Legal Alert: Cross-Border Enforcements of Mediated Settlement Agreements

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The United Nations Convention on International Settlement Agreements Resulting from Mediation (referred to as the Singapore Mediation Convention – “Convention”) was signed by 46 member States of the United Nations on 7 August 2019 in Singapore. As a binding instrument, the Convention paves the way for mediation as the preferred alternative dispute resolution mechanism in international trade. In light of the foregoing, this Legal Alert will briefly address Indonesia’s prospect of signing and even ratifying the Convention.

Scope of Application

The Convention applies to written international settlement agreements resulting from mediation that were concluded to resolve only commercial disputes, excluding transactions that are personal or familial in nature and purposes. The “international” element would be fulfilled when at least 2 (two) of the parties have their places of business in different States or the place of business is located in a State that is different from where the substantial part of the obligation is performed or where the subject matter of the settlement agreement is most closely connected.

Moreover, the Convention does not apply to settlement agreements that were approved or concluded in court proceedings, enforceable as a judgment, or that is recorded and enforceable as an arbitral award.

State parties are also offered a relatively high degree of flexibility as the Convention among others broadly defines the term “mediation” without restricting how the process must be carried out and allows any third person “lacking the authority to impose a solution upon the parties to the dispute” to be a mediator. Settlement agreements can also take in the form of an electronic communication as long as it is accessible and serves its intended purpose.

Enforcement Process

While State parties enjoy autonomy in determining the enforcement procedure, the Convention mandates a “competent authority” to verify and enforce the settlement agreement. The settlement agreement submitted to the competent authority shall contain the signatures of the parties and supported with evidence proving that it resulted from mediation, such as the mediator’s signature or an attestation by the institution that administered the mediation.

The competent authority may refuse enforcement on certain grounds, including in cases where the reliefs sought are unclear, incapable of being performed under the applicable law or are against public policy, and the mediator committed a serious breach of its standards of conduct.

Other Prominent Features

In the event where there is an overlapping claim relating to the settlement agreement is made to another authorized forum, the Convention briefly states that the competent authority may adjourn the decision and interestingly, order a party to provide security if requested the other party without explanation.

State parties are entitled to make a reservation to exempt the application of the Convention in cases where the settlement agreement is concluded with a State party or its governmental agency. Apart from that, State parties can make a declaration that the Convention only applies if the parties in the settlement agreement have agreed to its application.

To further promote international trade, the Convention welcomes regional economic integration organizations like the Association of South East Asian Nations (ASEAN) and the European Union to also sign, ratify accept, approve or accede to the Convention and be bound to the rights and obligations contained therein.

The Convention is the first standardized framework that may be relied upon by State parties to enforce mediated settlement agreements efficiently in different jurisdictions. Nevertheless, the effectiveness of the enforcement would be predominantly left to the procedures applicable in the respective State parties.

Application in Indonesia

The constructive process of mediation that balances the interest of both parties is in line with the Indonesian value and culture that encourages decision making based on the consensus between the parties (e.g. musyawarah and mufakat). Not only does this enable the parties to maintain good relationship post-dispute, the enforcement process would accordingly be less prone to challenges.

Indonesia’s ratification of the Convention would bring commercial certainty and foster the culture of mediation in Indonesia. In turn, the flow of investments and familiarity of the Indonesian courts with the enforcement of mediated settlement agreements could also increase.

Indonesia already has an existing legal framework on the enforcement of settlement agreements as regulated in the Supreme Court Regulation No. 1 Year 2016 regarding Mediation Procedure in Courts (“Mediation Regulation”). Settlement agreements concluded through a court-annexed or out-of-court mediation arising out of certain disputes that fall within the Indonesian court’s jurisdiction may be registered and drawn up as a deed in a court decision with an executorial power. However, they would be excluded from or inapplicable under the Convention.

Similar to the Convention, the Mediation Regulation also requires the Indonesian district court to first verify the settlement agreement to ensure that the reliefs do not contradict with the applicable laws, public policy and/or morals, deprive third parties, or not possible to be executed.

Indonesia appointed the court as the competent authority to enforce awards pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). If Indonesia ratifies the Convention and does the same, then Indonesian courts must have a clear understanding on the enforcement procedures for out-of-court mediated settlement agreements based on the Convention or only the Mediation Regulation.

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