Disputes over unpaid supplier bills, casualties, charter hire and mortgage enforcements would lead to a handful of vessel arrests in Singapore each week in the not so distant past.
Today, the number of arrests has dropped to just one or two each month, with most being made by banks foreclosing on vessels.
But partners at Reed Smith Resource Law Alliance — a tie-up between Reed Smith and Singapore law practice Resource Law — say this does not reflect a decline in Singapore’s attractiveness as a place to arrest a ship. Instead, they say, it is a result of cooler heads being more willing to negotiate.
“If we look at the dry bulk market, we are not seeing a large volume of disputes as the amounts [of money involved] are not big enough to warrant legal action,” says Resource Law managing director Subbaraman Mohan. “There are still large disputes out there, but very often they are being negotiated rather than fought.”
This is also the case with arrests for security in casualty disputes. Reed Smith partner and casualty specialist Richard Lovell says the protection and indemnity clubs that were behind arrests in the past are now more willing to talk to each other.
“There is an increased level of trust between the clubs, so there is no need for them to be so aggressive,” he notes.
But the drop in arrests has not eased the workload of Singapore’s maritime legal community, with partners claiming to be busier than ever.
They cite transactions and finance as growth areas, so much so that Reed Smith brought onboard maritime and trade finance specialist Jessica Kenworthy as a partner in January 2017.
Kenworthy says: “The growth of the shipping industry in Singapore means that we see an increasing amount of finance involving Singapore law or Singapore-flagged vessels.
“On a more global basis, a lot of our clients are looking to either divest their shipping portfolios or invest in them.
“Movers of commodities and mining companies have been taking advantage of the market and investing in ships.
New players
“Our existing commodities clients want shipping expertise. It is very interesting as these are new players in shipping and are very different in their outlook.”
Prolonged poor markets are also keeping the team busy as companies seek to restructure balance sheets and debt.
According to partner Barry Stimpson, restructurings can be very complex, especially when there are multiple levels of financing involved.
“Globally, we have been very busy with this kind of work. My sentiment is that we will see much more of this as the year goes along,” he says.
Mohan notes that advisory work is also increasing as the shipping industry finds itself in an ever-more regulated environment.
“The legal issues that the shipping industry faces today are more varied and complex, certainly more so than even five years ago,” Mohan says.
“Our clients want to know about issues such as data protection, cyber-security, and sanctions. They want to know what the positions of Singapore law or jurisdictions elsewhere are, and whether they comply.”
On the casualty front, Lovell laments laconically that whether the market is up or down, ships still get into trouble, and with Singapore at the entrance to the world’s busiest shipping lane, he is busier than ever.
Over the past two years, Reed Smith Resource Law has grown its casualty law team to seven lawyers, of which three are professional master mariners.
And, despite the recent lull in arrests, the alliance expects their volume to increase when the market improves.
With rising market rates and vessel prices, says Mohan, the value of disputes will go up, which should lead to an increase in arbitration and litigious cases.
Barry Stimpson, managing partner of Reed Smith in Singapore, agrees.
“Banks are starting to pull the plug on weak owners,” he says. “They are getting ready to arrest ships and foreclose on fleet mortgages. I expect they will be a lot busier with arrests in the future.”
