It’s Time to Settle How we Enforce Transnational Conciliation Agreements

It’s Time to Settle How we Enforce Transnational Conciliation Agreements

Trevor N. May is a first year law student at McGill University, where he is an associate editor of the MJDR and the managing director of the McGill Arbitration Student Society. An alumnus of McGill and the University of Toronto, he wrote his Master’s thesis, “Salida: Latin America, ICSID, and the Politics of International Investment Arbitration,” on Bolivia, Ecuador, and Venezuela’s withdrawal from the International Centre for the Settlement of Investment Disputes. As a researcher, Trevor has worked with the Institute for the Study of International Development in Montreal and the Inter-American Development Bank in Washington D.C. Outside of research, he enjoys reading both fiction and non-fiction, travelling, and running.

Conciliation’s potential as an alternative form of transnational dispute resolution remains unrealized. Non-uniform enforcement can leave its results uncertain, limiting its attractiveness to potential users. In light of UNCITRAL’s recent efforts to enhance international conciliation’s effectiveness, this post describes the challenges facing conciliation, reports on the most recent efforts of UNCITRAL’s Dispute Settlement Working Group to improve it, and argues for a convention that would standardize the way settlement agreements achieved through conciliation are recognized and enforced. 

Conciliation is a voluntary “process… whereby parties request a third person or persons (‘the conciliator’) to assist them in their attempt to reach an amicable settlement of their dispute arising out of or relating to a contractual or other legal relationship.” [1] While conciliation is often distinguished from mediation, the UNCITRAL Model Law on International Commercial Conciliation considers them synonymous. For uniformity’s sake, I will refer to conciliation.

There is currently no international enforcement mechanism for settlement agreements achieved through transnational conciliation. As it stands, if one party refuses to uphold a settlement, its counterpart typically has to sue in a domestic court to enforce the agreement. [2] Beyond the jurisdictional limitations this recourse imposes on parties seeking enforcement, resorting to litigation to uphold a conciliation settlement “undermines the benefits” of pursuing conciliation in the first place. [3]

To remedy this state of affairs, the United Nations Commission on International Trade Law (UNCITRAL) has tasked its Dispute Settlement Working Group with developing an instrument that would standardize enforcement of international conciliation agreements. Among other options, the Working Group is considering a potential convention whereby member states would agree to enforce the outcomes of international conciliation. Noting the success that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) has achieved for international arbitration, supporters of a conciliation convention are eager for UNCITRAL to develop an equivalent measure for international conciliation.

The Working Group, however, has yet to agree on the form “the instrument” will take. In fact, it has intentionally avoided committing to any form. At its most recent session, held September 12-23 in Vienna, “it was generally felt that it would be premature for the Working Group to make a decision on the final form of the instrument”. [4] 

This hesitancy is concerning. While exploring multiple options is prudent, after three multiday sessions over a greater than year-long period, it is difficult to consider failing to agree on the basic nature of the instrument progress. To its credit, however, the Working Group did achieve consensus on several aspects of the instrument, whatever its eventual form.

Importantly, it was decided that the instrument should apply to the “enforcement of international commercial settlement agreements resulting from conciliation.” [5]  Whether this scope will extend to the “recognition” of settlement agreements, however, has not been finalized as this recognition could confer a res judicata effect on agreements in certain jurisdictions, precluding further negotiation. [6] Methods of addressing this concern were debated but left to be resolved in later sessions.

