Australia - anything is possible

Bob Hartley, ASA, "Our message to the government is that it should decide whether or not Australia wants a national fleet. If so, it will need to provide assistance to meet foreign competition."
Report by Roger Overall

IT is no surprise that Australia was one of the last parts of the world to be explored by European mariners. It is at the edge of everything and at the heart of nothing - a geographical handicap that still makes itself felt today. While the nation exists by the grace of seaborne trade, this fertile source of income for Australia's maritime lawyers is largely going begging - a dichotomy the legal profession is working hard to abolish.

At the heart of the problem lies Australia's dwindling national fleet and its diminished significance on the nation's inward and outward-bound trade lanes. As much as ninety per cent of Australia's trade is transported by sea, according to one source, but only four per cent is carried by national shipping interests. The reasons are many.

According to Bob Hartley, maritime policy manager with the Australian Shipowners Association (ASA), part of the blame for the continued demise of national shipping rests with the current federal government, which has offered little help in the face of continued support by other countries for their national fleets. "Our message to the government is that it should decide whether or not Australia wants a national fleet. If so, it will need to provide assistance to meet foreign competition," he says. Without it, Australia's register may be empty sooner rather than later.

Fears of a rapidly shrinking Australian fleet are borne out by ASA membership figures. Membership currently stands at 22 companies, which together have around sixty vessels on their books. Only three years ago, when the current government came to power, the total fleet was 78. Hartley is hoping a change of political fortunes will turn things round. "A Labour government will probably provide assistance again," he predicts.

Derek Luxford, a partner at the Sydney office of law firm Phillips Fox, sees the diminishing domestic fleet not only as a consequence of cheaper carriers abroad and a disinterested government and business community at home but as part of a worldwide business trend towards globalisation that is making itself felt on maritime lawyers everywhere, not just in Australia. "Traditional national markets are contracting as a result of mergers, and decisions are being made at head offices that are more often than not abroad," he says. "Overseas shipowners and operators often insist on non-Australian choice of law and jurisdiction clauses, and Australian operators often feel - perhaps wrongly - that they do not have the bargaining power to negotiate Australian law and jurisdiction clauses."

The reluctance on the part of foreign interests to settle disputes in Australian courts is a complex issue involving both cultural and commercial considerations. "Many of Australia's commercial partners are Asian, but Asian interests like to settle their disputes their own way, which is often not through legal channels," Derek Luxford says. "It's very difficult to persuade Koreans, for example, to come here to settle disputes."

And while Far Eastern ship operators like to keep things in the family, the rest of the maritime industry is more likely to turn to London than to Melbourne to contest a dispute. It's a cruel quirk of the industry that otherwise price-conscious shipowners rely on the most expensive - and in the case of Australia, most distant - forum to settle their differences. Even Australian interests, it seems, are not immune to London's calling.

It's a case of the familiar outweighing the practical, says Ian Davis, a partner in the Sydney office of Ebsworth and Ebsworth. "In shipping, people prefer to agree to something they know, and London arbitration clauses are more common than Sydney ones," he says. Is this fair? "Never!" he beams.

What rankles Australian lawyers in particular - and they are not alone in this - is that many clients confuse quantity with quality when seeking legal advice. "Many shipping companies are not sophisticated, and there is a feeling that if something comes out of London, it must be okay. This isn't necessarily the case," says Derek Luxford.

Australian practitioners are keen to point out that there is a competent vein of maritime expertise waiting to be bled down under. What they are conscious of, though, is its apparent anaemia - a lack of knowledge in depth that is the consequence of the structural shortage of maritime work that is given to them. "It's the proverbial chicken and egg problem. Without a volume of work we can't develop the experience and reputation we require," says Ian Davis.

Things are improving, though, albeit slowly. Richard Hein, managing director of P&O Australia, which has interests across a broad business spectrum including shipmanagement and operation, ships agency, shipbroking and port operations, says that, 25 years ago, he would have been reluctant to employ an Australian maritime lawyer. The experience simply wasn't there. "Even judges had trouble with maritime cases and there were only two law firms we could use. The choice often depended on which party got to which firm first," he says. "Now there are five pretty respectable firms to choose from. It's rare for us to go for court proceedings or arbitration in London."

