With the Australian shipping industry continuing to feel the squeeze, maritime lawyers are being kept busy grappling with disputes, legislative reform and the much-publicised issues of asylum seekers and super trawlers. Andrew Jennings reports.
On the afternoon of 13 December 2008, the captain of a Chinese container ship, battling ferocious gales and huge seas, was ordered by the port authorities to remain anchored in Port Phillip Bay in Melbourne.
Captain Xu Pingfeng’s vessel, the APL Sydney, was in dire trouble as it drifted ever closer to a subsea gas pipeline.
The captain’s efforts to avert the impending disaster proved to be in vain.
The anchor of the APL Sydney snagged and ultimately punctured the pipeline. It severed the flow of ethane from Esso and BHP Billiton’s rigs in the Bass Strait to chemical plants in Altona, west of Melbourne.
The incident ended up in the Federal Court as Esso and BHP Billiton and their customers, Qenos and Huntsman Chemical, sued the ship’s owner for multi-million dollar losses.
In late March 2010, the Federal Court slammed the Port Phillip sea pilot involved and the Port of Melbourne Authority for their parts in the disaster.
The case — arguably the biggest in maritime law in recent years — went far beyond the commercial claims and courtroom blame game.
It proved to be a landmark case of great importance to the global shipping industry, recognised as an important decision of international significance due to its interpretation of an Article of the Convention on Limitation of Liability for Maritime Claims 1976 (the Limitation Convention).
It was the first time a court — anywhere in the world — had handed down a judgment dealing with what constituted an “incident” for the purposes of limiting a ship owner’s liability under the Convention.
International law firm Holman Fenwick Willan (HFW) acted in the Federal Court proceedings, and one of its partners, Gavin Vallely, describes it as a “hugely important watershed decision” in the context of international maritime law.
“There are times when marine-related incidents receive publicity due to their emotional appeal [oil spills, asylum seekers, the super trawler and live exports], however, there are much more significant cases in the general development of the law, like the APL Sydney case, which generated claims in excess of $300 million,” says Vallely.
HFW, with more than 480 lawyers operating in 14 offices across 11 countries, is a powerhouse of international trade and transport logistics. It sits in the top bracket of maritime firms globally.
The firm has expertise acting in respect of all aspects of the marine supply chain sector and first established a presence in Australia by opening an office in Melbourne in 2006.
HFW has specialist maritime lawyers working across dry shipping, admiralty, crisis management and transactional work. It represents ship owners and charterers, Protection & Indemnity (P&I) clubs, banks, financial institutions, shipyards, marine insurance underwriters, governments and brokers.
More than 95 per cent of the international merchant tonnage obtain their third-party liability cover from non-profit-making mutual insurance associations, known as P&I clubs. They operate by ship owners pooling their resources together in order to meet losses suffered by each individual member, thereby effectively self-insuring one another’s risk. Thirteen major P&I Clubs are member clubs of the International Group of P&I Clubs, which between them provide liability cover for approximately 90 per cent of the world’s cargo ships. Of these, eight have management offices based in London, with others located in Scandinavia, Japan and the USA.
In April last year, HFW expanded its Australian operations by opening an office in Perth — following the launch of a Sydney office in September 2009 — which has seen the firm increase its workload into energy, mining, agricultural commodities and related areas.
“We have had a substantial flow of work generating out of Perth in the offshore energy area, as well as acting for mining companies in the trade and logistics area,” says Vallely. “In that sense, the opening of the office is very much driven by client demand.”
The firm’s commodities and energy practices tend to look after the big commodities houses and mining companies, both in terms of sale and purchase aspect of their business, but also freight requirements.
“With international trade, shipping is an integral part of a company’s business,” says Vallely.
He adds that although many of the country’s blue-chip companies do not have substantial fleets of their own they do have major chartering requirements. For example, companies such as BHP Billiton, Rio Tinto and our agricultural commodities’ exporters charter several hundred vessels annually and have a substantial number of vessels on the water at any one time.
