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The SCM’s importance for peaceful settlement of commercial disputes is hard to overestimate. Adopted in 2019, it was signed by forty six countries, including the PRC & US. 

So, let’s see what it’s all about & why it’s so important for resolving disputes through mediation. 

Mediation & Its Types

Based on an non-adversarial principle, mediation is an ADR method which involves assistance of a neutral & impartial 3rd party (sometimes, a mediation lawyer may be involved, too). ADR methods can be broadly divided into 2 categories: 

  • adversarial (i.e. litigation & arbitration).
  • non-adversarial (i.e. peaceful resolution of commercial disputes through mediation).

The following three characteristics are typically ascribed to mediation:

  • confidentiality (i.e. resolving a commercial dispute by mediation requires parties to maintain full confidentiality with regard to mediation & any other information related to it);
  • no damage (i.e. no statement made by parties during resolution of a dispute by mediation shouldn’t be used against them during litigation and arbitration);
  • voluntariness (i.e. parties voluntarily settle a commercial dispute through mediation).

Under the SCM, mediators are required to be neutral, independent & impartial. They must also ensure that parties have no doubts whatsoever regarding either of the three qualities. In addition, mediators must refrain from forcefully imposing a solution on parties to a dispute.

Normally, mediation comprises the following stages:

  • getting the mediation process underway;
  • mediator making a statement;
  • parties making statements;
  • defining an issue(s);
  • mediator discussing an issue(s) with parties;
  • mediator discussing an issue(s) with each of the parties;
  • reaching an amicable agreement or acknowledging lack thereof;
  • ending the mediation process.

It's important to ensure that settlement through mediation isn’t binding. Under the SCM, enforcement of a settlement agreement can be refused if:

  • a party is incapacitated;
  • a settlement agreement is invalid;
  • a settlement agreement isn’t non-binding, final or modified;
  • settlement terms aren’t acceptable or were previously enforced;
  • a mediator commits a serious violation or isn’t sufficiently impartial/independent;
  • a settlement is inconsistent with the public policy in a country where a party is based;
  • settlement of a dispute through mediation as per legislation of a country a party comes from is impossible.

SCM: Application

The SCM’s provisions are only applicable to settlement of international commercial disputes. Any disputes related to personal or family disputes  (i.e. consumer, marriage, inheritance or labor disputes) are expressly excluded from it. 

Prior to signing an agreement on resolving an international dispute, the following conditions must be met:

  • parties to an agreement must have commercial enterprises in different jurisdictions; 
  • a country in which parties have commercial enterprises must be different from the one both of them come from:
  • a country in which the bulk of the obligations under an agreement is fulfilled must differ from the ones parties come from; 
  • a country the subject of an agreement has the closest connection to must be different from the ones parties come from.

It should also be kept in mind that the SCM applies only to concluding international settlement agreements in writing. It can also apply to e-agreements, provided information contained therein is reusable.

The SCm doesn’t apply to settlement agreements if:

  • settlement wasn’t reached through mediation;
  • settlement reached in the course of court proceedings is to be executed as a court decision;
  • settlement is registered & enforceable as an arbitral award.

Conclusion

By providing an alternative means of enforcing settlement agreements concluded through mediation, the SCM further contributes to peaceful resolution of cross-border commercial disputes. 

Looking to get more information on amicable settlement of a commercial dispute? Why not reach out to IQ Decision UK? Our experts are always on standby to lend you a hand with any issues you might be facing in that regard.