By John Sze, Deputy Managing Partner, JTJB Lawyers
It’s no secret that companies across the globe are contending with a myriad of commercial disputes as a consequence of the effects of the COVID-19 pandemic. Intrinsically intertwined with global supply chains, the shipping sector holds no immunity.
But disputes are costly by nature and parties may be stuck in a rock and hard place, trying to conserve resources and hold back from launching expensive legal proceedings during volatile times.
Thus far, arbitration has been a popular method of resolving disputes in the shipping sector.
Shipping contracts that typically provide for arbitration include shipbuilding contracts, ship sale, charterparties and ship management agreements. Cost of court litigation aside, the relative ease of global enforceability of arbitration awards is key to the preference of arbitration over litigation.
Also growing in popularity is the provision of mediation in shipping disputes. Mediation has the benefit of preserving commercial and business relationships, finding a creative solution (that awards via both litigation and arbitration cannot offer) to the conflict with the aim of achieving a common goal and thereby creating a win-win for the parties.
Mediation’s increasing popularity is proven by the introduction of mediation clauses by maritime arbitral bodies. BIMCO redrafted its Standard Dispute Resolution Clause and carved out the mediation part into a stand-alone process.
More broadly, significant efforts have been made to promote mediation as the most cost-effective approach to resolving disputes. On 12 September 2020, the Singapore Convention on Mediation came into effect. The Convention, which has over 50 signatories including the U.S., China and India, addresses enforcement issues in dispute resolution, where breach of contract claims can be difficult to enforce in certain jurisdictions.
There is also possibly a “best of both worlds” hybrid mechanism which combines both arbitration and mediation.
At the start of arbitration, parties are typically entrenched in their positions. As arbitration progresses, parties gain a clearer picture of the merits, and may lean towards settlement. Arb-Med-Arb is a perfect tool for parties to pause arbitration and mediate with a firmer intention to settle. Where the contract allows parties to do this, the proposer is not seen as surrendering or having “a weaker case”. This is a huge psychological benefit.
Arb-Med-Arb is available to all disputes submitted to the SCMA for resolution under the Arb-Med-Arb Clause or any dispute which parties have agreed to submit for resolution under the Arb-Med-Arb Protocol.
To ensure impartiality, the arbitrator and mediator are separate persons. The Arb-Med-Arb Protocol, however, does allow the parties to agree on the appointment of one individual for both proceedings rather than two.
The most appealing benefit to the Arb-Med-Arb Protocol is that any settlement reached by the parties in a mediation would be enforceable, and it also provides a real opportunity for parties to negotiate in a constructive manner before taking it to arbitration.
Singapore has been a strong proponent of hybrid mechanisms, demonstrated by partnerships between the SIAC, the Singapore Chamber of Maritime Arbitration (SCMA) and the Singapore International Mediation Centre (SIMC) and the consequent offering of the Arb-Med-Arb Protocols.
Established in 1988, JTJB has built a stellar reputation as shipping and maritime specialists in Singapore. Across the globe, we work with some of the sector’s most prominent legal advisors. Together we bring our disputes expertise to bear, acting for maritime leaders around the world, helping them resolve their cross-border disputes effectively and efficiently. If you need help with resolving your dispute or have any queries about your shipping business more generally, please feel free to reach out to John Sze, Deputy Managing Partner, JTJB Lawyers.