“It’s essential to have a seamless supply chain to get your product to market in a safe, timely and cost-effective manner,” says Vallely.
HFW also specialises in non-marine insurance, and has a corporate group focusing on the commercial and M&A side of transport, infrastructure, mining and agribusiness.
Keep dry or get wet
Traditionally, maritime law has been at the forefront of much of the world’s common law.
“I have the view that anybody who is a competent maritme lawyer can probably turn their hand to most aspects of the law,” says Joe Hurley, head of HWL Ebsworth’s shipping and trade practice.
He describes most of the work the firm deals with as “intellectually challenging and demanding”.
Firms advising clients in maritime law generally refer to ‘dry’ and ‘wet’ (contentious and non-contentious) shipping matters.
Traditional wet work areas include advising on rights and liabilities for ship owners, disputes arising from casualties, ship arrests, marine pollution, salvage and accidents.
Dry work areas include advice on charter parties and insurance policies, as well as disputes arising from such contracts. New and growing areas in dry work include ship building, repair and conversion contracts.
Shipping finance matters cover all work relating to the financing of vessels and ship-owning
companies. This includes legal documentation for sale and purchase, mortgages, M&A and public listing.
Generally, bigger maritime firms will be split into a commercial practice and a dispute resolution practice.
On the commercial side, HFW is doing a lot of project shipping work, port infrastructure and advising on the sale and purchase of ships. It is heavily involved in servicing the offshore energy sector in WA and advises on Australian coastal project shipping.
It also has dealings with peak bodies in relation to regulatory aspects of operating foreign crew and foreign flag tonnage on the Australian coast, and the industrial relations issues that emanate from that.
In 2009, an investigation found that a Greek grain ship, which ran aground on the WA coast a year earlier, did not follow its own navigation procedures.
No one on the bridge of the Atlantic Eagle monitored its progress as it sailed and the crew failed to take account of prevailing winds, the current or the risk posed by a nearby reef.
The subsequent investigation found the ship’s safety management system procedures for navigation and record-keeping were not followed and that no attempt was made by the ship’s managers to correct the latter.
HWL Ebsworth and a WA-based maritime law firm, Cocks Macnish, advised parties on the dispute that followed.
“The Atlantic Eagle ended in Federal Court proceedings and arbitration in London ... it was big news in the industry,” says Tim Cocks, partner at Cocks Macnish, a niche maritime firm solely based in WA.
According to Cocks, in the past few years, the firm has witnessed much more intense contact with Southeast Asia, in particular Singapore and Jarkarta.
“We’ve had two mediations in Singapore in the last 18 months and have another starting in a couple of weeks. Singapore is more important for us than Melbourne or Sydney,” he adds.
Like HFW, Cocks Macnish has dealings in areas away from purely maritime matters.
“On occasion, we’ve had to expand the firm to a bigger size,” says Cocks. “We did work with Gina Rinehart for about five years associated with her Hancock Prospecting, which involved a couple of arbitrations in London. So there has been a degree of non-shipping work.”
HWL Ebsworth, with one of the largest maritime practices in Australia (15 partners and 59 lawyers), is a full-service commercial law firm with offices in all major cities on the eastern seaboard.
Across all of its practices, the firm has approximately 160 partners.
Given the international nature of maritime work — and with international mergers all the rage right now — the prospect of global alliances remains high on the agenda for firms working in the area.
However, HWL Ebsworth says that it’s happy with its model at the moment.
“It’s not something we’ve been actively looking at,” says Hurley.
“From time to time we do get contacted by international law firms enquiring about our interest in a link-up.
“But our philosophy is that we are what we are: a full-service national law firm that, in terms of people and turnover, could probably be considered a top-tier firm,” he says.
Clouds on the horizon
There are a number of contentious issues on the horizon for maritime law in Australia.
Most notable is the Coastal Trading (Revitalising Australian Shipping) Act, introduced in July, which creates a new three-tier licensing system for access to the coastal trade.
