Janci Karri and Jonathan Brown are the founders of SeaSolveX. Image Credit: SeaSolveX

• Mediation has a growing role in complex and commercially sensitive bunker disputes
• Quality, quantity, delivery, and payment disputes are best suited to early mediation
• Security, mediation, and formal proceedings can form part of the same dispute strategy
• Hormuz underscores the value of preserving supply relationships, cash flow, and management time more than a legal win, the firm argues
• Strong case for dispute-resolution clauses that build in early mediation as a commercial off-ramp

Mediation is playing an increasingly important role in bunker disputes, not simply as an alternative to arbitration or litigation, but as part of a broader dispute resolution strategy, according to London maritime mediation firm SeaSolveX.

The firm, launched last month by shipping lawyers Janci Karri and Jonathan Brown, recently spoke to Ship & Bunker about what mediation brings to the table when a bunker dispute arises, such as when a supplier is owed money for a stem, and when to reach for it either alongside, or instead of, the other tools available.

"The question is not simply whether to arrest, mediate or litigate," Karri told Ship & Bunker. "It is: what needs protecting now and which route offers the best commercial outcome?"

The size of the claim is only one part of that assessment, said Karri.

Parties must also consider the contractual chain, counterparty creditworthiness and assets, merits of the defence, vessel movements, security, jurisdiction, time bars, sanctions, and enforcement prospects.

These factors, alongside prior dealings, ongoing relationships, and prevailing market conditions, inform whether mediation offers an appropriate and commercially effective route to resolution, she said.

"Security protects the recovery position. Arbitration or litigation provides binding determination where required. Mediation seeks resolution. The right strategy may involve more than one," Karri said, adding that the comments are general observations on dispute strategy rather than legal advice, with the right approach depending on the contract, governing law, and jurisdiction in each case.

The Toolbox

A supplier chasing an unpaid or disputed stem has four key tools they can use to resolve it, and each serves a different purpose.

Arrest detains the ship until security is put up for the claim. It does not decide anything, but it protects the recovery position. It is only available where local law allows it and only creates pressure while a trading vessel is tied up.

Litigation takes the dispute to a court for a binding, public judgment. This can be important in a number of instances irrespective of claim size, such as when either side is acting in bad faith or a precedent needs to be set. It typically involves disclosure, witness evidence, expert reports, hearings, and proceedings that must fit in with a court schedule. It results in a judgment that can be appealed. When taken to its conclusion, it is the slowest and most expensive route to dispute resolution, and can strain business relationships.

Arbitration, like litigation, also produces a binding decision, but does so privately with proceedings that take place before a tribunal chosen by the parties. It keeps the dispute and the tribunal's reasoning on the outcome out of the public record. Compared to litigation, costs can be less and timelines shorter, but both can run close to those of a court and put an equal strain on business relationships.

Mediation brings in a neutral third party who helps both sides reach their own settlement. While nothing is binding unless signed, a settlement can take forms a judge or arbitrator may not be able to impose, such as payment plans, commercial credits, or revised terms. It is often the fastest, most flexible, and lowest-cost route to resolution, where the parties maintain control over the outcome, and has the highest chance of preserving the trading relationship. Its weaknesses are the mirror image: it secures nothing, it does not stop time bars running, and it needs a counterparty willing to talk.

"Arrest, arbitration, litigation and mediation are not competing options. They are tools," said Karri.

"The first question is: what does the business need, security, an authoritative determination, a commercial resolution, or a combination of these?"

Order of Play

Sequencing typically starts with security, and whether it can and should be obtained, since arrest is not universally available and arrest rights vary significantly between jurisdictions, said Karri.

The next question is counterparty risk: whether the matter is a genuine commercial dispute, or whether the buyer's credit, assets, or solvency are deteriorating.

"Third, protect the clock. Mediation does not suspend contractual or statutory time limits. In the absence of the parties agreeing (in writing) to suspend time in accordance with the contractual and/or jurisdictional requirements, protective proceedings may need to be commenced to preserve the parties' position, then paused while mediation proceeds in parallel."

Going in with an arrest is primarily about protecting the claimant's position rather than forcing the other side to the table, said Karri, although detaining a trading vessel inevitably creates commercial pressure.

