By A.J. Jawad (India) & Roar Thun Wægger (Norway)
As SIMI-accredited mediators deeply engaged in fostering effective dispute-resolution mechanisms, we underscore the pivotal role mediation plays in international trade. With a lens focused on the recent historic trade agreement between Norway and India, we outline the profound benefits mediation offers to exporters and importers from both nations.
Insights from the Norway-India Trade Agreement: The recent trade pact between Norway and India marks a seminal moment, heralding zero tariffs on over ninety percent of Norwegian exports to India. This agreement, facilitated by the EFTA countries, promises unparalleled export opportunities, particularly for the Norwegian seafood industry. It exemplifies the tangible benefits of fostering robust trade relationships through bilateral agreements.
While celebrating this important milestone, we believe that a significant contributor to the “ease of doing business”, particularly in the cross-border context, is the ease of dispute resolution.
In the dynamic landscape of international trade, disputes are inevitable. However, how nations and businesses navigate these disputes defines their resilience and adaptability.
Mediation offers a non-adversarial platform wherein parties can collaboratively resolve disputes, ensuring minimal disruption to trade flows and preserving long-term business relationships. Several countries have developed a culture of mediation as an effective mechanism for resolving international trade disputes, but several countries have not developed such a culture.
Our experience is that the mediation culture is booming in both India and Norway.
The Significance of Mediation in International Trade: It is banal to say that the business of business is to make money. In this process, disputes may arise. Conventional dispute resolution processes like litigation and arbitration are procedure-heavy, expensive, and time-consuming. This means that business moves away from its main raison d’etre of making money to what is anathema to it – losing money. These conventional processes also mean loss of control.
Addressing a group of business executives in India, one of us asked them two questions:
(a) “Would you like to lose control of your business?” (b) “Would you like to lose control of your disputes?” The answer to both these questions was a resounding “NO!”. The follow-up question was “In that case, why choose litigation?”
Mediation stands as the signal of the future for resolving disputes in the global arena. Unlike conventional legal avenues, mediation embodies neutrality, control, flexibility, confidentiality, and cost-effectiveness, all hallmarks critical for fostering sustainable business relationships. Mediation is nothing but a facilitated negotiation where the mediator, a neutral third party, facilitates the discussions between the two disputing parties, helps them to unknot their interests and needs, and assists them in reaching a mutually beneficial resolution. It places power back into the hands of disputants, allowing them to craft mutually beneficial solutions under the guidance of a neutral mediator.
One of the biggest factors that make a strong case for mediation, apart from the control and the speed, is the finality of a mediated settlement agreement. Disputants resolve a process of examining their interests and needs and exploring the best solutions that work for both. A mediated settlement agreement being a product of the decision-making process undertaken by the parties, is invariably honoured and acted upon by them. It is not a judgement or award imposed on the parties through a process of adjudication. A mediated settlement agreement is a consensus reached between the parties as to the best way forward. Therefore, there is no reason for any of them to renege on it unless circumstances present themselves that make it impossible to honor it.
Nevertheless, there has always been a concern in legal circles as to the enforceability of mediated settlement agreements arrived at in cross-border disputes in the absence of a treaty like the New York Convention of Arbitration (The NYC). The NYC was not clear on the enforceability of a mediated settlement agreement that does not commence in an arbitration. Even if the mediator was appointed as an arbitrator and recorded the settlement agreement as an arbitral award, the different positions of the statutes in different jurisdictions raised the question of the enforceability of an arbitral award passed by an arbitrator who was not appointed when the dispute was in existence[1]. One of the devices that was adopted to use mediation and at the same time make the settlement agreement enforceable was the Arb-Med-Arb model. This helped to overcome the jurisdictional issues of enforcing the mediated settlement agreement in jurisdictions that required the arbitrator to be appointed when the dispute was in existence. This situation now stands changed with the adoption of the United Nations Convention on International Settlement Agreements Resulting from Mediation, otherwise known as the Singapore Convention, adopted by the United Nations General Assembly on 20-12-2018 and opened for signature on 07-08-2019.
The Singapore Convention on Mediation: The monumental Singapore Convention on Mediation, signed by India, the US, and 44 other nations in August 2019, lays the groundwork for promoting mediation as a preferred method for resolving international trade disputes. The UK is a huge trade partner with both India and Norway, and they signed the convention in May 2023. While not yet signed by the EU or any of the Nordic countries, its principles resonate deeply with the ethos of effective dispute resolution. Though India was one of the first signatories to the Singapore Convention, it has still not ratified the Convention. The newly minted Mediation Act, of 2023 was expected to provide the framework for the ratification and implementation of the Singapore Convention. However, the Act has been passed with a glaring omission of the Singapore Convention.
With this trade accord, it would be a huge advantage for businesses in India and Norway if Norway also signed the Singapore Convention and both countries took appropriate steps for the ratification of the Convention.
A common international framework aims to give the international business environment better confidence in using mediation as a dispute resolution mechanism. It is a high priority to avoid commercial disputes being resolved in court because it is very time-consuming and costly, and many have experienced that cases are often resolved in favor of the local party.
We believe the Convention will help mediation become a more accepted method because it will provide an international standard of recognition and enforcement. Businesses engaged in international trade will receive assurances under the Convention that they can use mediation as dispute resolution and be able to trust that what has been agreed is also enforceable.
The revolutionary feature of the Singapore Convention is that it ensures that agreements between the parties become legally binding in all jurisdictions and can be more effectively enforced.
The Convention specifies a criterion, that the solution has been negotiated in mediation, as necessary for the agreement between the parties to be enforced by the court. The mediator may certify the mediation agreement or another document confirming that the mediation has been conducted.
Key Learnings from Mediation Principles: Drawing insights from recent legal precedents and international conventions, including the Singapore Convention, we emphasize the importance of clear drafting, authority verification, and the acknowledgment of online dispute resolution mechanisms. These principles serve as guideposts for mediators and legal practitioners navigating complex trade disputes.
Challenges and Opportunities: While the Singapore Convention heralds a new era for mediation enforcement, challenges persist. Some practitioners question its necessity, while others highlight potential inconsistencies with established mediation practices.
Nonetheless, the convention offers a powerful tool for expanding the global adoption of mediation, fostering trust and credibility in its efficacy.
As mediators deeply invested in facilitating cross-border trade relationships, we advocate for the widespread adoption of mediation as a primary mechanism for resolving international trade disputes.
The Norway-India trade agreement exemplifies the transformative power of bilateral collaborations, underscored by effective dispute-resolution mechanisms. In an increasingly interconnected world, mediation stands as the cornerstone for fostering resilient and sustainable trade relations.
Through collaborative efforts and adherence to international standards, we can forge a future where disputes are resolved amicably, ensuring the uninterrupted flow of trade, and bolstering global economic prosperity.
A.J. Jawad & Roar Thun Waegger
Chennai, India & Oslo, Norway
March 28th, 2024
[1] https://sussmanadr.com/docs/NY%20Coinvention%20Prism%20ABA%20DR%20as%20printed-%20white%20background%208-09.pdf