Rates sink to keep London ship litigation work afloat

Shipping litigation has grown by 143 per cent in the last three years compared with the same period up to 2000, contradicting gloomy reports of ship litigation drying up.

According to research by Jackson Parton, the firm with the largest increase in reported cases since 2000 is Stephenson Harwood, which has seen the number rise by 166 per cent, having capitalised on disputes arising out of the firm's bulk ship financing department coupled with its long-term handle on wet litigation.

Ince & Co and Clyde & Co, meanwhile, have handled 94 and 80 cases respectively since 1996. In the last three years each has enjoyed significant increases in the volume of work. For Clyde & Co, volume has rocketed by 76 per cent. This reflects both firms' greater reliance on low-value, high-volume litigation, such as work on behalf of the protection and indemnity (P&I) clubs and over collisions.

Holmes Hardingham and Waltons & Morse have also grown during the same period, by 100 and 133 per cent respectively, again reflecting their reliance on the volume end of the market.

Nevertheless, these encouraging statistics are not necessarily cause for renewed optimism. Collision work is now on the decline due to greater regulation of the seas and improved training, while P&I clubs have intensified the downward pressure on lawyers' rates and are taking much more work in-house.

Clyde & Co and Ince & Co have, as a result, moved to diversify considerably. Clyde & Co, for instance, is becoming as well known for its insurance practice as shipping.

Clyde & Co shipping litigation partner Brian Nash said: "There's an increasing need for a higher level of international expertise and this plays to our strengths in handling high-value cases." He points to his firm's involvement in virtually every major casualty in the world, including the Tricolor, Prestige, Hual Europe and Starsin cases.

There are further reasons to be pessimistic. Mainland European countries, particularly the Netherlands, Belgium and Germany, are receiving more ship litigation work because their rates are said to be cheaper than those of London lawyers and because of a marked improvement in levels of expertise on the Continent.

The growing intensity of competition in London, particularly on rates, further suggests a drop-off even in wet litigation. For firms such as Holman Fenwick & Willan, Ince & Co and Clyde & Co, this is not good news.

The low number of reported cases for the likes of Clifford Chance, Norton Rose and Watson Farley & Williams can be explained by their extensive reliance on shipping construction disputes, acting for banks or ship companies. Because of the massive sums involved, there tends to be a small number of disputes that actually get as far as trial. Others, such as Curtis Davis Garrard, focus on arbitrations.

There are, of course, exceptions. One firm with a high number of reported cases, but which does not focus on the low-value wet work, is Shaw and Croft. Its expertise lies in the salvage arena, exceptionally buoyant throughout the 1980s and early 1990s, largely on the back of the Iran-Iraq conflict, the so-called 'tanker war', but which still provides a steady stream of work.

The firm has also seen the potential for taking actions against governments that have failed to abide by international conventions relating to restricting pollution at sea by assisting stranded ships. Ben Browne, a ship litigation partner at Shaw and Croft, says: "Governments are strapped into oil pollution conventions. By creating so much law, governments have placed themselves in a position for lawyers to shoot at them." This is largely through judicial review.

For those firms persisting with wet work, the key is clearly to remain competitive. Jackson Parton, which compiled the survey, claims to have achieved this by keeping overheads low and maintaining longstanding contacts in the important Greek and Far East markets.

For those unable to maintain a competitive edge on rates, diversification has become key. Barlow Lyde & Gilbert, with just five reported cases since 1996 (which may show an exceptional ability at securing settlements rather than a lack of work) is one firm now looking to expand its practice. To that end, the firm has signalled its intention by hiring two partners from Hill Taylor Dickinson, Tim Taylor and Patrick Foss, who start at Barlows next month.

The exploitation of the salvage arena by Shaw and Croft and Clyde & Co in the insurance field proves that it can be done.