Given the unfortunate tag of 'sunset industry', the shipping and maritime industry is undergoing change. But, as Thin Lei Win discovers, there are many who remain optimistic over its future.

If rattling off a series of statistics is the most expedient way to create a convincing argument, then try this on for size. Singapore’s ports handled over 313 million tonnes of sea cargo in 2001, while preliminary estimates from the Maritime and Port Authority have revealed that some 29.1 million tonnes were handled in April 2002 alone.

The scale of these figures has not varied much over the years, nor indeed decades. It is little wonder, then, that maritime law has been the bedrock of practitioners in Singapore for some time, as the Lion City has sought to confirm its status as the location of one of the busiest and finest ports in Asia.

But the severe downturn in the global shipping industry in the past few years has added fuel to speculation that the industry is in decline. Increased competition from port operators such as Tanjong Pelapas hasn’t helped either. Even Singapore’s flagship maritime event, Asia Pacific Maritime, was postponed for a year – from 2003 to 2004 – due to current market sentiment. And according to Maritime Strategies International (MSI), an independent consultancy based in the UK, there is no clear indication of a recovery in the shipping industry in 2002. In fact, says MSI, a sharp downturn is already on the way.

Sunset industry
All of these factors have dampened the appeal of a once ubiquitous area of law. But somewhat ironically, the major factor influencing the shrinkage in maritime-related litigation work has been the strict enforcement of regulations – from IMO (International Maritime Organization), insurers and port facility operators – regarding how ships should be operated. The standards of management and operational efficiency demanded of ship owners have risen tremendously, which has led to safer ships, which in turn has resulted in fewer collisions, damages, claims – and therefore, litigation.

Says Peter Flint, managing partner of UK firm Watson Farley & Williams: “The litigation side is much quieter, for both ‘wet’ and ‘dry’ work. There will be far fewer cases for lawyers in the future arising out of the operation of ships.”

But although wet work is, at least for now, drying up, firms are being flooded with work in other areas. Says Flint: “On the transaction side, we’re very busy at the moment.” And Martin Green, managing partner of Stephenson Harwood, says his firm is experiencing a healthy demand for services in ship finance, an area he says is a bedrock even in bad times.

Local lawyers such as Dato’ Jude Benny, Prem Gurbani and Haridass Ajaib, all believe the phenomenon is simply market-related and recession-driven.

Ajaib, name partner at Haridass Ho & Partners, says the nature of the work handled by shipping lawyers has changed in the past few years, due in no small part to changes in the industry itself. For example, cargo is now containerised and vessels are newer. The way forward for firms, he says, is to focus on individual clients and find out where they can add value. “Shrinkage in wet work is not a new phenomenon. It has been going this way. We just need to refocus ourselves.”

New-kid-on-the-block DLA has witnessed an overall reduction in ‘dry’ work. But the firm, which opened for business in Singapore on October 1 2000 and has since tied up with local firm J Koh & Co, has had 30 new instructions in the last three months. This bodes well, according to DLA partner Peter Shelford, formerly with UK firm Clyde & Co. But the going is not easy. Says Shelford: “We have found it an uphill struggle to move up in an industry perceived to be in the slumps.”

But Clyde & Co partner Julian Gray is more optimistic about arresting the downturn, observing that the shipping industry is fairly cyclical. “Shipping seems to be more susceptible to dire downturns and upswings in the region and globally than other industries,” says Gray. “But I don’t necessarily believe that the industry is in decline. It changes. My own perception is that the industry is static.”

Having just added partners to his team, Richards Butler’s Chris Howse is bullish about the future of shipping-related work. He does not agree the nature of the industry is responsible for any decline. “I am not sure that this change in the pattern of work is due to a cycle,” says Howse. “Depressed trading conditions in Asia Pacific countries will result in less trade and this in turn could result in fewer maritime disputes. Conversely, in adverse trading conditions, owners and charterers are more likely to litigate.”

Although his firm has not experienced any particular downturn in volume, Howse admits there is less work coming in from P&I Clubs. “But this is largely as a result of the major international P&I Clubs establishing a network of offices in the Asia Pacific region and other important centres round the world,” he says. “The P&I Clubs’ local offices are now able handle more of the work in the region. The increase in work has come direct from owners either on matters that are not covered by their Club or from owners who prefer to deal with matters themselves.”

