An advantage of using mediation to resolve a dispute is that, when successful, it results in an outcome that both parties are willing to accept.  This is because mediation is a process which seeks to find a solution that is better for both parties than their alternative of continuing to fight each other.

Because of this, it might be thought that a mediated solution isn’t very effective – that it relies on the parties’ goodwill, but isn’t legally binding.  While understandable, that view is wrong. Once a solution is found through mediation, it is recorded in writing and signed by the parties. It becomes a contract between them;  and, like any other contract, it is binding. If one party does not keep its promise, the other party can ask a court to make them do so.

That all sounds well and good, but what about an international dispute?  How could a mediated solution with a party outside Australia be enforced?  Until recently, the answer was: with great difficulty, if at all.  Fortunately, however, the Australian government recently agreed to join an international treaty that solves this problem for commercial disputes.

The UN Convention on International Settlement Agreements Resulting from Mediation requires countries to recognise and to enforce in their local courts an international mediated settlement agreement. This is so even where one or both parties are from another country.  On 10 September 2021, Australia joined 54 other countries as signatories to that Convention.  Once enacting legislation is passed by the federal parliament, the Convention will take force in Australia.

So, if your commercial dispute is with a foreign entity, consider the option of mediating for a resolution.  Enforcement of a mediated outcome is about to get a whole lot easier.

The Federal Magistrate’s Court recently refused to stay proceedings in a case brought by a party that had failed to comply with a mandatory mediation clause.  The case shows that even though a party to a contract may have promised to not commence legal proceedings until it had first engaged in mediation, the court will not always require it to do so. Factors that weigh in favour of not requiring compliance with the mediation clause include: the dispute involves entities beyond the other party to the contract, the issues in dispute go beyond those based on the contract, and the dispute has been on foot for a number years already. Source: Lexology