The framework for international Mediation under Singapore Mediation Convention is now well settled. The time is now to demonstrate, how one would apply it in an Offshore & Marine Industry segments, with focus on Charter Party Agreements.
In maritime, unlike in shore-based contracts, the parties are not well known to each other. The CPAs are often negotiated and agreed through brokers, based on standard forms. For example, for tankers on SHELLTIME or BPVOYAGE or BPTIME, in most of the other segments BIMCO CPA Forms are quite common.
When a dispute arises, the general tendency over the past decades has been, that if negotiations failed, then due to limited time of initiating an action, within six months to maximum one year from the date of an incident or dispute, it is common practice to proceed with arbitration or litigation first, and negotiate later.
In this context and culture of international arbitration savvy industry, if Singapore Mediation Convention (“SMC”) and enforceability of Settlement Agreements is to be introduced, there are few immediate questions or concepts which must be understood first, before a party would agree for “Mediation first” approach.
How NYC and SMC are related?
- Whether there should be a seat of mediation or a specific place of mediation? Can it be virtual?
- Should there be an applicable law of mediation process?
- Like Arbitral Institution, is it a requirement for mediation to be conducted under the auspices of a recognized and designated Mediation Centre?
- What is the impact of Mediation Laws of a country where a settlement agreement may have to be enforced, if a party changes its mind and SA needs to be enforced? It is quite common in maritime industry, for parties to agree and then disagree once the ship or a vessel has completed its delivery or obligation, and payments under a settlement agreement have not been made or SA was defective.
- Should a Country where mediation takes place be a convention country?
- For example, in Singapore, if a mediation was held in Singapore, at a designated Mediation Centre or by a recognized Service provider, then only a settlement agreement can be registered as a Judgment of a Court, or Order of the Court as per Section 12 of Singapore Mediation Act 2017.
With some certainty of enforceability, mediation can be a game-changer in maritime industry. Otherwise curtain must be lifted from too many uncertainties. In shipping contracts, Time is most often of the essence, to commence a legal action to avoid being time-barred, as per the CPA. Mediation ought to provide a level of confidence that, its outcome will be recognized in one form or the other. For example, if a party refused to mediate or abandoned the process halfway, the party initiating the mediation should be able to get cost advantage, when the matter escalates to a Court litigation or arbitration.
In this background, the next challenge is to redraft pre-printed Clauses in the Standard Forms, for Mediation to be the preferred and first forum after negotiations have failed.
The statements in the BIMCO Mediation Clause, provides too many flexibilities and freedom of choices, which parties in dispute, may have a difficulty to agree for a common ground. “Either party may at any time and from time to time elect to refer the dispute or part of the dispute to mediation” means at a choice of one party, which may not be the right time for another party.
The para (v) implies that arbitration would have commenced before mediation, as it states: “arbitration procedure shall continue during the conduct of the mediation, but the Tribunal may take the mediation timetable into account when setting the timetable for steps in the arbitration.”
For mediation to be effective, the commencement of mediation from the date of notice of mediation, should be regarded as the legal action has commenced. This will give time for the parties to continue with mediation without a fear of losing the right of starting arbitration or court proceedings or being time-barred. Thus, commencing mediation is to be recognized as commencement of a legal action for resolving disputes. It is not addressed in the SMC or in the Model Law of Mediation, so it should be addressed by the Parties in their Agreement, when Drafting a Dispute Resolution Clause.
A critic’s review of the BIMCO Mediation Clause shows, several pitfalls, or flexibilities for parties to decide before opting for mediation, which for instance are:
- Governing Law
- Place of Mediation
- Applicable Mediation Rules
- Choice of a Mediation Centre
- Appointment of a Mediator
- Enforceability of Settlement Agreement and jurisdiction
In short, the pre-printed Charter Party Forms and clauses like BIMCO Dispute Resolution Clauses lack clarity and are templates, which must be edited instead of opting for default provisions.
From an objective viewpoint, there should be prescribed stages with meaningful indicators or outcomes before a next stage is invoked. Here are some recommendations for the parties and their contract drafters to take home:
- Delete pre-printed mediation clause and start fresh in context of Singapore Mediation Convention.
- Identify the tiers and draft in a logical sequence.
- Make Mediation first as the floodgate valve, before invoking arbitration or litigation in courts.
- A suggested Model Mediation Clause may look like this:
Suggested Model Clause based on AIPN Model Clause for Oil & Gas Industry Contracts
- If the Dispute is not resolved by negotiation pursuant to Article ____ within [•] days after the Notice of Dispute, then, the Parties to the Dispute shall seek to resolve the Dispute by mediation conducted in accordance with the _AIADR_ [designate mediation rules] (“Mediation Rules”).
- The Parties to the Dispute shall attempt to jointly [appoint] [nominate] a neutral mediator. If they are unable to do so within [•] days after the [mediation request] [Notice of Dispute], the ____________ [mediation administrator or institution] shall appoint the mediator in accordance with the Mediation Rules. The mediator shall meet with the Parties to the Dispute to mediate the Dispute within [•] days after the written request for mediation.
- The Settlement Agreement shall be governed by United Nations Convention on International Settlement Agreements Resulting from Mediation.
(Parties to opt-in according to Article 8 (1)(b) of the SMC, in case the state declares such a reservation: (b) It shall apply this Convention only to the extent that the parties to the settlement agreement have agreed to the application of the Convention.)
- Settlement agreement shall be enforceable as a judgment or as an arbitral award.
- If the Dispute is not resolved through mediation within [•] days after the request for mediation, or such other time as the Parties may agree, any Party may initiate arbitration in accordance with Article ____.
- The mediation as per Article [*] shall be a precondition before commencement of an arbitration.
In addition to the above, parties must be aware of some more Practical Considerations and challenges in enforcement of settlement agreements under Article 5: Grounds for refusing to grant relief,” of the SMC.
For further details or copy of the presentation, write to email@example.com
(The above is a brief transcript of the Paper presented by Mr. Jayems Dhingra, at the conference – Dispute Management in a New World – organized by the Jamaica International Arbitration Centre Limited (JAIAC), on 24 June 2020.)
 See Section (e) of the BIMCO Dispute Resolution Clause 2017.