Mediation for Shipping/Maritime Disputes
By Jagannath Muthu, Maritime Expert
We had recently attended two events in which there were serious and vigorous discussions on Mediation. While Mediation has a significant role to play in resolving shipping and maritime disputes, it would be too simplistic to consider this in every dispute. This article argues that while Mediation may be one of the ways to deal with a shipping and maritime dispute, it may need to be coupled with other dispute resolution methods to be successful.
- Singapore Chamber of Maritime Arbitration conducted their annual conference on 15th March 2017. The theme was “Making Maritime Arbitration work for you”. There were many stimulating and thought provoking topics discussed with one of the sessions on Mediation. The talk focused on the integration of mediation in the arbitration process as was provided in the SCMA’s Arb-Med-Arb protocol (listed in Schedule C of the current SCMA Rules). The discussions also focused on the reduction in costs by the use of the protocol and which would allow parties obtain a consent award if an agreement was reached during the mediation. The advantage of this procedure is that while the International Mediation Settlement Agreement i) in itself would not have the bite for enforcement proceedings, an Arbitration Award by virtue of the New York Convention ii) would lend the bite.
- The other event which we attended was the Conclave on Indian Shipping Bills / Act iii) conducted by the Institute of Chartered Shipbrokers, Chennai Branch. One of the sessions was on Mediation and Ms Sathya Rao, an Indian Advocate and practicing Mediator & Trainer at the Chennai Mediation Centre, spoke on the benefits of mediation to resolve disputes considering that parties may be able to reach a settlement by a process over which they have control, a settlement with which they could live with and also satisfy their requirements with significantly reduced costs. She has been very successful in various commercial and personal disputes and suggested attendees to seriously consider Mediation as a dispute resolution mechanism instead of the other conflict based mechanisms available.
- We had, in an earlier article, Mediation for Commercial Shipping Disputes, commented that each form of dispute resolution has its importance and place i.e. they are meant to complement each other. While mediation has significant cost benefits, parties may not wish to initiate mediation as it may be treated as a sign of weakness and further that it may lack the bite of an Arbitration Award or a Judgement by the Court. Since then, there have been various developments such as the increased use of Arb-Med-Arb protocol in both the Arbitral Institutions in Singapore (Singapore International Arbitration Centre and Singapore Chamber of Maritime Arbitration) and in other jurisdictions. The other major development is that UNCITRAL has undertaken work on creating a new legal instrument for the enforcement of Mediation agreements. If this results in a convention similar to the New York Convention, then it would be possible for International Mediation Settlement Agreements to have the same bite as provided for International Arbitration Awards.
- Shipping and Maritime Disputes are different from Commercial Disputes in that most of the times, the dispute are being funded by the various insurers (P&I Clubs iv, FD&D, Cargo, Transport Liability v, Professional Indemnity Insurers to name a few).
- Invariably, the interests of the Insurers may differ from that of the Insured’s in that they would be interested in reducing their claim costs or reducing the claim for which they may be liable for or have been paid instead of considering ongoing or future businesses or relationships. While the Insurers involved in Shipping Disputes are generally before the event Insurers (After the Event Insurers on the other hand are 3rd party funders who are allowed in some jurisdictions to fund the claim – both arbitration and court litigation), their interests may not be in tandem with their Insureds. This will be obviously an impediment to “enlarge the pie” and which may facilitate parties to consider alternative settlements.
- Involvement of insurers may also lead to tactical ploys such as
- Dilatory tactics so as to allow the time bar to expire
- Testing as to whether the other party is serious and will indeed spend monies to pursue the claim given that the claimed amounts are not substantial
- Raising technical defences against the jurisdiction of the court or arbitrators to deal with the dispute
- Considering other attack provisions such as arrest of a vessel to both found jurisdiction and secure the claim.
