Insurers have pulled out of providing legal expenses cover in an arbitration that has grossed the largest lawyers’ fees – some £100m – in any case of its kind in English history.
It has emerged that Norwegian protection and indemnity (P&I) club Gard has won a case, which was held in private, granting it permission to cap the fees of its client, the Swiss-based Allseas Group, a medium-sized pipe-laying company.
As a result, Allseas, which has exceeded that cap, is now liable to pay its lawyers, Denton Wilde Sapte (DWS) and a large team of barristers, in its ongoing arbitration against Singapore engineering group SembCorp Industries.
A London tribunal has held that it was legal for Allseas to terminate early its contract with Sembawang, part of SembCorp, for the conversion of the pipe-laying ship Solitaire on the grounds that it had failed to complete the project on time and to the client’s specifications.
The withdrawal by Gard places a considerable burden on Allseas, because the arbitration, which has already been rumbling on for nine years and has seen one arbitrator die and another retire, still has many months of evidence-taking, appeals and counter claims before completion.
Legal fees to date have amounted to some £50m for each side, which includes disbursements to large teams of experts. Heathrow-based firm Curtis Davis Gerrard, which replaced Norton Rose as SembCorp’s lawyers, has hired a large team of assistants to work solely on the arbitration. It is also about to move to better premises thanks in part to a significant revenue boost derived from the case.
Gard was able to cap its legal expenses cover because of special insurance policies that allow it to keep legal expenditure in check. The power to do so is derived from the fact that, as a mutual, it has a responsibility to its members to keep costs as low as possible.
On 9 July, by a majority of two to one, the London arbitration ruled that Allseas’ decision to move Solitaire to Newcastle shipyard Swan Hunter to be converted was correct. SembCorp, which could be liable for the cost of the Swan Hunter £250m conversion, disputes this, claiming another Asian shipyard would have done the job far more cheaply and efficiently.
Gard and the DWS partner responsible for the case, Philip Chong, declined to comment.