Implications of Singapore Convention for shipping community

Eleni Antoniadou, claims executive at Standard Club, has written on what the Singapore Convention could mean for the shipping community and on making maritime dispute resolution more efficient.

Noting that litigating maritime claims could cost P&I clubs, and vessel and cargo interests, millions of dollars in legal costs per year, Antoniadou added that it also took time and resources. With this in mind, Antoniadou looked at alternative routes to resolution.

Arbitration

Arbitration was perceived by some as being less costly than litigation. It was also attractive to have a case decided by an arbitrator who applied the same level of maritime legal analysis and impartial judgement to a case as would a judge, with the added bonus of having expert knowledge of the commercial realities that the main actors face.

Antoniadou noted that, for these reasons, arbitration had long remained the preferred method of dispute resolution in this arena, and was bolstered by the New York Convention. Signatory states to this international convention agreed that arbitration awards would be recognised by their domestic courts, thus making enforcement much quicker and easier.

Mediation

Attempts had been made to promote mediation as an alternative to litigation and arbitration.

BIMCO had recognized the value of mediation as early as 2001 and encouraged its use by drafting the BIMCO mediation clause. This was later incorporated into the BIMCO Dispute Resolution Clause 2017, which provided that ‘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.’

Unlike arbitration, the mediator does not evaluate the case and issue an award. The mediation procedure is much less formal and relies on the consent of the parties to come to a mutually agreeable solution to their dispute. Decisions are not imposed.

UK-based mediators were estimated to have saved businesses around £3bn in time, damaged relationships, lost productivity and legal fees, with a success rate in the region of between 74% to 89% settling within a day of mediation and a further 15% shortly after mediation. Antoniadou observed that, given these advantages, it was “unsurprising that several jurisdictions such as China and Italy now oblige parties in dispute to mediate prior to commencing arbitration or litigation”.

However, Antoniadou warned that, if a settlement agreement achieved following a mediation is not honoured, this could lead to a breach of contract action. “In the UK, an application may be made to the courts to recognize a written settlement agreement as a consent order, thus making it enforceable as a legally binding instrument. Not all jurisdictions offer this possibility and so suing for breach of contract incurs further legal costs, wastes time and in some jurisdictions, may not be a commercially realistic course of action. Enforcement in this context is often an obstacle to obtaining a remedy.”

The Singapore Convention

The Singapore Convention aims to replicate the effect of the New York Convention in the context of mediation. Articles 1 and 3 make it clear that a settlement agreement reached through mediation shall be enforced in accordance with each signatory state’s legal procedures, without the need to bring a claim for breach of contract. The matter would in such a case be assessed by the state’s ‘competent authority’, a term left ambiguous by the Singapore Convention.

To achieve recognition, the parties are required to provide the courts with a written settlement agreement signed by the parties to the dispute as well as evidence that it resulted from a mediation.

Any request for relief by a party may be challenged in accordance with article 5. The New York Convention also contains similar grounds for challenge under its article 5.

What this may mean for parties to maritime disputes

The Singapore Convention is intended to encourage the amicable resolution of disputes within the context of international trade. In so doing, it addresses one possible impediment to success: enforcement. This is especially true for challenging jurisdictions in which it can prove difficult to bring claims for breach of contract.

The Singapore Convention does not change the process of mediation. However, it does add an extra benefit. Once parties settle a cross-border dispute, the time, costs and effort to enforce their agreement in signatory jurisdictions are significantly reduced.

The Singapore Convention has yet to be ratified by at least three of its signatories and it will only come into force six months after they have done so. None of the EU states (including the UK) nor Australia, has signed. There is some discussion as to whether EU states may sign individually or whether they must sign as one collective. At present, EU Directive 2008/52/EC  which is implemented in the UK under The Cross-Border Mediation (EU Directive) Regulations 2011 (SI 2011 No 1133) allows those involved in a cross-border dispute, where one party is domiciled in an EU Member State at the time of the dispute, to request that a written agreement arising from mediation be made enforceable.

Antoniadou concluded that the success of the Singapore Convention would ultimately depend on whether it comes into force and the extent to which it is adopted. “Nonetheless, it has the potential to make mediation a vital part of anyone’s maritime dispute resolution strategy.”http://www.standard-club.com/news-and-knowledge/latest-updates/2019/08/article-making-maritime-dispute-resolution-more-efficient-what-the-singapore-convention-may-mean-for-the-shipping-community.aspx