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International relations

U.S. and China keep Singapore waiting on business mediation treaty

U.N. pact led by city-state gains little ratification traction amid COVID

Singapore is positioning itself as a neutral forum for resolving international business disputes, and is lobbying peers to ratify a U.N. mediation treaty that bears its name.   © Reuters

SINGAPORE -- Demand for international mediation is rising, but a United Nations treaty spearheaded by Singapore is in ratification limbo two years after its introduction, as the pandemic alters priorities and the world's two biggest economies stay on the sidelines.

The U.S. and China have both signed the Singapore Convention on Mediation with over 50 others. But the rival powers have yet to ratify it or give equivalent approval, and in fact only a handful of smaller countries besides the treaty's namesake have done so. This keeps a potentially useful tool for managing fallout from the pandemic and U.S.-China tensions on the back burner -- a state of affairs Singapore hopes to change.

The Singapore Convention, launched in August 2019, gives different jurisdictions the ability to enforce commercial settlement agreements arrived at through mediation, as it sets out a common legal framework.

In contrast to arbitration, where an arbitrator looks into the legal rights and wrongs of a dispute and makes a decision, mediation is a softer approach. Conflicting parties narrow their differences through discussion before coming to an agreement. The convention gives legal force to such deals, so businesses have more certainty that the results of mediation will be honored within jurisdictions that have ratified the treaty.

Singapore's second minister for law, Edwin Tong, told Nikkei Asia in a recent interview that the pace of progress was not surprising. "In its initial stages, just like any new convention, it will take a bit of time, simply because besides a convention being agreed to, there needs to be a domestic process," he said.

Tong noted that signatories would have to ensure the international agreement jibes with rules and regulations at home. "That had taken us some time but we were quicker off the mark," he said of Singapore. "Other countries would be a little slower and that is to be expected."

Named after the city-state to recognize its contributions in developing it, the convention has been ratified by only Singapore, Honduras, Fiji, Qatar, Saudi Arabia, Belarus and Ecuador, according to a U.N. website. Implementing it in more countries will be key, Tong said -- especially larger economies.

"The nature of the treaty is such that the more countries come on board, the more multiparty and multifaceted it is, the better it is," he said. "You look at number of countries as one marker, you look at size of economies as another marker and as long as you grow either one of them, obviously the treaty, and the convention, will have a bigger effect."

Sharon Lin, partner in litigation and arbitration at law firm Withers KhattarWong, noted that countries have had to dedicate much of their resources and attention to coping with the unprecedented health crisis, entailing complex regulatory and policy decisions.

"Signatory States may not exactly feature 'taking steps towards the ratification of the Singapore Convention' as the foremost consideration or of the highest priority as they try to deal with the pandemic in this difficult period."

Still, she noted, "Both the U.S. and China have signed the Singapore Convention, so in a sense while not legally bound to comply with the treaty itself, they have indicated their intention to take steps to be bound by the treaty at a later date."

Taking the next step would be significant especially in light of the U.S.-China trade war, disputes over the role of Chinese telecommunications company Huawei Technologies' international pursuits, and U.S. allegations of China stealing trade secrets. In theory, the mediation treaty could help companies from the two economic giants deal with some of these differences.

Nevertheless, Lin suggested that sealing participation in the Singapore Convention "may not be such a straightforward process and especially for bigger economies, may take a longer time."

Meanwhile, as the COVID-19 pandemic disrupts business and strains corporate finances worldwide, mediation cases are on the rise, according to the not-for-profit Singapore International Mediation Centre.

Filings at the SIMC almost doubled to a record 43 in 2020, from 23 in 2019. In the first eight months of 2021 alone, the center said it received 54 cases.

In addition, the mediation requests pertain to disputes with higher sums of money at stake. The SIMC said the average dispute value of cases in the first eight months of this year was $30.5 million -- close to double the average of $16.7 million in 2019.

Many of the cases were cross-border in nature. SIMC said it has received cases involving parties from about 40 jurisdictions, including the U.S., China, India, Japan, South Korea and Australia.

Singapore is positioning itself as a neutral forum for international parties to resolve such matters, and the city-state is lobbying peers to strengthen the U.N. mediation convention by ratifying it. It is also engaging counterparts such as Japan, which has yet to sign the convention. In July, Singapore and Japan inked a bilateral agreement to strengthen legal cooperation, including in international commercial dispute resolution.

Singapore's Tong said his country is working to raise awareness of the U.N. treaty. "We are prepared to offer assistance, whether it is in terms of education, or seminars, or making sure that people understand the internal processes that are needed to get themselves up to speed," he said.

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