Specialise or diversify
Although remaining buoyant about its survival as a practice area, offshore firms are keen to promote the fact that they do not solely concentrate on shipping and maritime work. They describe their services as ‘diversified’, although shipping remains a core focus.

DLA plans to venture into corporate and project finance in the next three years; Clyde & Co regards itself as a broad-based commercial firm; Stephenson Harwood is involved in other financing services apart from shipping, and; Watson Farley & Williams points to its corporate services.

All agree that now is not the optimum time to start out or continue as a boutique shipping operation. Says Gray: “Any firm that has intentions of going global cannot remain simply as a shipping firm. My own firm has taken this view.”

But local firms see a different picture. Perhaps not compromised by grand global plans, they argue that specialising is the only way to strengthen expertise. Their view is that if they want to venture regionally, they simply maintain good relationships with reputable firms in neighbouring countries.

Says Prem Gurbani of Gurbani & Co: “We’ve been a specialist shipping firm for a long time. Diversification is not for me. There is enough work for us.”

Gurbani accepts, however, the need to raise the firm’s profile on a global scale. Being part of a global network of firms can help achieve that and can mean referrals from various firms, boosting work levels.

Most of the top-tier Singapore firms are part of some sort of network, giving them a wider reach. And even specialist firms are following suit. J Koh & Co works closely with UK firm DLA in order to offer the one-stop service desired by clients. If permitted, the firm admits it would merge with DLA tomorrow.

Joseph Tan Jude Benny (JTJB) has adopted an alternative strategy, successfully establishing branch offices in major shipping centres around the world and repatriating work back to Singapore

Consolidation
While J Koh & Co and DLA seek approval to merge their capabilities for the benefit of clients, there has been a spate of unions – or union talks – elsewhere, all related to shipping.

UK firms Stephenson Harwood and Sinclair Roche recently joined forces, Clyde & Co’s Paris office has teamed up with local firm Honig Preel Mettetal Buffat Coulon, while talks between Watson Farley & Williams and Simmons & Simmons only narrowly missed the boat.

Industry players say there is more fluidity in the local market at the moment. An offshore ship finance expert says there is pressure on ship owners to grow and then consolidate, which also applies to the service sector generally. Many agree consolidation is a good idea if two particular firms are trying to achieve economies of scale or have an overlapping client base. But there is also scepticism about how synergies can be achieved through firms merging in an industry already facing problems.

Most local firms do not see the need to consolidate, taking the view, not surprisingly, that the handful of well-known experts in Singapore is serving the market well. Jude Benny says Singapore’s topography is different to that of other shipping centres. “In the last couple of years, shipping was the obvious poorer cousin compared to corporate practice,” he says. “It was seen to be not as lucrative within a large firm so there were departures, closures and mergers. But shipping is now one of the better income contributors in Singapore, even in large practices.”

But Stephenson Harwood’s Martin Green says the consolidation phenomenon is nothing new, and it would be wrong to discount further merger activity in the near future. Says Green: “Generally, the whole legal market is seeing consolidation as a trend.”

Growth opportunities
Demand for legal services in the area of ship finance is expected to continue, especially structured and tax-driven financing. Insurance and reinsurance, and securitization and leasing are also tipped to be growth areas. Many lawyers say Keppel and Jurong Shipyards in Singapore are doing extremely well. But Watson Farley & Williams has warned that classic ‘vanilla’ asset ship finance work is not as abundant as before, and there is the expected impact of a slowdown in new deliveries from Asian yards next year.

And in spite of the general contraction of shipping litigation work, many practitioners are optimistic about the rise of arbitration as a means of resolving disputes. Says Flint: “We must encourage more people in the shipping industry to resolve their disputes by arbitration in Singapore, rather than referring the matter to distant courtrooms in London or New York.”

To help achieve the status of a maritime arbitration centre in the region, Gurbani says offshore firms have a role to play in attracting foreign clients to Singapore. Singapore International Arbitration Centre’s (SIAC) statistics reveal there were only 19 shipping arbitrations in 2001 out of a total of 100. The highest number was 28 in 1998, but many say these numbers could be improved. Shelford, who is applying to become a panel member at SIAC, says: “We need increased awareness, promotion and publicity here about the availability and panel of arbitrators.”

