Prospects for Investor-State Mediation in Asia

HomeContentProspects for Investor-State Mediation in Asia

Prospects for Investor-State Mediation in Asia: Belt and Road projects and the Singapore Convention 

Reporter:  Mushegh Manukyan (Three Crowns, Washington DC)

It is often remarked that mediation is deeply enshrined in Asian culture. For example, Wang Wenying in her article entitled “The Role of Conciliation in Resolving Disputes: A P.R.C. Perspective” stated traditional Chinese values such as praise of harmony (he wei gui), moderation in all things (zhong yong), concession or yielding (reng), and cessation of litigation (xi song) have been associated with a preference for mediation. Likewise, Confucianism and Taoism deem litigation as the conflict-resolution mechanism of last resort because of its association with “the breakdown of social harmony.” Given such enshrined traditional values, it is unsurprising that one of the only known investor-state mediations involved an Asian State (Systra v Philippines). The treaty practice of Asian States reflects an emphasis on amicable dispute settlement; many Free Trade Agreements entered into by such States as Vietnam, Malaysia, and China contain “good offices, conciliation and mediation” provisions, and the EU-Korea FTA (2010) and the current text of the EU-Vietnam trade agreement (2018) go further in prescribing sophisticated mediation mechanisms. 

Recent international developments reflect an upsurge in interest in mediation, including in relation to disputes involving Asian parties. This article focuses on two recent developments that will be of interest to dispute-resolution practitioners in Asia.

Formation of an international panel of mediators for disputes arising out of the Belt and Road Initiative (BRI)

Singapore and China recently signed an agreement to form an international panel of mediators to handle disputes arising from the multi-billion dollar infrastructure projects of the BRI. The agreement contemplates a skills exchange program that will establish best practices in mediation and equip panelists to resolve BRI disputes. China and Singapore will also jointly develop mediation rules, case management protocols, and enforcement procedures.

Although China and Singapore are both Asian states, the geographic scope of BRI projects extends far beyond Asia to encompass regions as diverse as Russia & CIS, Central Asia, and North Africa. Mediation is often most effective where mediators have a deep understanding of the legal and cultural traditions of the disputing parties and their languages. It is thus to be expected that BRI mediation will involve a diverse set of experienced practitioners.  

The formation of the BRI mediation panel has been framed as a conscious departure from adversarial—and perceivably Western—models of dispute resolution. In remarks given to commemorate the formation of the panel, Singapore’s Senior Minister of State for Law, Mr. Edwin Tong, observed that “[t]he rules and procedures for settling cross-border commercial disputes today are generally adversarial and embody western values and norms. They are not necessarily the best instruments for all types of disputes. Asian businesses need an alternative way of settling disputes that prioritize preserving the harmony and ensuring that the relationship continues.” Mr. Tong’s emphasis on the preservation of harmony and continuity of commercial relationships aptly reflects the key features of mediation. 

The precise scope of disputes potentially subject to mediation to be handled by the BRI panel remains unclear. It would be unsurprising, however, if the panel was intended to offer mediation services in relation to both commercial and investor-state disputes arising from BRI projects. The Singapore International Mediation Centre is positioned to play a prominent role in administering mediation of BRI disputes.
Further progress in this regard was achieved during the Second Belt and Road Forum for International Cooperation that took place in Beijing on 25-27 April 2019. Here, the China Council for the Promotion of International Trade, China Chamber of International Commerce, together with the industrial and commercial organizations and legal service agencies from over 30 countries and regions jointly established the International Commercial Dispute Prevention and Settlement Organization with a mandate to prevent disputes, inter alia, through mediation, and resolve them as they arise. 

Although most mediated settlement agreements are complied with voluntarily, the lack of a global enforcement tool was often identified as one of the disadvantages of mediation for international disputes. As discussed below, this gap has now been filled by the Singapore Convention—an international treaty that, for the first time, offers the prospect of global enforcement of mediated settlement agreements. 

The United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention)

On 20 December 2018, the U.N. General Assembly adopted the Singapore Convention, successfully concluding more than four years of work by the UNCITRAL Working Group. The Singapore Convention will be open for signature from 1 August 2019, with a signing ceremony scheduled for 7 August 2019 in Singapore. 

The Singapore Convention covers the enforcement of mediated settlements of international commercial disputes and promises to “contribute to the development of harmonious international economic relations.” As with the New York Convention, the Singapore Convention does not define what constitutes a “commercial” dispute. However, at least one commentator (Timothy Schnabel) who participated in the negotiation of the Singapore Convention has suggested that the term may encompass “at least some investor-state disputes, in areas such as construction or natural resource extraction.” The Singapore Convention does not contain any explicit exclusion of investor-state disputes or public law matters in stark contrast with the draft Hague Convention on the Recognition and Enforcement of Foreign Judgments, which specifically excludes public law matters. To that end, Asian States wanting to encourage investor-state mediation, whether for BRI projects or otherwise, may consider including a specific provision in their respective implementing legislation to ensure that the Article 1 term of “commercial disputes” covers settlement agreements of investor-state disputes. 

Article 8 of the Singapore Convention presents another important provision in the context of investor-state disputes, which allows States to exclude settlement agreements to which the State is a party, or to which a government agency or person acting on behalf of a government agency is a party. Time will tell whether States will make such a reservation and potentially exclude the application of the Singapore Convention to mediated settlements involving the State or a State agency. Indeed, Asian States aiming to encourage mediation would be expected to refrain from making such a reservation because it would be inconsistent with the Asian culture of favoring dispute resolution methods that preserve the harmony and ensure continuity of parties’ relationships.  

In this context, the Asian pro-mediation culture was also demonstrated during the recent meeting of the UNCITRAL Working Group III (Investor-State Dispute Settlement Reform), in which Indonesia pointed to the need for introducing mandatory mediation as an alternative dispute resolution resorting to investor-state arbitration. Indonesia highlighted that it had introduced this mediation procedure in its BIT negotiations. Similarly, Thailand was of the view that “current concerns on ISDS [had to] be also addressed by alternative dispute resolution.”

The Singapore Convention is a long-awaited development for the mediation community, which elevates mediated settlements to the level of an arbitration award by creating a mechanism for global enforcement. As the Chairman of the Board of the Singapore International Mediation Centre put it, “[m]ediation will now have “teeth”,” stressing that the Convention “will be the next game-changer in the field of international dispute resolution.” It is to be hoped that States embrace it with similar enthusiasm as they did the New York Convention, so as to enable international parties—including under BRI contracts—to mediate with the same degree of confidence regarding enforcement prospects with which they arbitrate. As Pieter Sanders once said with regard to the New York Convention, the same could be said in relation to the Singapore Convention: “Vivat, Floreat et Crescat [Singapore] Convention”.         

The BRI mediation panel and the Singapore Convention present a unique opportunity for Asia to shape the future of international mediation, and these innovations provide mediation practitioners with the tools necessary to efficiently and cost-effectively resolve disputes arising out of BRI projects.   

Click Newsletter Blog to go back. 

Share this