The legislation, designed to revitalise Australian shipping with the introduction of reasonably lucrative tax breaks for new operators, has been met with universal apathy by maritime experts.
“In my assesment, this won’t achieve anything,” says Cocks, “so any prospect of Australian blue-water tonnage increasing signicantly is very remote.”
Hurley says there are issues relating to the two types of licence available to ship owners: general, where an operator can apply for five years, and temporary, which is only valid for 12 months.
“There is a case in the Federal Court at the moment in respect to a dispute between a temporary and a general licence holder as to who should and who shouldn’t carry a certain parcel of cargo,” he says.
Vallely says that HFW has been heavily involved in advising various stakeholders in the industry about the implications of the new legislation, but shares the view that it won’t “achieve the stated objective”.
“One of the objectives is to incentivise new entrants into Australian ship owning,” says Vallely. “I don’t think that is going to happen, simply because it’s just such a specialised industry.
“In the main, companies who don’t specialise in shipping as their core business are not going to commit capital to that industry sector; it’s too risky and just doesn’t generate the return that their core business areas can. Plus, there is also a whole range of other issues about operating in Australia that makes it less attractive than other jurisdictions.”
Most firms working in the maritime sphere have been required to advise ship owners in relation to asylum seekers in recent years.
The advice usually involves the owners Safety of Life at Sea (SOLAS) obligations.
The International Convention for SOLAS is an international maritime safety treaty, generally regarded as the most important of all international treaties concerning the safety of merchant ships.
Cocks says his firm has had several cases where they’ve acted for ships that have been required to pick up asylum seekers.
“If ships are called upon to rescue asylum seekers – even though they have no association with Australia – the Australian authorties can compel the ship to pick up the asylum seekers,” says Cocks.
“Obviously ship owners, who are on very tight deadlines to deliver their cargo, need advice if they get a statutory direction from the authorities to deviate to pick people up.
“It’s extemely expensive for the company if that happens, and they could end up spending days on board with the asylum seekers, which brings security problems.”
An ongoing major review of fisheries legislation is aiming to clarify the extent of ministers’ rights to take precautionary measures, following the ban from Australian waters of super trawler the Abel Tasman in September.
Seafish Tasmania, the company that wants to operate Abel Tasman, continues to fight the ban that stops it fishing in Australian waters for up to two years while further scientific research is carried out on its environmental impact.
The company has reportedly received legal advice that suggests it has a good case to overturn the federal ban imposed by Environment Minister Tony Burke on the grounds of procedural unfairness.
Any such successful case for compensation, believed to range up to $10 million, would be based on costs incurred by Seafish and its Dutch joint-venture partners, Parlevliet & Van der Plas, in developing the operation.
“From my understanding of what happened with that super trawler, it’s an absolute disgrace. There would have to be a fairly big damages claim against the Government for reversing that decision without any sort of scientific basis,” says Cocks.
“The Government reacted entirely to what the Greens and other people with political influence had to say; people that don’t have the technical or research knowledge about it.
“If I was acting for the ship operators I would surely be looking at my legal rights.”
Competition is as fierce in maritime as any other legal market. Other than the firms mentioned, DLA Piper, Norton Rose and Clayton Utz tend to be the other major players.
Although small in size, Cocks Macnish is proud that it can hold its own with the big boys.
“In the last 30 years all of the big law firms have moved out here to WA and tried to steal our work ... I don’t think one of them has been successful,” says Cocks.
“DLA Piper probably tried the hardest, they do quite bit of marine work, as do one or two other medium-sized firms, but none of them have had an impact on the work we do, so the competition hasn’t worried us.”
Despite the obvious woes of Captain Xu Pingfeng and the APL Sydney in Port Philip Bay that summer’s afternoon in 2008, it’s said that “a ship is safe in harbour, but that’s not what ships are for”.
Something maritime law firms can be glad of.