Arbitration is attractive because it is seen as providing a level playing field for both offshore and onshore firms. But offshore firms would like SIAC to be more accessible and give disputed parties the freedom of appointing desired arbitrators. There are still restrictions on foreign arbitrators advising on cases involving Singapore law. Clyde & Co’s Gray suggests implementing Fast and Low Cost Arbitration (FALCA), a quicker and cheaper resolution for the middle range of maritime disputes, and at a capped cost (usually for claims under US$250,000).

The future
Shipping remains a key industry, the only viable way of moving certain goods around the world being by sea. And although growth opportunities may be scarce, the industry will continue to be a force in the world’s economy.

As shipping rides the peaks and troughs of another cycle, the nature of legal work in the area is changing. For many firms, the pressing question is how to add value to the services they provide.

Most practitioners say it is the lower-end bread and butter work that used to flow through the door that has been most affected by recent events. To succeed in the future, they concede they will need to target higher-end value-added sophisticated services.

Just as the Port of Singapore Authority (PSA) cannot rest on its laurels, shipping lawyers also have little room for complacency. Haridass Ajaib accepts that the market for the provision of legal services is highly competitive, but says that shipping firms need to “look at different types of work and adapt themselves to the present context of the market”.

Jude Benny adds: “People ought to stop calling this a sunset industry because it is here to stay. I don’t see a need for pessimism in this area.”

Joseph Tan Jude Benny
Many firms are complaining about a downturn in activity in the shipping area, clamouring for any work that’s available. But not shipping and conveyancing firm Joseph Tan Jude Benny. Co-founder Dato’ Jude Benny told Thin Lei Win why.

Singapore has one of the world’s largest and busiest ports, so it should come as little surprise that maritime law has achieved the status it has in the Lion City, or that local shipping law firms have been able to develop a profitable niche business.

As well as nurturing the necessary expertise in-house and having the ability to think ‘out-of-the-box’, Benny says Joseph Tan Jude Benny (JTJB) has also, along the way, enjoyed “some very fortunate breaks”.

JTJB was established in 1988 and has become one of the country’s leading shipping practices. “When people in major shipping centres around the world mention the top Singapore shipping firms,” says Benny, “our objective has always been to be one of them. And we’ve achieved that … to a certain extent.”

Benny heads JTJB’s admiralty and shipping practice, along with Danny Chua. The former received his ‘Dato’ title from the Sultan of Pahang for his many celebrated cases for the Malaysian government. The latter migrated from KhattarWong & Partners with his team in September 1999.

The arrival of Chua and his team (including Mohd. Ghoush Marikan who was a merchant navy officer as well as a qualified lawyer) was quite a coup and a major factor in the growth of the practice. With 15 lawyers, JTJB’s shipping practice is one of the largest in Singapore and is hoping to expand further this year.

JTJB has been involved in high-profile maritime cases such as the Seismic Ship collision off China, the sinking of the Calypso in Singapore, and has represented the Crown Prince of Abu Dhabi. JTJB also handled the first ship collision trial to be heard locally for 40 years (Ming Galaxy/Herci Novi).

Bring it on
Still, the firm is only too aware that the competition is getting fiercer and there’s only so much a specialist firm can do. Says Benny: “We must always be on our toes and have to be conscious of our limitations. We are far from saying that we’ve achieved the market standing for which we aspired. We’re not the largest of firms and we have budget constraints. It is all the more important that we should use our limited resources in a very focused approach: in marketing, client relations and the delivery of quality work.”

The delivery of quality work has helped the firm expand its business throughout the region and across the globe. JTJB now boasts five international offices in major ports including Hamburg, Piraeus, Bangkok, Kuala Lumpur and Taipei.

Benny says that while the offices offer interesting and unique origins, they are admittedly small. “But they’re our own and we work together with the nationals. The primary objective of the offices is to repatriate work back here.”

And it seems to be working. According to the firm, the number of cases it has taken on has increased, and the shipping industry as a whole remains dynamic. Benny says he continues to see litigation work coming out of Singapore, while there is enough regional work – from Malaysia and Thailand – to keep the firm busy.

The shrinkage in the volume of work, says Benny, simply means that the nature of the work becomes more recession-driven. “Whether the danger signs are out for the shipping practice – I don’t think so,” he says. “But caution is critical now.”

The present climate has put expansion plans on hold for JTJB and Benny is aware that clients are becoming more selective. The lull in activity has already forced some consolidation in the marketplace but there will be no such deals for JTJB. Says Benny: “We’re very happy with our own identity.”