Shipping

In a nutshell

Shipping lawyers deal with the carriage of goods or people by sea, plus any and every matter related to the financing, construction, use, insurance and decommissioning of the ships that carry them (or are arrested, sunk or salvaged while carrying them). Despite being the preserve of specialist firms, or relatively self-contained practice groups within larger firms, the discipline offers varied challenges. The major division is between 'wet' work relating to accidents or misadventure at sea, and 'dry' work involving the land-based, commercial and contractual side. In extension, disputes or litigation relating to contracts mean there is also a contentious side to dry work. While some lawyers in the area may be generalists, it is more common to specialise.

 

What lawyers do

 

Wet lawyers

  • Act swiftly and decisively at a moment’s notice to protect a client’s interests and minimise any loss.
  • Travel the world to assess the condition of ships, interview crew or witnesses and prepare cases.
  • Take witness statements and advise clients on the merits of and strategy for cases.
  • Handle court and arbitration appearances, conferences with barristers and client meetings.

Dry lawyers

  • Negotiate and draft contracts for ship finance and shipbuilding, crew employment, sale and purchase agreements, affreightment contracts and the registration and re-flagging of ships.
  • May specialise in niche areas such as yachts or fishing, an area in which regulatory issues feature prominently.
  • Handle similar tasks to wet lawyers in relation to contractual disputes but are less likely to jet off around the world at the drop of a hat.

The realities of the job

  • Wet work offers the excitement of international assignments and clients, so lawyers need to react coolly to sudden emergencies and travel to far-flung places to offer practical and pragmatic analysis and advice.
  • Despite the perils and pleasures of dealing with clients and instructions on the other side of the world, the hours are likely to be steady beyond those international rescue moments.
  • Non-contentious work touches on the intricacies of international trade, so it’s as important to keep up with sector knowledge as legal developments.
  • Dealing with a mixed clientele from all points on the social compass, you’ll need to be just as comfortable extracting a comprehensible statement from a Norwegian merchant seaman as conducting negotiations with major financiers.
  • Contentious cases are driven by the procedural rules and timetable of the court or arbitration forum to which the matter has been referred. A solid grasp of procedure is as important as a strong foundation in tort and contract law.
  • Some shipping lawyers do come from a naval background or are ex-mariners, but you won’t be becalmed if the closest comparable experience you’ve had is steering Tommy Tugboat in the bath as long as you can show a credible interest in the discipline.
  • Though not an all-boys club, parts of the shipping world are still male dominated. Women lawyers and clients are more commonly found on the dry side.
  • In the UK, shipping law is centred around London and a few other port cities. Major international centres include Piraeus in Greece, Hong Kong and Singapore. Some trainees even get to work in these locations.

Current issues

  • The shipping industry's current problem is oversupply. The sector is a pretty cumbersome beast: it takes almost three years for a ship to be launched after it's been ordered. Orders increased in 2013 when China raised its demand for coal imports, but as the state's need for the fossil fuel dropped, this led to an oversupply of vessels in the current market.
  • Low demand and too many ships meant the industry was hurting in early 2016. The cost of shipping raw materials – measured by the Baltic Dry Index – hit record lows and shipping giant Maersk reported a net loss of $1.94 billion, which was only its second loss since World War II. But there are signs of recovery. Demand is growing slowly thanks to activity in the Asian and emerging market economies, and Maersk saw demand outstrip supply in the fourth quarter of 2016 – the first time it recorded such a result since 2010. Commentators are now making cautious predictions of growth.
  • The downturn in the market bumped up shipping-related insolvencies. The world's seventh largest container line, Hanjin Shipping, recently filed for rehabilitation in the Seoul District Court, causing all sorts of difficulties (some ships were stranded at sea, with ports refusing to take the risk of unloading them and not being paid for the work) before it was finally declared bankrupt in February 2017.
  • Post EU referendum, the prospect of two years' worth of exit negotiations has prolonged the period of uncertainty. A worst case scenario for UK companies would likely include long negotiations resulting in tariffs on trade with the EU. Brexit could also give rise to disputes if contracts drafted pre-Brexit make vague reference to the EU or presume the existence of UK membership in the EU.
  • Globally, shipyards' order-books have been getting progressively emptier: there was a 71% drop in ordering in 2016 overall and estimates suggest an 18% fall in shipyard output in 2018. Both tanker and bulker orders were down significantly in 2016.
  • Piracy remains a concern: Somali pirates took a commercial ship hostage in 2017 for the first time since 2012. International efforts have dramatically decreased piracy in East Africa, but piracy off the coast of West Africa is on the rise. In practice, shipping law tends to focus on the ships themselves rather than the pirates, and as yet, no pirates have been brought to trial in the UK, though it has happened in the US.
  • While the trade of liquefied natural gas (LNG) previously flowed from China to the US, the proliferation of the shale gas industry in the US and China's efforts to decrease its coal usage in favour of gas, has turned the relationship on its head. China and the US are now discussing long-term contracts for the supply of LNG, with the US set to become a net exporter of the stuff.
  • The expansion of the Panama Canal was completed in June 2016 and should increase trade between China and the Americas. It now allows large NeoPanamax ships to pass through. Meanwhile, the second best known man-made waterway, the Suez Canal, is set to become an industrial and logistics hub (10% of global trade already passes through it). The plan is to expand to allow bigger vessels to come into port, while also developing transshipment activities and bunkering capabilities. Ports in Baltimore, Charleston, Miami, New York and Savannah are also upgrading to take NeoPanamax ships.
  • China has signed a $1.1 billion deal with Sri Lanka to take control of its deep-sea port at Hambantota – a move that reflects its 'One Belt, One Road' initiative to increase trading links to Europe.
  • The UN International Maritime Organisation (IMO) has decided to act on the polluting emissions from the shipping industry by placing a limit on the sulphur content of fuel, which will be applied from 2020. This will make fuel more expensive for ship owners, potentially increasing freight rates. In 2016 it was calculated that the carbon emissions caused by the shipping industry would rise to almost 17% of the global total over the next 30 years if no action was taken, and it already surpasses the aviation industry in terms of tonnes of CO2 emitted. Though 'progressive' shipping companies have driven the action on emissions, opposition comes from developing countries that rely on shipping, as well as other heavily-invested lobbying groups.