The scope was further refined such that “[s]ettlement agreements reached during judicial or arbitral proceedings but not recorded in a judicial decision or an arbitral award should fall within the scope of the instrument.” [7] While excluding judicial decisions and arbitral awards will limit the number of parties served by the instrument, the working group considered it best to avoid “overlap” with other conventions and minimize confusion among enforcement authorities over which instrument applies, although the final wording of this provision remains to be determined. [8]

Key terms that were finalized include “international” and “settlement agreement.” For the purposes of the instrument, “[a] settlement agreement is international if… [a]t least two parties to a settlement agreement have, at the time of the conclusion of that agreement, their places of business in different States.” [9] What constitutes “places of business” was intentionally undefined and left to the competent enforcing authority to decide on a case by case basis. [10] The Working Group further agreed that the term “settlement agreement” should refer to “an agreement in writing, that is concluded by parties to a commercial dispute, that results from international conciliation, and that resolves all or part of the dispute.” [11]

While these determinations are worth noting, the repeated references to “the instrument” above and in the report of the Working Group itself belie the results of the session. The value of a scope and certain definitions for an “instrument” whose essential form is undecided is debatable. Moreover, much of what remains to be decided is indeterminate because the form of the instrument is still unknown. For instance, the meaning of “commercial,” especially important given that the instrument is intended to address commercial agreements, has been left undefined until the form of the agreement is determined. [12]

The leading contender against a convention is model legislation that could be adopted by states. Since enforcing settlement agreements is novel, some have argued that “a uniform regime… might not be desirable or feasible” considering the divergence in current practice. [13] Alternatively, model legislative provisions would “highlight the usefulness of conciliation in international trade and could effectively lead to harmonization.” [14]

A proposal for model legislation that provides for a flexible approach to enforcement is somewhat bizarre given that UNCITRAL’s Model Law on International Commercial Conciliation already holds that settlement agreements are “binding and enforceable” while leaving the enforcement method up to states. [15] While new model legislation would delineate a method of enforcement, if states are free to adapt it at will, the standardization that the instrument is intended to achieve may be compromised.

Ultimately, the cross border nature of international conciliation agreements evidences a need for a “binding instrument” that makes enforcement certain. [16] As participants in the Working Group have noted, conciliation is under-used in commercial disputes because it lacks a convention. [17] Conventions allow states to gradually adopt just as model laws would, but the advantage is that the end result is cohesive and certain. This process is evident in how states have slowly entered institutions like the International Centre for the Settlement of Investment Disputes (ICSID) and the World Trade Organization (WTO), much to the benefit of investment and trade law, respectively. As the NY Convention paved the way for cross-border enforcement of arbitral awards, [18] a new convention would promote conciliation in international business and inspire international actors’ trust in its results.

It is time to move the debate along so drafting a convention can begin. The Working Group’s concerns of prematurity are suspect given that it is deliberating on draft provisions and definitions, but has not decided what it is drafting. As the Working Group itself has noted, “without a decision on the [instrument’s] form, it would be difficult to resolve some of the outstanding issues” being deliberated. [19] Rather than debating what to debate, the Working Group should devote its efforts to designing a conciliation convention that will fill a long-neglected gap in international private law.

Trevor N. May
Editor – McGill Journal of Dispute Resolution

[1] UNCITRAL, Model Law on International Commercial Conciliation, (New York: UN, 2002) at Art. 3 [Model Law].
[2] KC Lye & Tim Robbins, “Enforcement of mediated settlement agreements” (May 2016), Norton Rose Fulbright (publication), mediated-settlement-agreements.
[3] Ibid.
[4] Report of the Working Group II, UNCITRAL, 65 th Sess, A/CN.9/896 (2016) at para 213 [Report].
[5] Note by the Secretariat, UNCITRAL, 65 th Sess, A/CN.9/WG.II/WP.198 (2016) at para 1 [Note].
[6] Report supra note 4 at para 78.
[7] Ibid at 48.
[8] Ibid at para 210.
[9] Ibid at para 20; Note supra note 5 para 7.
[10] Report supra note 4 at para 28.
[11] Ibid at para 146.
[12] Ibid at para 16.
[13] Ibid at para 139.
[14] Ibid at 140.
[15] Model law supra note 1 at Art. 14.
[16] Report supra note 4 at 136.
[17] Ibid at para 137.
[18] Ibid.
[19] Ibid at para 212.