BIMCO publishes Mediation/Alternative Dispute Resolution Clause 2021

Denmark-based independent shipowners’ association BIMCO has recently published its new Mediation/Alternative Dispute Resolution Clause 2021, replacing BIMCO Mediation Clause 2020.

North of England Club noted that Andrea Skeoch, Deputy Director in North’s FD&D team, was part of the drafting committee.

Whilst the BIMCO Mediation Clause 2020 focussed on mediation in the traditional sense, North noted that there were many other forms of ADR that had become increasingly popular as practical means of dispute resolution.

The new BIMCO Mediation/Alternative Dispute Resolution Clause 2021 was therefore wider in scope and embraced not only traditional mediation but also other forms of ADR including Early Intervention and Early Neutral Evaluation. The 2021 clause was designed to enable the parties to enter into an ADR process of a type appropriate for their needs/the dispute.

Unlike the 2020 clause, commencement of proceedings under the 2021 clause was no longer a pre-condition to the right to call for ADR.

Paragraph (a) enables a party to call on the other to agree to ADR at any time, whether before or after the commencement of proceedings. North said that it was hoped that this would encourage parties to consider ADR at an early stage “before costs begin to increase”.

Once a party does call for ADR, paragraph (b) requires the other party to confirm within 14 days whether or not it agrees to ADR and, if it does not agree, to give reasons for its refusal so to do.

Paragraph (g) provides that any refusal to agree to ADR may be considered by the competent Tribunal/court when determining costs.

North said that it was hoped that the need to give reasons for refusal when coupled with the possibility of costs sanctions would encourage the parties to embrace ADR positively, with a view to achieving settlement.

Should the parties agree to ADR, paragraph (c) obliges the parties to participate in their chosen ADR procedure in good faith and without undue delay. North said that the intention was that this would reduce the risk of parties nominally agreeing to ADR but then making no genuine effort to engage in the process, something which the other party might seek to bring to the attention of the Tribunal or court when it came to the assessment of costs.

As with the 2020 clause, paragraphs (d) and (e) of the BIMCO Mediation/Alternative Dispute Resolution Clause 2021 provide that participation in the ADR process does not prevent the parties from taking steps to protect its interests and that documents disclosed in the ADR process shall not be disclosed in proceedings except to the extent disclosable by law and/or the procedure governing the relevant proceedings.

The Clause provides that, save where otherwise agreed, each party must bear its own costs of the ADR procedure and with third party costs to be shared equally.

North said that it was essential to remember that agreement to participate in ADR pursuant to the clause did not interrupt any applicable timebars. If a timebar approaches, a party should take steps to protect time by commencement of proceedings or agreement of an extension to the timebar, North said, noting also that the clause was not a substitute for a law and jurisdiction provision and should always be incorporated into the Charter.