THE AUTHORS:
Benedikt Kaneko, Law Clerk at the Higher Regional Court of Hamburg
Shinji Ogawa, Case Manager at the Japan Commercial Arbitration Association
Introduction
On 1 April 2024, the United Nations Convention on International Settlement Agreements Resulting from Mediation (“Singapore Convention”) entered into force in Japan. The Singapore Convention establishes a framework to enforce settlement agreements resulting from international commercial mediation. While 57 States have signed the Singapore Convention, Japan is only the 12th State and largest economy yet to actually ratify and enforce it. Even though the Japan Commercial Arbitration Association (“JCAA”) already reflected the Singapore Convention in its 2020 Commercial Mediation Rules, it further amended its Commercial Mediation Rules with effect on 15 April 2024 (“JCAA Commercial Mediation Rules 2024”).
This article describes both changes and the now available framework for parties wishing to utilize mediation as a dispute resolution mechanism in or in connection to Japan.
Scope of the Singapore Convention
The Singapore Convention applies to written settlements that result from mediation and concern an international and commercial dispute, which are not enforceable as a judgment or arbitral award (Article 1 of the Singapore Convention). Absent the Singapore Convention’s ratification or a similar available mechanism under national law, a party wishing to enforce such a settlement agreement would have to initiate costly and time-consuming separate litigation or arbitration to enforce the parties’ settlement.
At first glance, the Singapore Convention might have remarkable similarities to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). A closer look unveils several significant differences. An important distinction is that the Singapore Convention does not require reciprocity to be applied. A settlement agreement falling within the scope of the Singapore Convention can therefore be enforced in any State that has ratified the Singapore Convention, even if the mediated settlement agreement was reached in a State that is not a signatory to the Singapore Convention. Japan’s ratification of the Singapore Convention, therefore, opens its door as a potential venue for the enforcement of settlement agreements, as long as they fall within the Singapore Convention’s scope.
Under Article 5 of the Singapore Convention, courts may only refuse to grant enforcement of a settlement on a limited number of grounds. This mechanism is built similarly to the New York Convention’s Article V, e.g., providing for refusal of enforcement in cases where the settlement is against public policy or the underlying settlement agreement is null and void. It is reasonable to expect that courts dealing with these refusal grounds can and will refer to existing case law and commentary that address these grounds in the context of the New York Convention, when applying the Singapore Convention.
Two grounds are particularly noteworthy, as they are not modeled after the New York Convention: Article 5 (1) (e) of the Singapore Convention allows for non-enforcement in case of a “serious breach by the mediator of standards applicable to the mediator or the mediation without which breach that party would not have entered into the settlement agreement”. Under Article 5 (1) (f) of the Singapore Convention, “failure by the mediator to disclose to the parties circumstances that raise justifiable doubts as to the mediator’s impartiality or independence and such failure to disclose had a material impact or undue influence on a party without which failure that party would not have entered into the settlement agreement” constitutes another ground for non-enforcement.
Absent a clear definition or available guidelines, it is uncertain how these provisions – i.e., “standards applicable to the mediator or the mediation”, “serious breach”, “justifiable doubts” or “material impact” – will be interpreted by courts in the future. The same is true for any “failure (…) to disclose”. In the coming years, these uncertainties will likely be filled by commentary and guidelines from international stakeholders, as well as national courts interpreting the Singapore Convention’s respective provisions. Given the limited number of parties having ratified the Singapore Convention, Japan’s courts could be among the first national courts of a major economy to deal with these provisions and thereby play a crucial role in interpreting them. At the same time, international stakeholders and courts everywhere might monitor reporting from Japan regarding any judgments dealing with these issues.
Applying the Singapore Convention in Japan
Japan ratified the Singapore Convention by way of the Act for Implementation of the United Nations Convention on International Settlement Agreements Resulting from Mediation (Act No. 16 of 2023) (“Ratification Act”), which entered into force on 1 April 2024. To ensure smooth and consistent court decisions dealing with the conditions for the enforcement of settlement agreements, Japan has established a special jurisdiction for the enforcement of settlement agreements. Under Article 5 (6) (iv) of the Ratification Act, any party wishing to enforce a settlement agreement may apply to the Tokyo or Osaka District Courts. This applies as long as the assets or property in question are located in Japan, the subject matter of the settled dispute is in Japan, or the respondent’s general venue is in Japan. For the Tokyo District Court, the “Business Court” established in October 2022 exclusively handles the enforcement applications. However, it should be noted that this jurisdiction does not constitute an exclusive jurisdiction and any enforcement action may still be brought to the district courts that otherwise have jurisdiction under the Ratification Act.
