Full steam ahead

Shipping law firms are riding the crest of a wave As london dominates the market- but involvement in this specialist area marks out differences between large and small firms, writes andrew towler

Once upon a time it was said that the sun never set on the British Empire and Britannia ruled the waves, with her vast fleet conquering all before it.

Those halcyon days are long gone, and today the Commonwealth and monuments all over the world are all that remain - along with shipping law.

The long history of English law governing the seas means today it is still the 'common currency' of shipping law firms, both domestic and foreign.

Understandably, this has led to concern among European counterparts, highlighted by the Piraeus Bar Association's claims over the last couple of years that the Greek offices of 12 English firms were practising illegally.After threats of criminal prosecutions, the Misdemeanour Court of Piraeus ruled recently that the solicitors were practising within EU law, a decision generally viewed to be in the best interests of both sides and potential clients alike (see [2001] Gazette, 26 April, 6).Chris Hobbs, a Piraeus-based partner in the shipping litigation group at Norton Rose, says: 'International clients consider English law to be neutral, developed and sophisticated.

They like it because it produces a result.' Such sentiments are echoed by Archie Bishop, former senior partner and now a consultant at shipping specialists Holman Fenwick & Willan.

'Even though the UK has lost its way a bit in the shipping industry, London is still the world centre for maritime services,' he says, 'and most maritime laws are still based on English laws for historical reasons.'The pre-eminent position of the Lloyd's insurance market undoubtedly enhances the City's position as the shipping capital of the world, but this is reinforced by the presence of various other brokers, insurers, protection and indemnity (P&I) clubs and ship chartering companies.

The benefits of being surrounded by such a network of auxiliary services means those London law firms that specialise in shipping dominate the world market.

A survey carried out by financial services promoter British Invisibles last year found that City firms generated more than 200 million in maritime-related fee income in the 1998/99 accounting year - and 170 million of that figure came from overseas customers.Tony Vlasto, head of shipping and admiralty at Clifford Chance, says: 'Some people complain about the UK prices, but the firms are the most thorough, and clients feel most comfortable with them.' Though Mr Vlasto says the UK will continue to dominate the market, he warns: 'It is dangerous for the English to be too relaxed.

It is important to continue promoting maritime London.'Any challenge to London's market dominance is more likely to come from Asia, where trade barriers are falling, than the fragmented US market.

'Fifteen years ago, New York was very important in the shipping market,' Mr Bishop says.

'But now maritime law has shrunk in the US, and work has gone to other cities such as Los Angeles and New Orleans - I doubt whether New York even leads the American market any more.'Derek Hodgson, a partner at leading shipping firm Clyde & Co, adds: 'There is no real competition for London anymore.

If anywhere is going to offer a challenge, it will be Far East and coastal cities such as Shanghai.' With an eye on the worldwide market, UK firms have expanded internationally to adopt a more hands-on role in dealing with such work.

Holman Fenwick & Wilan, for example, has set up offices along trade routes such as Shanghai, Singapore, Hong Kong and Piraeus.

'Those firms which have branched out into foreign lands are benefiting on the whole,' says Mr Bishop.

'Ninety-five per cent of our business is foreign work, and it's always better to service the client across the desk than over the telephone.'Similarly, Clyde & Co has branches in Shanghai, Dubai, Paris, Venezuela, St Petersburg and a new office in Belgrade; Norton Rose is in Greece, Bahrain, Singapore and Paris - though, notably, not in China, where Mr Hobbs says the firm is 'waiting to see what develops'.However, while the larger firms are choosing to widen their net to capture marine work, the smaller niche firms are happy to stay put.

Simon Curtis, formerly a partner in another leading player in the shipping field, Watson Farley & Williams, set up his own specialist firm, Curtis Davis Garrard, in 1996.

This is one of an increasing number of law practices acting as niche operators, fixing on a narrow range of services.

Based in Heathrow and with 95% of its client base outside the UK, Mr Curtis has no intention of starting offices abroad.'The larger firms tend to send their best people to their foreign offices to act as ambassadors,' he says.

'This can lead to a dilution of quality at the firm's centre and an overall weakening.' He continues: 'A lot of expansions are prestige orientated, and local offices end up as nothing but post-boxes, which the client ends up paying for.'Curtis Davis specialises in offshore work such as the building of rigs and construction platforms, and niche work is what small firms such as his are good at.

Mr Curtis says the bulk of work that the larger firms concentrate on is insurance or technology-based, or involves unravelling the ever-increasing number of EC regulations.There appears to be consolidation among the law firms in the field, with the big players being traditional shipping firms, such as Clydes, Ince & Co and Watson Farley & Williams, the City firms with established departments - such as Norton Rose and Clifford Chance - and specialist firms such as Curtis Davis.Mr Hodgson reflects: 'Ten years ago, all the big firms were sniffing around, but they're not interested anymore.

Herbert Smith got rid of its shipping practice two years ago, and Lovells is no longer the market presence it once was.'While Herbert Smith no longer has shipping clients, it says it can cope with the shipping elements and deals for non-shipping clients.

Lovells partner Christopher Wells says: 'Lovells made a decision a number of years ago to move away from having a litigation-based shipping practice and to focus on the corporate and financial aspects of shipping.' One of the primary reasons for firms focusing their resources elsewhere, and why new firms have such difficulty penetrating the market, is the lower rates that shipping companies will pay.

While the demand for legal work from the companies remains high, as a cost-conscious industry, shipowners are not willing to pay the same rates that City firms are charging other clients.Mr Bishop estimates the rates to be two-thirds of those usually charged by London firms, with effects on the wages firms can pay.

Mr Vlasto says: 'The knock-on effects down into the firms means that all the legal talent will go elsewhere - where the money is.

This is not in the long-term interests of the shipping industry.

As they say: "You pay peanuts, you get monkeys".' While such issues are bad news for firms trying to establish a shipping practice, those established firms have found ways to combat them.

Mr Hodgson predicts the dwindling supply of shipping lawyers will adversely affect the smaller firms, highlighting that Clyde's size will work in its favour.

'Due to our size we may attract, say, 16 trainees to train with our firm, who have no intention of branching into shipping,' he says.

'But then they discover what an interesting and exciting area it is to work in, and decide it's what they want to do.'However, Mr Curtis says: 'The economics just don't work at the bigger firms, because the overheads are higher and there is a downward pressure on rates.

In niche firms, we work in specialised areas of shipping and the margins are better - thus the profits are more.'Whatever the arguments for and against, those firms with well-known shipping practices only talk of success, and how this should continue in the future.

'The world is becoming increasingly covered in water, and there is roughly 40% less ice than there was 70 years ago,' maintains Mr Vlasto.

'International trade is on the up and I doubt the world will go totally supersonic in the next hundred years.

I can only see the workload increasing.'Nonetheless, it seems unlikely that working in shipping law will be all plain sailing, but as Mr Curtis says: 'Although it may not be a fashionable industry, it is an essential one.