Author: Ayca Bengu Koksal
Introduction
The United Nations Convention on International Settlement Agreements Resulting from Mediation (“Singapore Convention”) was adopted by the United Nations General Assembly on 20 December 2018. It was signed by Turkey on August 7, 2019, when it was opened for signature. Finally, the Presidential Decision dated 21 April 2021 and numbered 3866 on the ratification of the Singapore Convention entered into force after being published in the Official Gazette dated 22 April 2021 and numbered 31462.
The Singapore Convention regulates the enforceability of settlement agreements that resolve commercial disputes of an international nature through mediation.
Mediation, which is one of the alternative dispute resolution methods, strives to provide a faster and more cost-effective solution method than state courts, as in arbitration. However, mediation is not a dispute resolution method that is used as frequently as arbitration. One of the most important reasons for this is that arbitral awards rendered as a result of arbitration proceedings can be easily enforced in other countries according to the 1958 New York Convention; whereas the same facility is not provided for settlement agreements that are reached through mediation.[1] The Singapore Convention aims to remove this obstacle to the mediation method and to extend its application.
Enforcement of Settlement Agreements in Turkey
Different suggestions have been put forward for the execution of settlement agreements signed as a result of mediation:
- Since the settlement agreement is a private law contract subject to the law of obligations, its execution can be demanded through litigation, like other contracts. However, in this case, all substantive legal defenses that the parties may put forward within the framework of the law applicable to the contract can be made.[2]
- The settlement agreement reached as a result of mediation can be accepted as a court decision, that is, a verdict. When the settlement agreement is formally executed, its execution will be in the form of the execution of court decisions. The decision will have consequences in foreign courts in accordance with the recognition/enforcement provisions of foreign decisions.[3]
- The settlement agreement made during arbitration proceedings can be made into an arbitral award. In this case, the execution of the said arbitral award will take place in accordance with the international arbitration laws of the countries, the New York Convention, or the provisions on the recognition and enforcement of foreign arbitral awards.
When the legal regulations in Turkey are examined, it is clear that settlement agreements made as a result of mediation are accepted as a judgment document. Pursuant to Article 18(2) of the Law on Mediation in Civil Disputes (“HUAK”);
“[…]if the parties reach an agreement at the end of the mediation activity, they may request an annotation regarding the enforceability of this agreement document. If mediation has been applied before the lawsuit is filed, an annotation regarding the enforceability of the agreement may be requested from the magistrate's court of the place where the mediator works. If mediation is applied during a trial, an annotation regarding the enforceability of the agreement may be requested from the court where the case is being heard. The agreement containing this annotation is considered as a judgment document.” According to Article 18(4) of the HUAK, “The agreement document signed jointly by the parties, their lawyers and the mediator shall be deemed a document in the nature of a verdict without seeking an annotation of enforceability.”
Giving an enforceability annotation by the court to the settlement agreement made in accordance with the HUAK does not make the settlement agreement a verdict, but rather it only provides acceptance as a verdict-like document. Therefore, although a settlement agreement reached as a result of mediation according to the HUAK can be enforced in Turkey, it cannot be enforced as a foreign court decision in foreign countries. By the same token, even though the settlement agreement concluded in a foreign country as a result of a mediation made in accordance with the laws of that country is considered as a verdict-like document, it cannot be enforced in Turkey as a foreign judgment.
The Singapore Convention removed these obstacles to the enforceability of settlement agreements.
Enforcement of Settlement Agreements Under the Singapore Convention and Grounds for Refusal of Enforcement
According to the Singapore Convention, in order for settlement agreements to be enforceable, they must be mediated, international in character, commercial in nature and suitable to mediation:
- Mediation: Settlement agreements must be concluded through mediation. Mediation is defined under art. 2(3) of the Singapore Convention which defines mediation as a process in which “parties attempt to reach an amicable settlement of their dispute with the assistance of a third person or persons (mediator) lacking the authority to impose a solution upon the parties to the dispute”.
- International in character: The Singapore Convention is applicable to international settlement agreements. The term "international" used here includes the element of foreignness. The circumstances under which settlement agreements are considered of international nature are set out in art. 1(1) of the Singapore Convention.[4]
- Commercial nature: An international settlement agreement must be an agreement resolving commercial disputes. The definition of ‘commercial’ is not given in the Convention.
- Suitable to mediation: Since there is no clear definition in the Singapore Convention, the qualification on this subject will be made according to the law of the country (lex fori) where the execution of the settlement agreement is requested. However, the Singapore Convention expressly excludes settlement agreements which are concluded to resolve a dispute arising from transactions engaged in by one of the parties (a consumer) for personal, family or household purposes, or relating to family, inheritance or employment law.