With its ratification, Japan might have limited its potentially significant role as a venue to enforce settlements and shaping jurisprudence on the Singapore Convention’s enforcement regime, as Japan made a reservation under Article 8 (1) (b) of the Singapore Convention. Pursuant to this reservation, the Singapore Convention only applies to the extent that the parties to the settlement agreement have agreed to its application. Parties wishing to take advantage of Japan’s ratification of the Singapore Convention should be mindful of this additional requirement, which can be addressed, e.g., at the outset of any mediation by agreeing to the application of the Singapore Convention.
In line with the Singapore Convention and the Ratification Act, Japan also amended its Act on Promotion of Use of Alternative Dispute Resolution (“ADR Act”) to provide an effective mechanism for the enforcement of settlement agreements resulting from domestic mediation cases administered by certified mediation institutions, such as the JCAA.
The settlement of domestic commercial disputes by way of mediation is not uncommon in Japanese litigation proceedings. While it might be surprising from the point of view of some jurisdictions and most international arbitrations, including those seated in Japan, judges in Japan can and commonly do actively undertake to discuss settlement options with both parties to a litigation – or even conferring with only one of the parties at a time in the absence of the other party – trying to reach a settlement. Against this backdrop of Japanese parties’ preference for amicable settlements, one can expect them to be open to utilizing the Singapore Convention in appropriate situations. This is in line with Japan’s Ministry of Foreign Affairs’ statement that it “is expected that the entry into force of [the Singapore] Convention for Japan will further facilitate the use of mediation” and the observation that an “increasing number of large international commercial disputes in Japan have been resolved under the JCAA’s International Commercial Mediation Rules.”
2024 JCAA Commercial Mediation Rules
With effect from 15 April 2024, the JCAA partially amended its Commercial Mediation Rules by adding provisions on the procedures under Article 26 that parties, the JCAA, and the mediator have to follow in case the parties agree to the enforcement of their settlement. This amendment became necessary because such parties’ agreement is required for enforcement under both the Ratification Act and the amended ADR Act. For the same reason, the JCAA Commercial Mediation Rules 2024 add Article 12.2 (4) (e) under which a request for mediation may indicate the applicant’s proposal or views on the possibility of enforcement based on the settlement agreement. This provision aims to facilitate the parties’ discussion about the application of the Singapore Convention at the outset of a mediation. As of 31 May 2024, the JCAA recognizes one JCAA-administered domestic mediation case where the parties agreed to the enforcement of their settlement agreement.
Further amendments to reflect the Singapore Convention were not necessary, as the JCAA had already incorporated any such requirements back in 2020, enabling enforcement of settlements in all countries that ratified the Singapore Convention. Another enforcement mechanism is covered by Article 27 of the JCAA Commercial Mediation Rules 2024, under which parties may appoint the mediator as arbitrator once a settlement is reached, and request that the settlement be recorded in the form of an arbitral award. This essentially makes the settlement as consent awards potentially enforceable under the New York Convention as an arbitral award.
The JCAA Commercial Mediation Rules 2024 emphasize party autonomy and encourage parties to mutually agree on the mediation’s procedure and structure. This includes decisions regarding the number of mediators, their appointment, and remuneration. Only in cases where the parties are unable or unwilling to make such decisions will the JCAA act as an appointing authority and provide default remuneration for mediators.
When it comes to confidentiality, the JCAA Commercial Mediation Rules 2024 ensure that mediation proceedings, by default, are privileged, without prejudice, and confidential. The mechanism is mostly based on the UNCITRAL Model Law on International Commercial Mediation, providing an international standard expected by parties engaged in confidential mediation proceedings and thereby enabling the parties to engage in frank and candid settlement discussions.
Conclusion
Overall, the 2024 JCAA Commercial Mediation Rules continue to provide modern and sophisticated mediation rules for all parties wishing to settle their dispute by way of mediation. The Singapore Convention’s entry into force in Japan establishes an enforcement mechanism for all parties wishing to enforce a settlement stemming from an international mediation, as long as the parties are mindful of Japan’s reservation to the Singapore Convention and agree to its application.
ABOUT THE AUTHORS:
Dr. Benedikt Yuji Kaneko currently works as a law clerk at the Higher Regional Court of Hamburg as part of the mandatory two-year clerkship for admission to the German Bar (Referendariat). He is admitted to the New York Bar (Attorney at Law).
Shinji Ogawa currently works as the Case Manager at the Japan Commercial Arbitration Association (JCAA). He manages all arbitration and mediation cases filed with the JCAA.