- Unfortunately, Mediation may not work well in these circumstances as parties do not have the opportunity to move from their “position” to “interests”. The tactics mentioned in 4b may be also adopted by the primary parties such that Mediation may not be the best fit in those circumstances. In order to get the best fit in Mediation,3rd party interests who have an interest in the dispute should be involved as a separate party in the mediation so that their interests are also considered in the mediation. Mr Geoff Sharpe, a well-known International Mediator, in his recent post “A New Seat at the Mediation Table? The Impact of Third Party Funding on the Mediation Process” has suggested that allowing third party funders as a party to the mediation may be one of the ways to reach a solution. (There are two parts on this article and which can be viewed by clicking the hyperlinks: Part 1, Part 2). Alternatively, parties to the dispute may take the lead to resolve the dispute on basis of their sole interests (provided they are able to do or their Insurers allow them to do so). Subsequently, they could discuss with their Insurers keeping in mind the potential loss of recovery which may have been prejudiced.
- On the other hand, the use of other dispute resolution mechanisms such as arbitration or court process may force the disputants to deal with the dispute instead of using any tactical ploys. At this stage, Mediation may be helpful but again as mentioned in a above, the full potential available may be not realized due to lack of common interests (if third parties are also involved such as Insured). Instead what may result is “assisted negotiation” of the claim and which may lead to a settlement. In any event, the negotiated settlement reached provides an economical solution to parties to deal with their dispute at hand.
- In conclusion, while Mediation should certainly be considered for Shipping and Maritime Disputes, parties should be aware that it may not be the best fit for all disputes. Parties should therefore consider the appropriate form of dispute resolution to deal with the dispute at hand and see whether Mediation can be used in conjunction to reach resolution of their disputes.
- At present, an international mediated settlement agreement (or IMSA) has no better legal status than any other contract. Hence, there is at present no mechanism for the IMSA’s to be enforced internationally without resorting to available methods such as initiating action in the relevant courts or arbitration as may be provided in the IMSA.
- The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the “New York Convention”, applies to the recognition and enforcement of foreign arbitral awards. More than 155 countries have ratified the New York Convention and therefore this allows the International Arbitration Awards to be easily enforceable compared to other forms of dispute resolution.
- We were a panelist on “Multimodal Transport of Goods Act 1993” and had commented that the act could be made to good use by trade to develop arbitration as the act does all for disputes to be resolved by arbitration. We had earlier presented a paper on “Unintended Consequences of the Multimodal Transport of Goods Act 1993” at the All India Annual Conference on Risk & Marine Insurance on 19 Dec 2015 conducted at Tolani Maritime Institute, Pune.
- Rule 36 of the current UK P and I Club on Claims for P&I and FD&D Risks state
- Without prejudice to any other provision of these Rules and without waiving any of the Association’s rights hereunder, the Managers may at any and all times appoint and employ on behalf of the Owner upon such terms as the Managers may think fit lawyers, surveyors or other persons for the purpose of dealing with any matter liable to give rise to a claim by an Owner upon the Association, including investigating or advising upon any such matter and taking or defending legal or other proceedings in connection therewith. The Managers may also at any time discontinue such employment if they think fit.
- All lawyers, surveyors and other persons appointed by the Managers on behalf of the Owner or appointed by the Owner with the prior consent of the Managers shall at all times be and be deemed to be appointed and employed on the terms that they have been instructed by the Owner at all times (both while so acting and after having retired from the matter) to give advice and to report to the Association in connection with the matter without prior reference to the Owner and to produce to the Association without prior reference to the Owner any documents or information in their possession or power relating to such matter, all as if such person had been appointed to act and had at all times been acting on behalf of the Association.
- Rule 7.1 of the current TT Club on Claims / G3 state:The Power of Managers- The Manager may, in respect of any claim or proceeding relating to a risk for which you are or may be insured
- direct the conduct of the claim / proceeding
- settle, compromise or dispose of the claim/proceedings in their discretion
- at any time appoint – and discontinue the appointment of – lawyers, surveyors and others on your behalf, in connection with theclaim/proceedings
***The views expressed here together with all errors are entirely ours. This article should not be considered as an advice and instead you must seek advice from your advisers on the best way to deal with your dispute.