforcement of Arbitral agreements which only requires signatory states to enforce awards from other signatory states.

ADR is becoming much more effective after Covid and will become more powerful still after Brexit. ADR has adapted rapidly and effectively to social distancing and video hearings and mediations are common and well structured. As the courts slow down in the struggle to adapt to a changed environment the speed of ADR is a real benefit. As the UK also faces new challenges around international enforcement the growth of international conventions that assist this process makes ADR even more attractive.

So what changes can be made? Companies and individuals entering into contracts with an international dimension should consider whether they want some form of compulsory ADR clause in there. There are many types ranging from a requirement to use arbitration to a lighter-touch requirement to use mediation before issuing court proceedings. The right choice will be dictated by the appetite of the parties, the countries involved, and the subject-matter of the contract. For example, a contract involving Singapore would benefit from a “mediation first” clause as a mediation settlement agreement is enforceable there due to the Singapore Convention. A contract with a party in New York might be better to have an arbitration clause as arbitral awards are easily enforceable there.

Whatever mechanism is chosen it is important to remember that the position is evolving quickly. This is one of the reasons I prefer a “mediation first” clause as while it requires parties to mediate it does not require them to settle at mediation and leaves open the option of court. That way the parties can weigh into their mediation position the respective costs and effort of enforcing a mediation agreement and a court order at the time they are mediating.

The changing world needs a change in attitudes to dispute resolution. ADR has seen growth in recent years but the new challenges we face may finally see it rise to pre-eminence over traditional, court-based, problem solving.

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David Smith is a Partner located in Londonin our Commercial Litigation department

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