There has been the biggest dislocation in the shipping market for the past 25 years, as the surge in activity in prices, chartering, futures and trading in the first half of 2008, gave way to a dramatic slump in the second half of the year and in to 2009.  The consequences have been many: among them, the unwinding of leveraged positions, reneging of all kinds of shipping contracts and a general rise in disputes.  

The global credit crunch and subsequent economic downturn have obviously had a significant impact on the world economy generally and international trade specifically, whether in relation to significantly reducing banking liquidity, or restricting corporate activity. The shipping sector has seen some specific impacts;

• Investment in shipping has declined dramatically, with newbuilding contracts not being completed, either due to shipyards defaulting or buyers not having committed finance in place and now being unable to raise funds. The difficulty of obtaining refund guarantees has put further pressure on the newbuilding sector. As asset values (and charter rates) drop, there is also an increased likelihood of disputes as parties try to back out of contracts that no longer seem so favourable. Falling values and charter rates also raise the spectre of future loan defaults as shipowners struggle to meet their financing covenants.
• Corporate insolvencies have risen across international commerce – especially liner shipping companies, bulker and tanker owners, logistics businesses, commodities houses, port operators and energy businesses.
• Funding of corporate activity has come sharply in to focus, with the recent rise of shipping funds and the need to both restructure and raise additional finance.
• The restructuring of bank loans and work-outs in relation to all classes of asset has become a major issue.
• Freight and commodities contracts, with a rise in charterparty disputes and charterparty amendments, along with issues related to defaults and deferrals.
• Derivative contracts often need to be re-negotiated, either to ensure contractual obligations can still be met, or to agree liabilities and conclude arising disputes.
• A rise of litigation activity generally amongst commercial organisations, as banks and corporates alike seek to explore liability for investment or commercial losses.
• The regulatory environment in relation to world trade and competition, highlighted by the G20 conference and subsequent attempts to stimulate corporate and banking activity around the world.

These unprecedented market conditions have led to an extremely busy year for our offices in Hong Kong, Shanghai, Singapore, Sydney and Melbourne. To enable us to cater for clients' needs in these volatile times, HFW has invested heavily within the region, with a team that now numbers 28 partners and 52 other fee earners, coupled with a master mariner in each of Melbourne and Shanghai, with two in each of Hong Kong and Singapore. As a direct result of this expansion, the region now accounts for over a quarter of the firm's revenue. 

The cases we are dealing with across our Asia-Pacific network highlight the nature of the current shipping market; due to the number of ships anchored offshore, our Singapore office is dealing with numerous mid-sized collision cases, groundings, pollution and the like. Meanwhile, our Melbourne office is dealing with an incident where a ship's anchor dragged over a gas pipeline in the Port of Melbourne, causing a loss in excess of A$300 million. It is the biggest maritime claim ever in Australia. Otherwise, our Hong Kong office has been dealing with a case where a Chinese flagged bulk carrier collided with a Ukrainian offshore supply vessel in Hong Kong territorial waters, leading to the total loss of the Ukrainian vessel and the loss of 18 of her crew. This was the single largest  loss of life in Hong Kong waters in peace time since the Second World War.

On the corporate and finance side of our business, the level of restructurings and re-financing has been unprecedented, whether of specific assets, or business entities. Contract re-drafting has also become the norm as businesses try to ride out the storm.

However, in what have been highly unusual market circumstances, we have maintained our market leading reputation as top-tier for shipping and commodities, as well as investing in commercial litigation, corporate and finance capabilities to build a wider set of capabilities. Founded in 1883, Holman Fenwick Willan is an international law firm with over 300 lawyers across 10 offices globally - specialising in all aspects of international commerce.

For further information, please contact (pictured left - right):
Paul Hatzer, Managing Partner, HFW Hong Kong
Tel: +852 2522 3006
E-mail: paul.hatzer@hfw.com

Paul Aston, Managing Partner, HFW Shanghai
Tel: +86 21 5888 7711
E-mail: paul.aston@hfw.com

Simon Davidson, Managing Partner, HFW Singapore
Tel: +65 6534 0195
E-mail: simon.davidson@hfw.com

Gavin Vallely, Managing Partner, HFW Australia
Tel: +61 (0)3 8601 4500
E-mail: gavin.vallely@hfw.com

Or go to: www.hfw.com