"Arrest and mediation need not be alternatives. Once satisfactory security is in place, recovery risk may be reduced, creating a more constructive environment for settlement."

Where a supplier goes straight to mediation with the claim unsecured and the ship still trading, that risk has to be actively managed, with lawyers continuing to protect the legal position while the mediation runs, said Karri.

"Mediation should reduce dispute risk, not increase recovery risk."

Where Mediation Works Best

Some bunker disputes are naturally a better fit for mediation than others.

Quality, quantity, and delivery disputes are often strong candidates for mediation because they combine technical uncertainty with commercial flexibility, said Brown.

Off-spec claims can turn on sampling, testing, causation, machinery damage, and competing expert views, while quantity disputes involve measurement and documentation, and delivery disputes can involve nominations, port conditions, and competing calculations of loss.

The case is stronger still in the current market, Brown argued: with fuel availability constrained and replacement costs sharply higher, a reliable counterparty or supply relationship may be worth far more than it was when the contract was signed, and a settlement that keeps it intact has a value no judgment can deliver.

Where It Does Not

Where the real problem is insolvency or assets about to be moved, mediation cannot replace security or recovery measures, and arrest comes first, Karri added.

Where a dispute turns on complex technical issues that need expert evidence tested under cross-examination, arbitration or litigation may be the better forum.

And since mediation is voluntary, it needs a counterparty willing to engage: a buyer that has gone quiet cannot be mediated with, only pursued.

Nor does it stop the clock on time bars, which is why the protective proceedings described above may need to run alongside it, unless the parties agree in writing to suspend time in line with the relevant contractual or jurisdictional requirements.

The Economics

Brown cautions against putting universal figures on what each route costs or how long it takes, as both vary with jurisdiction, complexity, and evidence.

But having litigated and arbitrated bunker claims for many years, the firm's founders have seen legal costs escalate quickly and become disproportionate to the amount in dispute, on top of management time, operational distraction, and damage to business relationships.

An arrest can sometimes be achieved relatively quickly where the legal requirements are met, but it is a means of obtaining security rather than resolving the dispute, and what follows can be considerably more involved, said Karri.

"There is also no universal claim size below which litigation stops making sense," said Brown. "It is true for any claim of US$500,000 or less that legal expenditure must be balanced against recovery."

"Pleadings, disclosure, witness evidence, technical experts, hearings and ultimately enforcement can materially alter the economics of what began as a relatively straightforward bunker claim."

The more useful question, in Brown's view, is a different one: "How much of the amount genuinely in dispute are we prepared to spend determining who is right and what commercial value will that determination actually create?

"SeaSolveX addresses this issue by incorporating a purpose-built free initial assessment, which we call Resolution Readiness Diagnostic. This allows the parties to address the issues at the earliest stage and enables appropriate fees to be fixed in advance for the entire mediation process."

Overall, disputes need to be looked at on a case-by-case basis: a smaller claim may justify formal proceedings where liability is clear and recovery straightforward, while a larger one may become unattractive where several jurisdictions, expert evidence, and uncertain enforcement are involved.

"The threshold is practical and economic, not numerical," Brown said.

Complexity

Readers need look no further than recent cases reported in these pages as examples of how disputes over a relatively small sum can quickly spiral in a legal process fragmented across jurisdictions while the underlying commercial dispute stays the same.

It is a recurring problem in shipping, said Brown, and one where structured mediation is becoming increasingly important.

"Each individual enforcement step may be entirely justified. But businesses should periodically reassess the overall economics of the dispute: what has already been spent, what remains genuinely in dispute, what further expenditure is contemplated, what recovery is realistically achievable and whether a commercial settlement would now produce a better outcome."

The situation in Hormuz brings the point into focus, he added, with shipping businesses managing vessel security, sanctions, disrupted routes, fuel availability, higher costs, credit exposure, and fast-changing counterparty risk, all occurring at the same time.

There is now a strong case for dispute-resolution clauses that build in early mediation while expressly preserving the right to obtain security or seek urgent protective measures, said Karri.

"The objective of mediation should be to create an early commercial off-ramp, not a procedural roadblock.

"Protect what needs protecting. Preserve what needs preserving. Then create the earliest commercially sensible opportunity to resolve the dispute and move forward."