10 Sep, 2019

The Singapore Convention – A Sisyphean Task or a Beginning of a (R)evolution?

Singapore – the Ceremony

At the beginning of August, the United Nations Convention on International Settlement Agreements Resulting from Mediation (the “Convention”) was signed in Singapore.  The Convention signed by 46 states shall enter into force 6 months as from ratification in at least three signatory parties.

The primary concern addressed by the Convention is how to motivate companies involved in cross-border projects and transactions to rely on the mediation process as a means of alternative dispute resolution, bearing in mind that it cut costs both in terms of time and material resources.

Application and Benefits of the Convention

The scope of the Convention is limited to agreements which settle international commercial disputes.  Agreements which settle consumer disputes, or disputes relating to family, inheritance or employment law, are explicitly excluded.  In addition, the Convention does not apply to disputes settled in the course of proceedings before a court, or to disputes settled by an arbitral award.

The provisions of the Convention lay down a procedure for direct enforcement of written cross-border settlement agreements concluded as a result of mediation between at least two parties which have their places of business in different signatory states.  Such settlement agreement shall be directly enforceable in all states that have ratified the Convention.

For example, a company with a place of business in Serbia could, after mediation and in accordance with the resulting agreement, seek direct enforcement in any other state, provided that: 1. such state ratified the Convention; and 2. Serbia ratified the Convention.

The Convention is expected to significantly enhance legal transactions, and provide relief from all the costs (time, money) of arbitral and court proceedings.  In addition, direct enforcement in states that have ratified the Convention should serve to forestall multiple court and other proceedings aimed at settling claims between the parties to the dispute.

The World vs the Balkans

Law students in Serbia learn (at least in theory) in the first year of their studies that law ought to follow life, and that the process of shaping positive legal framework should accurately reflect the collective mental and spiritual state of a society.

Carl Jung’s creational opus was mainly based on the concept of archetype (on what truly lies within us) and attempted to prove that the archetype is indestructible, regardless of the times.  For example, he claimed that humans today, despite the industrial revolution and the domination of science, hasn’t made even the smallest move away from early humans when it comes to superstitions and inclination towards rituals.  The only difference lies in their manifestation.

Technology is the dominant religion of modern humans, their Holy Bible.  On the other hand, despite the major technological inroads and the need to adapt legal and other transactions to the era of digitalization and hypertrophy of consumerism, sometimes the mental structure of a nation (or a region) is such that it, more or less, successfully resists global processes, and retains its “behavioral” niche.  The Balkans is an example of such a region, and the people who live there are an example of such nations…

In the developed states, both East and West, everything is far more “clearer, calmer, rational”.  Their modus operandi may be summarized in the maxim “time is money”.  While people from the Balkans say this without really meaning it, these others really do mean it and live by it.  “Time is money, my friend!” is a reflection of a collective DNA of a world which people from the Balkans claim to want to be a part of, but which, at the same time, they instinctively insulate themselves from.

Bearing in mind the differences between the developed states of the East and the West, and the Balkans, views on dispute resolution are also different.  On the one hand, a popular means of dispute resolution is mediation (e.g. USA), while on the other hand, the courts play the leading role in the Balkans.  Additionally, bearing in mind the transnational scope of the Convention in which the corporate culture of one world may affect the other, the Convention could, but not necessarily, mark the starting point of a (r)evolution of using mediation as a dominant means of dispute resolution in the Balkans.  Therefore, the Convention, as a multilateral agreement concluded by nations of different dispositions and cultures, provides an opportunity to, through knock-on cultural effects, properly understand the true nature of mediation as voluntary, rational, effective and an alternative means of dispute resolution, and for settlement agreements resulting from successful mediation to assume the same legal effect as a decision rendered by a court or the arbitral tribunal.

Litigation vs Mediation

People from the Balkans have always been predisposed to litigation and disputes.  Balkan cinematographers have perpetuated this temperament, one which is driven by a thirst for material gain, but also by a desire prove to the whole world that they are in the right. It is “in their blood” to litigate, not only to get what is owed, but to make the other party “pay for disrespecting them”.  Is there a better (legal) means of achieving this instead of a final judgement which orders the other party, under the threat of enforcement, to take certain steps and pay the costs of proceedings arising from their definite defeat?

In Serbia, mediation is regulated by the Mediation in Dispute Resolution Act (the “Act”), which repealed the previous Mediation Act.  One of the core principles of the Act is the principle of voluntariness, pursuant to which mediation is “conducted voluntarily, on the basis of explicit agreement between the parties”.  The only exceptions are those disputes in which the court, in accordance with a special act, is required to refer the parties to the mediation process, which precedes court or other proceedings.

With regard to the above, it is worth recalling the temper of “people from the Balkans” which, even when they accept the possibility of negotiating amicably, they never fail to turn to what they know best in the end- litigation.  Consequently, if a mediation proceeding was to go ahead in Serbia, in accordance with the Act – there would always be a lingering risk of it being abandoned “halfway through”, or even rejected, making a dead duck of any amicable dispute resolution clause.  However, and as discussed above, if the Convention is adopted and ratified by a large group of states, it paves the way for the corporate culture of societies, where mediation has already become a traditional means of dispute resolution, to be gradually adopted by companies in the Balkans. Only time will tell whether the opportunity will be seized.

