MEDIATION - Recent developments

The last issue of the “Intermediary“ contained an article on mediation. Since that article was published there have been three major developments affecting the use of this increasingly popular form of dispute resolution. Bimco have released a new standard dispute resolution clause which provides for the possibility of mediation. The London Maritime Arbitrators Association has published the LMAA Mediation Terms (2002). These developments provide the basis for mediation in the maritime sector. The other important development has been the judgement of the Court of Appeal in Dennett v Railtrack which provides a warning of a potentially expensive penalty for parties who decline to mediate.

Mediation involves the appointment of a mutually acceptable person, the mediator, to attempt to assist in reaching a settlement of the dispute. The mediator is not there in the capacity of a Judge or Arbitrator and does not pass any judgement on the parties’ position. The option of mediation is often only considered after proceedings have been issued. There is no need to have any contractual provision since the process is a voluntary one. The new Bimco Clause is, however, intended to make a written provision for the possibility of mediation to insert in charterparties. It extends the provisions of the standard law and arbitration clause to provide a wider “dispute resolution clause“ for inclusion within charterparties. The new clause, therefore, successively makes provisions for the governing law of the charterparty, that any disputes would be subject to arbitration and that the parties have the option of attempting mediation.

The LMAA Mediation Terms (2002) provide a more detailed framework for the mediation to take place.

Although mediation is a voluntary process the courts may impose penalties if a party does not agree to mediate. In the recent case of Dennett v Railtrack the English Court of Appeal held that the defendants had been unreasonable when they refused to consider mediation. In the circumstances the Court was not willing to order the other party to pay the defendants’ costs despite the defendant being successful in the matter. The Court’s discretion to make such orders means that litigants may have to give serious consideration to the grounds upon which they are declining the suggestion of mediation if the matter is being litigated before the English Court. The potential penalty for unreasonable behaviour is also a feature of the Bimco Clause and LMMA terms. The clause provides that if a party does not agree to an offer to mediate then the fact may be brought to the attention of an Arbitration Tribunal and taken into account when the Tribunal is allocating the costs of the arbitration. The LMAA terms provide that the mediator may order the costs of a mediation to be paid by a party whose conduct has been unreasonable.