MEDIATION – an increasingly common way to resolve disputes

There has been a considerable rise in the number of shipping disputes referred to mediation in the last few years. Mediation is a form of assisted negotiation and involves the appointment by the parties of a mutually acceptable person to attempt to assist them to reach a settlement. The role of a mediator is not to pass judgement on the parties. If the parties do not reach their own settlement then nothing is enforced upon them. The proceedings are private and confidential throughout.

In London the growth in this form of dispute resolution has been the result of the Woolf Reforms. These reforms have fundamentally changed English court procedures and have aimed to reduce the costs and delays involved in traditional litigation. The trend towards the use of mediation is not, however, just a London based phenomenon. In the last year the Club has also been involved in mediations in the USA and Australia.

The mediations involving ITIC’s Members have included both claims against the Member, typically Members alleged to have been negligent, and cases where the Member is bringing the claim. Last year a large commission dispute between a shipbroker and a shipyard was resolved by mediation. The process was quicker and cheaper than litigation. Just as important was the reduction in ill feeling that is inevitably caused by a court hearing. Professional relationships are accordingly much more likely to survive a settlement reached through mediation than a solution ordered by a judge.

Mediation is usually an option considered after proceedings have been issued.The majority of mediations are, if not court ordered, at least positively encouraged by judges. It is increasingly likely that Members with claims will become involved in mediation. 

Mediation is an informal process and accordingly the exact procedures  may vary but the following is a general guide to how mediation, especially in London, is conducted:

Although it is informal, mediation does take a considerable amount of preparation. If the mediation is successful then the costs will be much less than had the proceedings gone to trial. The procedure is also much quicker than formal court proceedings.

The mediation process will start with the parties and their chosen mediator entering into a written mediation agreement. This confirms that the proceedings are confidential and that anything exchanged cannot be used in later proceedings if the mediation does not result in a settlement. The mediator’s fees will be agreed. These are shared equally between the parties.

There are no formal pleadings but before the mediation itself each side will prepare a case summary to be given to the mediator and the opponents. These are exchanged at an agreed time prior to the mediation. Usually a couple of days is considered sufficient. The summary sets out the basis of the parties’ claim or defence. The parties will normally agree what documents are at the centre of the dispute. These will be sent to the mediator in advance.

On the day of the mediation the mediator will normally choose to meet the parties together. This will give the mediator the opportunity to outline his or her role and  stress that the mediator is not acting as a judge or arbitrator. There are two other important points. The mediator may privately offer opinions to a party but this is simply to help  them to consider whether the point in issue really is a strong one; it is not a question of taking sides.  In addition the mediator will only pass information to the other party if authorised to do so. The parties can discuss their case and possible weaknesses with the mediator in complete confidence.

The parties normally commence the mediation by making an opening statement. This is informal and it is often useful to ask one of the Members’ own senior staff to make the statement as opposed to having it delivered by a lawyer. The involvement of senior staff is important. One of the main features of mediation is the need for the parties to have someone present with the necessary authority to settle the matter. This does not mean that they have to have unlimited authority, but simply that someone must have seniority sufficient to negotiate and agree a settlement.

In most mediations the parties will then separate and the mediator will discuss the case independently with each side in turn and move between them. The parties are located in separate rooms but, where appropriate, the mediator will often bring them together to discuss various issues.

Neither party is obliged to settle at mediation and can withdraw from the process at any time.  Many lawyers report that one of the real benefits of mediation is that, although settlement is not agreed at the mediation itself, the fact that  the parties have addressed  the issues involved in the dispute means that settlement becomes much more likely in the days and weeks following a mediation.

It will not be possible to settle every dispute by mediation, but the growth in this form of dispute resolution will enable many Members to resolve disputes in a cheaper and less confrontational manner.