Offshore companies exposed to litigation

Offshore companies, such as oil rig operators, are being exposed unnecessarily to multimillion-dollar litigation because they do not have a coherent legal strategy, a report has shown.

Refusal to instruct a lawyer at an early stage, negative attitudes towards in-house lawyers and lack of commercial advice from external law firms, are also cited.

Some 60 per cent of offshore companies have “no strategy for avoiding litigation”, according to the ‘Industry Attitudes to Risk, Contracts and Legal Services’ report, commissioned by maritime firm Curtis Davis Garrard.

Operators say lawyers are often not used at the outset of projects because they “bring no value to discussions about commercial risk”. Contractors, on the other hand, believe “there are enough in-house lawyers in the offshore industry and thus there is no need for external lawyers”. The report was based on interviews with 52 companies in the offshore sector, as well as shipyards and shipbrokers from 11 countries.

External law firms are also criticised for not focusing on the commercial goals of their offshore clients, a factor that the survey links to standard engineering, procurement and construction (EPC) documents – used widely in large offshore construction projects – being ineffectively employed.

Rather than seeing the EPC documents as a working document, designed and used to keep commercial objectives at the forefront of discussions, offshore contractors and operators believe they “should only be consulted when a problem arises”.

In-house lawyers are accused of giving little time to due diligence in the early stages of a tender, while the process of contract negotiation and document drafting is also “hurried and poorly administered”.

Curtis Davis Garrard partner Ian Garrard said: “It is not a case of more lawyers, but the better use of legal advisers with specialist knowledge.”