BIMCO Promotes Use of Mediation with Dispute Resolution Clause

In a move designed to increase the shipping community’s awareness and use of mediation techniques in resolving disputes, BIMCO has developed a Standard Dispute Resolution Clause by incorporating a comprehensive Mediation Clause in to its widely used Standard Law and Arbitration Clause. A specialist BIMCO Working Group consisting of experts with particular expertise in maritime arbitration and mediation were responsible for the drafting work. The London Maritime Arbitrators Association (LMAA) and the Society of Maritime Arbitrators, Inc, of New York (SMA) provided valuable input and comment throughout the process.

In shipping industry terms Mediation remains a relatively new dispute resolution technique, although it has gained widespread approval in other sectors. In the last few years, however, there has been a noticeable increase in the level of interest in mediation. BIMCO’s Deputy Secretary General, Søren Larsen, believes that “the new Clause will provide parties with a solid contractual platform on which the mediation process can be applied if appropriate to the dispute”.

BIMCO has chosen to incorporate a standard mediation provision in to its existing Law and Arbitration Clause to ensure that one party cannot use mediation as a delaying tactic. Although parties are free to mediate at any time, the provisions of the BIMCO Mediation Clause are only triggered by the commencement of arbitration proceedings by one party against another. Should the parties elect to use mediation to resolve all or part of their dispute, the arbitration process continues to run in parallel. The Mediation Clause has been drafted in contemplation of scenarios where parties may go to mediation at various times throughout an arbitration process in order to attempt to resolve parts of a larger dispute.

BIMCO’s recognizes that mediation is a voluntary, confidential, “without prejudice” process and the Mediation Clause does not attempt to impose mediation on parties that do not believe the technique to be appropriate to their dispute. Nevertheless, should one party simply refuse even to try resolving the dispute through mediation, the arbitration tribunal is given the right to take any refusal without good reason into account when allocating the costs of the arbitration.

To ensure that the mediation does not interfere with the conduct of the arbitration procedure the Clause provides for the arbitration tribunal to consider possible conflicts with the mediation when setting the timetable for the arbitration. By default, the Mediation Clause provides that each party should bear its own costs incurred in the mediation, but share the mediator’s costs and expenses.

Although the mediation process has been integrated with arbitration in an attempt to minimize any conflict of timetabling between the two procedures, according to BIMCO’s Grant Hunter “the confidentiality and legal rights of the parties are fully protected by the Clause. No information or documents disclosed during the mediation can be revealed to the arbitration tribunal, unless required by law. Similarly, the right of either party to take measures they consider necessary to protect their interest is not affected by the mediation”.

BIMCO’s Clause is designed for use internationally under a wide variety of jurisdictions. Because of differences in the application of statutory time limits under different jurisdictions, the Mediation Clause is careful to draw to the attention of the parties that they should be aware that the mediation process might not necessarily interrupt time limits.

The BIMCO Standard Mediation Clause has received widespread international endorsement from leading dispute resolution associations. The LMAA, which was involved with the development of the BIMCO Standard Law and Arbitration Clause in 1998, has stated that it “has been pleased to continue the co-operation with BIMCO that began with the previous BIMCO Arbitration Clause. Whilst acknowledging that the trend towards mediation has been slower than anticipated when it first introduced its own mediation terms in 1991 the LMAA has noted an increasing interest in mediation in the last two years. This has led the LMAA to provide formal mediation training to nearly half of its full members and to prepare new Mediation Terms which will come into effect early in 2002. A full LMAA mediation service will therefore be available for parties agreeing to mediation and the new BIMCO Dispute Resolution Clause”.

In New York, the Society of Maritime Arbitrators (SMA) said that "close co-operation between the LMAA and SMA, as leading dispute resolving associations, is essential to furthering the interests of the industry we serve. We were delighted to have this opportunity of working closely with our LMAA colleagues in support of the BIMCO Standard Mediation Clause and look forward to more opportunities of doing so in the future".

Further support has come from the Chambre Arbitrale Maritime de Paris (CAMP) which “appreciates that the new Mediation Clause to be incorporated in the BIMCO Standard Law and Arbitration Clause has been adopted by the Documentary Committee. There is no contradiction between that Clause and the text of the Conciliation/Mediation Rules of Chambre Arbitrale. CAMP fully supports the idea of such a clause which answers the more and more insisting needs of the parties all over the world”.

BIMCO Standard Dispute Resolution Clause (a) This Contract shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Contract shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause.

The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced.

The reference shall be to three arbitrators. A party wishing to refer a dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within 14 calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the 14 days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the 14 days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement.

Nothing herein shall prevent the parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator. In cases where neither the claim nor any counterclaim exceeds the sum of US$50,000 (or such other sum as the parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced.

(b) This Contract shall be governed by and construed in accordance with Title 9 of the United States Code and the Maritime Law of the United States and any dispute arising out of or in connection with this Contract shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for the purposes of enforcing any award, judgment may be entered on an award by any court of competent jurisdiction. The proceedings shall be conducted in accordance with the rules of the Society of Maritime Arbitrators, Inc. In cases where neither the claim nor any counterclaim exceeds the sum of US$50,000 (or such other sum as the parties may agree) the arbitration shall be conducted in accordance with the Shortened Arbitration Procedure of the Society of Maritime Arbitrators, Inc. current at the time when the arbitration proceedings are commenced.

(c) This Contract shall be governed by and construed in accordance with the laws of the place mutually agreed by the parties and any dispute arising out of or in connection with this Contract shall be referred to arbitration at a mutually agreed place, subject to the procedures applicable there.

(d) Notwithstanding (a), (b) or (c) above, the parties may agree at any time to refer to mediation any difference and/or dispute arising out of or in connection with this Contract.

In the case of a dispute in respect of which arbitration has been commenced under (a), (b) or (c) above, the following shall apply:-

(i) Either party may at any time and from time to time elect to refer the dispute or part of the dispute to mediation by service on the other party of a written notice (the “Mediation Notice”) calling on the other party to agree to mediation. (ii) The other party shall thereupon within 14 calendar days of receipt of the Mediation Notice confirm that they agree to mediation, in which case the parties shall thereafter agree a mediator within a further 14 calendar days, failing which on the application of either party a mediator will be appointed promptly by the Arbitration Tribunal (“the Tribunal”) or such person as the Tribunal may designate for that purpose. The mediation shall be conducted in such place and in accordance with such procedure and on such terms as the parties may agree or, in the event of disagreement, as may be set by the mediator. (iii) If the other party does not agree to mediate, that fact may be brought to the attention of the Tribunal and may be taken into account by the Tribunal when allocating the costs of the arbitration as between the parties. (iv) The mediation shall not affect the right of either party to seek such relief or take such steps as it considers necessary to protect its interest. (v) Either party may advise the Tribunal that they have agreed to mediation. The 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. (vi) Unless otherwise agreed or specified in the mediation terms, each party shall bear its own costs incurred in the mediation and the parties shall share equally the mediator’s costs and expenses. (vii) The mediation process shall be without prejudice and confidential and no information or documents disclosed during it shall be revealed to the Tribunal except to the extent that they are disclosable under the law and procedure governing the arbitration.

(e) If this Clause has been incorporated in to the Contract without an express choice of law and arbitration forum chosen from sub-clauses (a), (b) and (c), then sub-clause (a) of this Clause shall apply. Sub-clause (d) shall apply in all cases.