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Mediation for Commercial Shipping Disputes

Author: M.Jagannath
Date: May 31, 2016

While businesses work certainly better without disputes, differences do arise leading to disputes. The various alternatives available to resolve disputes are Negotiation, Mediation (which is the purpose of this topic), Expert Determination, Arbitration and Litigation. There appears to be increasing attention on Mediation in commercial shipping disputes and this article will touch upon the reasons for this interest.

  1. Every form of dispute resolution has its importance and place i.e. they are not meant to oust but complement each other. Parties can make use of the wide range of dispute resolution alternatives either solely or in conjunction to achieve the result they so desire. Disputed sums are now often much lower (cargo, speed/consumption in time charterparty, demurrage and deviation claims in voyage charterparty) and therefore parties are loath to initiate arbitration or litigation considering the costs which may be incurred to either pursue or defend the matter. This has led to interest in Mediation as a possible way to reduce costs. This is indeed a boost to mediation and which has to lead to more enquiries (we hope that this would translate to more mediations and engagements of mediators which obviously would help in honing their skills).

  2. While focus on reduction in costs is certainly important, mediation has other advantages in that parties can discuss issues, in a non - adversial manner, to try and achieve resolution. There however appears to be a certain amount of scepticism with parties on the possibility of achieving their interests by mediation. Instead, the common feeling is that mediation may not solve the issues but instead may help parties in “splitting the difference”. It is however submitted that it is possible for both (or more) parties to achieve their interests provided parties are "open minded" and wish to maintain a continued working relationship.

  3. As the new “kid” in the block, there are limitations in that parties may be unwilling to opt out for mediation. This may be due to limited exposure to one or more of the parties due to the following reasons:

    1. Mediation may be considered as a sign of weakness / loss of face: On the contrary, our view is that asking for mediation is a sign of strength in that the parties are aware of the merits of their claim but still wish to see whether they could resolve the matter amicably.

    2. Right time to initiate mediation? Our view is that there is “no” right time. Instead, any time is the “right time”. As mediation is conducted on a “without prejudice” basis, whatever is discussed or exchanged during the mediation proceedings cannot be used in support of any new or ongoing litigation / arbitration. In fact, hearing the other side would allow disputants to better understand the issues at hand.

    3. Effectiveness of mediated settlements: If a settlement is reached, parties would sign a settlement agreement (often crafted by the party’s lawyers) and which is enforceable like any other contract. If the matter is being litigated or arbitrated, parties can submit the mediated settlement agreement to the courts / arbitration panel to request for a consent judgement / award.

    4. If mediated settlements are not possible on some of the issues discussed: It may be that in some mediations, all of the issues may not be resolved through mediation. Disputants should then identify the issues which could be resolved through mediation and proceed with a settlement agreement on these issues. Subsequently, the unresolved issues could be dealt with by the other forms of dispute resolution methods which may include arbitration and litigation. The advantage of this approach is that there would be significant reduction of costs and time in resolving disputes.

    5. Enlarging the pie: Mediation allows parties to resolve disputes on a win-win basis (instead of a win / lose). Obviously, this would require parties to ascertain their interests and consider if they could collaborate with each other. In such situations, parties may well reach a mediated settlement which best satisfies their interests by agreeing to continue to do further business so that both parties are able to achieve what they had set out to.

  1. In conclusion, while the increasing interest in Mediation is certainly welcome, it is submitted that this interest should not be solely for cost considerations. Parties must also consider mediation for the opportunity to explore collaborative strategies to resolve their disputes and achieve their interests.

 

 

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