For frictions in global commerce, the world tries a new grease

Dozens of countries signed a treaty this week that will boost the use of neutral mediators in disputes between companies. At a time of high global tensions, this harmony-inducing approach is a welcome alternative.

Reuters
Singapore's Law Minister K. Shanmugam: “We need to encourage more mediators around the world."

As if in defiance of the prevailing winds against trade and commerce, 46 countries signed a treaty Wednesday aimed at helping international companies resolve their disputes through the consensus-making process of voluntary mediation.

This relatively new type of dispute settlement in global commerce should boost the confidence of a world economy currently unsettled by political disputes from Brexit to Iran’s disruption of Gulf oil.

Yet the real wonder of the signing ceremony in Singapore was that China and the United States – despite a trade fight between the world’s two largest economies – also inked the document. The Trump administration was fully on board with an initiative, begun under President Barack Obama, designed to bring neutral mediation as an alternative to the traditional methods of court litigation or forced arbitration between quarreling parties.

“Mediation is cheaper and faster,” said Heng Swee Keat, Singapore’s deputy prime minister and finance minister, at the ceremony. “It preserves harmony and business relationships, which is in line with many cultures, particularly in Asia.”

The key to the treaty, which will take effect after three countries ratify it, was that it will ensure enforcement of mediated settlements by a court, something both parties would need to agree to. The city-state of Singapore, which is a global legal hub with more than 130 foreign law firms, hopes to become the center for assisting businesses that opt for mediation.

By providing a trusted space for two parties to talk, mediators can focus “on solving the problem rather than on deciding who is right,” said Mr. Heng. He said the current settlement rate for Singapore’s mediation center is 85% compared with a global average of 70%. Perhaps the biggest beneficiaries of the new treaty will be construction companies caught up in disputes over building infrastructure projects. A mediator can help the parties bridge differences, find solutions, and restore their working relationship.

If commercial mediation takes off in countries that approve the treaty, it could set a new tone in a world now engulfed in trade battles driven by a notion that “might is right.” What’s right is that businesses want good relations and can fix broken ones if a trusted mediator helps them find what is right for both sides.

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