In the past few years, mediation has been regarded to be a serious mode of dispute resolution by the shipping industry. In 2002, BIMCO developed a Standard Dispute Resolution Clause that incorporated an option to mediate into its standard law and arbitration clause. In BIMCO forms today, parties who select one of the law and arbitration options (i.e. English law/London arbitration, US Law/New York arbitration, Singapore-English law/Singapore arbitration or agreed law/agreed place of arbitration) also agree at the same time that the parties may at any time refer their disputes to mediation and, if arbitration has already been commenced, to determine if they will mediate by a formal notice procedure.
Leading maritime arbitral institutions now have procedures by which parties are asked to consider whether mediation might be worthwhile (LMAA Terms, Third Schedule; SCMA Rules, Schedule A) and have also set up mediation procedures either within or associated with the arbitration process (LMAA Baltic Exchange Mediation Terms, SMA Mediation Rules, SCMA Arb-Med-Arb Protocol; CMAC Mediation Rules).
Old (maritime arbitration) habits die hard but it can be seen that mediation is beginning to be recognised as a mode of dispute resolution that parties in maritime transactions would like to have as a serious option. In time to come, mediation might be chosen as a primary mode of dispute resolution rather than as an adjunct to the arbitral or litigation process. One of the factors that might have slowed mediation on its path to being a primary dispute resolution mode is the fact that unlike arbitration awards, which are enforceable virtually worldwide through the New York Convention, there is no international convention for the enforcement of settlement or compromise agreements. Parties to a settlement, mediated or otherwise, would often use the device of referring the concluded terms of settlement to an arbitral tribunal with a request that the terms be recorded as an arbitral award which would then be enforceable under the New York Convention. Other parties insert an arbitration clause in the settlement agreement and arbitrate the breach of the settlement agreement and seek an arbitral award. Yet others would take the chance that the settlement agreement would be recognised as a contract in the jurisdiction in which enforcement might be needed and that it would be enforced without review of the underlying merits of parties’ cases leading to the settlement agreement. In short, the perception of risk associated with enforcement was and is substantial.
Mediation’s path toward being a primary dispute resolution mode has been made easier by the recent adoption in December 2018 by the UN General Assembly of a ‘Convention on International Settlement Agreements Resulting from Mediation’. The Convention is to be known as ‘the Singapore Convention on Mediation’. If the Convention is ratified and comes into force, parties to a settlement agreement would be able to enforce their rights under a mediated settlement agreement directly, and in a manner analogous to the enforcement of arbitral awards under the New York Convention. There are, of course, qualification and conditions to terms by which settlement agreements may be enforced under the Singapore Convention which are beyond the scope of this report. If you would like to know more about the Singapore Convention and its place in arbitration and mediation, get in touch with us.