Shipping and Maritime Mediation

Disputes in the shipping industry are driven by economics and market fluctuation. At its most fundamental an Owner needs to make a profit out of its maritime assets or at least cover its costs during periods of market downturn. A Charterer or sub-charterer needs a fully available vessel to perform to speed, fuel usage laden cargo and gear specification. The two agendas often conflict where unforeseen circumstances require changes to itinerary, cargo, breakdown, or destination reachable. On arrival Failure of ship performance criteria occur mostly with Time Charters where delays and demurrage disputes are most frequent with voyage charters. Whatever the cause both parties are best served by working together to resolve issues as they arise. The concept of an arrived ship has been debated for more than 40 years your mediator has been involved with the industry.

Conflict in the shipping industry often reflects market conditions. Where freight rates are low or decaying smart chartering organisations may confect an ostensible repudiation only to refix the vessel hours later at a lower rate. Where freight rates are high and increasing a smart owner may try the same in reverse. Unfortunately, the Owner is also under a bill of lading contract and may find itself in deviation and require to negotiate its way out of unforeseen difficulties.

The reasons giving rise to conflict in vessel charter are manifold and arise out of complex factual and technical matrices different in each case. By the time your dispute reaches arbitration or the door of the court, substantial resources sounding in costs approaching millions of dollars will have been invested in P&I claims consultants, technical experts, and lawyers not to mention the invisible cost of internal resources which could otherwise be deployed in profitable enterprise. The arbitration or court process will produce a winner and a loser having decided issues obvious over many years in a matter of weeks. Squeezing 3 to 5 years of time charter into a 2 week hearing requires an extreme form of natural selection necessarily producing an edited version of events which may or may not be compelling.

There is another way. Mediation is said to produce a win-win with both parties resolving their competing agendas in a way which allows then to return to the business of making commercial returns from their business without the distraction of litigating history. I prefer to think of the solution as being more an acceptable lose-lose where each party is content to compromise within its comfort zone to produce a settlement freeing both parties from the chains of litigation.

As corporate counsel confronted by many expensive disputes over a 40 year career I have often asked the following question when making main board presentations on complex disputes. Explaining to members of the board that this dispute will cost at least a couple of million dollars in the current year with the cost is likely to increase steeply towards the trial of the issues unless a settlement can be reached. “Do you want me to give this money to the lawyers or can I use these resources to find an acceptable settlement?”. Mediation attempts to resolve a dispute in a similar way. It is based on collaborative working.