Interview with Ivana Ninčić Österle

In order to obtain first-hand information and a more detailed analysis of all aspects related to the Convention and the mediation process itself, a very insightful meeting was held at the Gecić Law Office with Ivana Ninčić Österle, a member of the working group for drafting amendments to the Mediation in Dispute Resolution Act and one of the representatives of the Republic of Serbia at the signing ceremony of the Singapore Convention.

The importance of the Convention and its reach was discussed at the meeting, in terms of level of influence that it will exert on people from this area, as well as on people from other nations with traditional perceptions of dispute settlement, with the aim of popularizing recourse to mediation as an alternative way of resolving disputes with a foreign element.

Ivana believes that the Convention will reverberate and crucially influence people’s awareness of mediation and all its benefits (as evidenced by the number of countries that signed the Convention on the very first day it was opened for signature).  It was pointed out that, despite the existing legal provisions on the referral of parties to mediation, practice in Serbia so far has shown a general lack of will or time on the part of judges to actually implement these provisions.  Only a few courts and judges stand out in this regard.  In that regard, there was a discussion about various possibilities considered by the working group of the Ministry of Justice, to raise awareness about mediation among the general public and those involved in business, in the form of proposals for amendments to the relevant regulations, and the creation of legal mechanisms through which legal entities would more frequently resort to this form of dispute settlement.  For example, one of the current hypothetical normative solutions would be to create a mechanism by which the suitability of a particular case for mediation would be determined after a lawsuit is filed and, depending on that, the parties would be required to have a mandatory meeting with a mediator.  At the meeting itself, the parties would consider joining the mediation process as an alternative way of resolving their dispute, with the assistance of the mediator.  Ivana pointed out that the existing legal provisions also allow for referral to a mediator in order learn about the mediation process, but that they have been largely ignored to date.  This form of referral is the best means of promoting mediation, because who is better equipped to convince parties of the benefits of the process than the mediator, who recommends not only the process, but himself/herself as well.  Additionally, she pointed out that in Croatia, under recent amendments to the Civil Procedure Act, the court may direct the parties to engage in mediation.  This is mandatory in certain cases.

On the other hand, it was pointed out (unanimously) that no proposal for a normative solution could be put to the experts or general public until, among other things, such time as all relevant legal and practical aspects of the implementation of such a solution are worked out (legality and legal conformity on the one hand, and logistical, material and other resources that would be required, on the other).

Regardless of the specific legal solutions, it was jointly concluded at the meeting that attorneys should champion mediation as an alternative dispute resolution method, through contact and professional relationship with clients, raising their awareness of the need for more efficient and economically more rational dispute resolution, while maintaining business relationships. Moreover, the Legal Profession Act stipulates that the provision of legal aid also includes mediation for the purpose of amicable dispute resolution, while the Code of Professional Ethics further requires attorneys to inform clients about the possibility and efficiency of resolving disputes amicably.  Ivana noted that these provisions make sense as mediation enables parties to come up with creative solutions in an informal atmosphere that would not otherwise be possible in litigation, and a way for attorneys to increase client satisfaction and retention.  She also noted that attorneys abroad are heavily involved as mediators of commercial disputes, and that in Serbia 20% of mediators are attorneys. In other words, the fact that more than 200 attorneys are registered as mediators is proof that they believe in mediation and that they are willing to facilitate dispute resolution as mediators.  This is particularly pleasing because, if the Convention succeeds in fostering international mediation of commercial disputes, more and more trained mediators will also be needed in the region, who will independently or as comediators help companies find amicable solutions to disputes.

Conclusion

Do people from the Balkans need to be press-ganged into mediation, or does it call for some kind of Solomon’s solution?  For example, could this be manifested in the form of a mechanism to determine the suitability of a case for mediation and consequently make it mandatory (only in those cases) for the courts or other competent authorities to refer parties to a meeting with a mediator?  Furthermore, in what percentage of cases would these provisions really be effective in practice and result in successful mediation?  Or would it most often lead to a meeting with a mediator just to complete the formalities?  After all, the latter scenario is certainly on the cards if the forces of social change fail to start raising awareness of mediation, which itself calls for a considerable investment of resources (in various forms). Time and case law should provide a final answer to the questions raised above.  Regarding the formal aspect of ratification of the Convention and the creation or strengthening of legal mechanisms to encourage mediation, there is no doubt that Serbia will do all in its power provide a platform for this once the most appropriate solutions are found through the process of collaboration.  Yet, as already stated, a positive legal framework of a society is, to a great extent, a reflection of developments and turmoil in mind-set.  Therefore, in order to effectively realize legal aspirations and projections, an adequate collective consciousness is required without exception. For people from the Balkans, a kind of mind-set revolution is required, and it is well known that revolutions of this kind are slowest of all…

Authors: Milinko Mijatović and Nemanja Jovanović