Dispute work remains tight, though, even if Australia does have a reasonably favourable ship arrest regime. An important maritime player such as the Sydney office of Philips Fox will handle a dozen arrests a year, along with thirty to forty insurance and charter party-related disputes. Other maritime income comes from sale and purchase contract consultation, arbitration, mediation and disputes surrounding commodities and sale of goods.

The relatively small volume of work available impacts on the way legal firms structure their maritime business. The maritime specialist is a rare breed in Australia, if indeed it exists at all. With maritime work thin on the ground, lawyers tend to have their fingers in a number of pies. The closest thing to a maritime lawyer in Melbourne and Sydney is the transport lawyer, who may well spend more time sorting out air cargo disputes than maritime ones.

"When I talk to UK lawyers, they see me as a general practitioner. When I talk to Australian lawyers, they see me as highly specialised," says Ron Salter, who is one of two partners in Philips Fox's Melbourne transport department and a former president of the Maritime Law Association of Australia and New Zealand (MLAANZ). "I'm not sorry, though. I'm happy not to spend my whole life doing tanker charter party disputes."

With the market so tight, the number of firms and practitioners is fairly stable. After an initial period of growth in the late 1980s, the number of law firms with maritime interests has remained fairly stable. Companies that currently don't have maritime experience are not seeking to acquire it, nor are those that do have it looking to ditch it. There have been mergers in the past. Some have affected the maritime law business, others haven't. "Full mergers are rare. The big firms tend to go cherry-picking, taking over just those bits of a firm they are interested in," says Derek Luxford.

The market for arbitration work is similarly compact. "Few, if any, make a living solely from arbitration," says Ian Davis. "Former judges or brokers do get some work, but even Ken Carruthers, a former admiralty judge in New South Wales, doesn't do it exclusively." It doesn't stop people from promoting themselves as arbitrators, though. The MLAANZ recently published a directory with over forty approved arbitrators. But 'approved' and 'experienced' are two different things.

Arbitration suffers from the workings of its own peculiar chicken and egg mechanism in Australia, according to Davis. "I get the feeling that because there are relatively few experienced arbitrators here, things follow an informal course. Most cases are settled one way or another without it going to a hearing," he says.

This conforms with the experience of Peter Murphy, a partner with the Sydney office of Norton Smith & Co, who compares himself to a surgeon who is reluctant to operate. "In one instance, we were approached by a potential plaintiff who wanted to bring a case against one of our existing clients. We contacted our client and were able to achieve a commercial settlement without any legal action being undertaken," he says.

Derek Luxford is clear in his mind about the other benefits that settling disputes in Australia brings, either in court or in arbitration. "Costs are much lower here compared with London, Hong Kong and Singapore. Australian maritime law has a grounding in English maritime law, which is familiar to contracting parties worldwide. We can offer a stable economic and political forum that is free of corruption and can give a neutral perspective," he says. "Cases also take longer to come to a hearing elsewhere. Sydney is much quicker."

Richard Hein says that, in many cases, it makes sense to go with Australian representation on an Australian stage. "You're often using the lawyers who put the deal together in the first place. They know the local conditions." However, he does tread cautiously where the outcome of a case can have far-reaching consequences. "If we had a big case, we would seek opinion here in Australia. If we weren't entirely happy, we'd get a second opinion in the UK or elsewhere." Trust but verify seems to be the message.

How things pan out for Australia's lawyers in the future depends on how successful they are in convincing foreign shipowners of the benefits of stipulating Australian jurisdiction in charter parties and on how Australian shipping develops in the future. The latter is a hot potato at the moment.

The outcome of the recent waterfront dispute between Patrick Stevedores and the Maritime Union of Australia (MUA) is seen by many as pivotal to the future of the Australian fleet. Unions in Australia are powerful, and many feel they have helped make the country's maritime sector unproductive and uncompetitive. Critics sense that reform could kickstart an ailing industry. Although far from radical, the MUA-Patrick settlement may prove to be the thin end of the wedge. Time will tell.

Ron Salter is optimistic. He underpins his optimism by citing the example of Australian shipbuilding. The nation's traditional shipbuilders, who were in the vice-like grip of the unions, gradually succumbed to more vibrant Korean and Japanese competitors and eventually vanished altogether. The last decade has seen a rebirth, though. Australia is the world's leading fast catamaran builder, barely able to keep up with demand. "It's a prime example that anything is possible," Salter says.

It certainly is. And if Australia's colonists were able to make an entire country work in adverse circumstances, then there's no reason their descendants can't get the nation's maritime industry shipshape..