Shipping lawyers pulled up for poor costs management

Shipping lawyers' and claims managers' methods are under internal review following criticism by the world's largest protection and indemnity (P&I) club, which mutually insures shipowners

Many lawyers, some of whom assisted the UK P&I Club, which commissioned the 'Value for Money' report, accept that there are difficulties over such areas as disclosure, delays and high costs.

The Club wants to harmonise lawyers' costs while ensuring they are not hired simply because they provide the cheapest rate. The Club's annual claims handling budget, of up to $68m (£42.3m), was the basis for the report.

It accuses lawyers of inadequate cost management and wants more early case management to “measure and assess the performance and cost-effectiveness of claims executives and outside experts”. It also wants more payments at an early stage “when liability is not an issue, rather than incurring disproportionate costs later”.

Richards Butler shipping partner Andrew Hughes highlighted the undesirability of costs exceeding the amount at stake, but added that steps are being taken to avoid this. They include drawing up a comprehensive costs budget soon after receiving an instruction, and sending the client a letter of advice detailing the chances of winning.

Club members need to share more information with their managers and external solicitors. “Cases are regularly lost or settled unsatisfactorily because of a lack of relevant data,” the report states.

The report also emphasises that lawyers lack an understanding of members' needs and businesses, and spend too long on technical rather than commercial and practical problems.

Clubs' claims managers were criticised for having no clear strategy, a limited understanding of their roles, providing overoptimistic advice, conducting protracted legal battles, costly delays and incurring unexpected costs.