Art. 5 of the Singapore Convention provides the reasons for refusal of enforcement of a settlement agreement. The existence of these reasons does not necessitate the rejection of the execution of the settlement agreement; but rather makes the rejection of the request possible:
- Incapacity: If a party to the settlement agreement is incapable of making this agreement, the execution of the agreement may be refused.
- Invalidity of settlement agreements: If a settlement agreement is void, ineffective, or impossible to implement, the enforcement request may be rejected. This provision is the same as the invalidity terms of arbitration agreements in art. II (3) of the New York Convention.
- A settlement agreement is not binding or final, nor may it be subsequently changed: If a settlement agreement is not binding, nor final according to the terms of the agreement, enforcement request may be refused. This provision will only be enforceable if the parties expressly state that the agreement is not binding or final.
- The execution of settlement agreements: If the undertaking specified in a settlement agreement has already been fulfilled, the enforcement of the settlement agreement cannot be demanded. In the case of partial performance, the enforcement request can only be made for the unperformed part.
- If a settlement agreement is unclear or incomprehensible: The fact that a settlement agreement is not clear and intelligible was regulated as a reason for the denial of execution.
- If the execution is contrary to the provisions of the settlement agreement: If the enforcement request is contrary to the terms of the settlement agreement, the request may be refused. Accordingly, if the parties have accepted a jurisdiction clause for the execution of the settlement agreement, requests contrary to that clause will not be accepted.
- Mediator's abuse of power: The Singapore Convention also accepted the rejection of the execution of the settlement agreement due to reasons arising from the mediator. Accordingly, if the mediator has seriously violated the standards applied to the mediator and mediation, and if the relevant party would not have made the settlement agreement without this violation, the enforcement of the agreement may be refused.
- If the execution of the settlement agreement is contrary to the public order: The execution of a settlement agreement which is contrary to the public order of a state party is a ground for refusal. It is accepted that the approach regarding the exceptional and narrow interpretation of the concept of public order in the New York Convention is also valid in the execution of the settlement agreement.
- If the subject of the dispute is not suitable for mediation: If the subject of the dispute is not suitable for resolution through mediation in accordance with the law of the state party, the execution of the settlement agreement may be refused.[5]
Conclusion and Evaluation
The settlement agreement reached as a result of a mediation carried out in accordance with the provisions of HUAK, even if it is of an international and commercial nature, is not within the scope of the Singapore Convention, as it is a judgment document according to Article 18 of the HUAK and can be executed in Turkey accordingly. However, since the settlement agreement that can be executed as a judgment document in Turkey is not of this nature in a foreign country, it will be covered by the Singapore Convention. On the other hand, on the condition that there is an element of foreignness, the execution in Turkey of a settlement agreement reached as a result of a mediation that is not made within the scope of the provisions of HUAK may be subject to the provisions of the Singapore Convention. Likewise, even if the settlement agreement concluded as a result of the mediation carried out in another country according to the laws of that country is accepted as a judgment document in the foreign country, its execution can be requested within the framework of the Singapore Convention, since it cannot be enforced as a court decision in Turkey.
The Singapore Convention aims at the more frequent use of mediation in international trade by enabling the effective execution of settlement agreements. This is possible, first and foremost, with the signing of a large number of states to the Singapore Convention. Turkey has taken the first step in this direction by signing and ratifying the Singapore Convention.
[1] ÖZEL, Sibel; Arabuluculuk Sonucunda Yapılan Milletlerarası Sulh Anlaşmaları Hakkında Birleşmiş Milletler Sözleşmesi: Singapur Konvansiyonu, Marmara Üniversitesi Hukuk Fakültesi Hukuk Araştırmaları Dergisi, Volume 25, Issue 2, Prof. Dr. Ferit Hakan Baykal Armağanı, December 2019, p. 1191.
[2] For SUSSMAN, Edna; “The Singapore Convention the Enforcement and Recognition of International Mediated Settlement Agreements” 3 ICC Dispute Resolution Bulletin, 42 (2018) p. 46. Please refer to ÖZEL; p. 1192.
[3] ÖZEL; p. 1192.
[4] Singapore Convention art. 1(1);
(a) At least two parties to the settlement agreement have their places of business in different States; or
(b) The State in which the parties to the settlement agreement have their places of business is different from either:
(i) The State in which a substantial part of the obligations under the settlement agreement is performed; or
(ii) The State with which the subject matter of the settlement agreement is most closely connected.
[5] ÖZEL; p. 1200-1207.
