Mixing oil and water

NEW Orleans is the grand old lady of the US Gulf Coast. Elegant, sophisticated and a little world-weary, she is the soul of the US Gulf Coast maritime bar. Her law firms have impressive maritime pedigrees and, in Tulane, she has the nation's premier maritime law school. Yet it took some effort for her to earn the recognition she deserved, and now she may be about to lose it.

Retired New Orleans practitioner and former president of the US Maritime Law Association (MLA) John Simms remembers how instructions from abroad, particularly from London-based interests, used to be given to New York-based firms, regardless of their geographical pertinence within the US. "New York firms would handle New Orleans cases themselves, or pass them on to local firms. Eventually, London learned that there were law firms outside New York and started to instruct New Orleans firms directly," he says.

The subsequent growth of the local maritime bar was tremendous. When Simms started practising law in 1939, you could count the number of full-time maritime lawyers in New Orleans on the fingers of both hands, he says. Now, according to Sam Giberga, a partner in the New Orleans office of Rice Fowler, "Outside of New York, New Orleans has the largest concentration of maritime lawyers." In fact, Giberga, much younger than Simms, has never known it any other way. "New Orleans has always been seen as of equal stature with New York, due to the amount of activity in our port," he says.

New Orleans port statistics do indeed make impressive reading. New Orleans, in fact, could make a strong case for top spot in the nation's port rankings. The port authority has big expansion plans too, and at the time of writing a feasibility study was under way into the construction of a $1bn container development project called Millennium Port. "There are various proposals on the table, but I'm pretty sure it's going to happen," Giberga says. "Which will mean more ships and more business."

If realised, the Millennium Port project will be a welcome boost to the depressed Louisiana economy. Long home to part of the US oil industry, New Orleans has been hit hard by the recent upheaval in the oil markets. Oil prices at the beginning of the year slumped, sparking off a round of cost-cutting exercises throughout the industry. "Oil majors with offices in both New Orleans and Houston have closed their New Orleans office and consolidated their operations in Houston," says Charles Lozes, of New Orleans-based law firm Terriberry, Carroll & Yancey.

According to Lozes, the consolidation in the oil industry has had a bearing on the local maritime scene. "There used to be several offshore supply fleets operating out of New Orleans. Now there are only two major firms. Only one law firm can get the business of a consolidated fleet, which means others are getting less," he says.

While New Orleans has suffered at the hands of the recent unrest in the oil business, Houston, the energy capital of the world, has benefited. Oil companies have widely taken the opportunity to concentrate their corporate operations there, giving a further injection to an already booming local economy and confirming the city's place as the world's leading offshore centre - a development that has brought benefits to local maritime practitioners.

The significance of offshore for maritime lawyers may not be immediately apparent, yet you don't have to look too far to discover it. "In the eyes of the law, oil rigs are vessels," says Eugene Silva, who works out of the Houston office of law firm Vinson & Elkins. "When the offshore industry took off in the early 1950s, there was suddenly millions of dollars of insurance business. The insurance industry looked to the maritime sector for its lead. The airline industry did the same. Remember, planes are referred to as 'hulls' in insurance policies," he explains. And so rigs are hulls in the eyes of US law, allowing them to be flagged and, if need be, arrested.

The links don't end there, says Sam Giberga in New Orleans, who lists a number of situations in which maritime law could prevail over other legal regimes. "If a rig were lost, then maritime rules of salvage would apply for its recovery. Rig workers are often seen as seamen, which means they are covered by the Jones Act. If there is a dispute between charterer and owner, maritime law applies," he says. Put simply, "If certain activities are deemed maritime in nature, then maritime law applies."

The oil business has another, more obvious, connection with the maritime industry. The oil majors may have split their fleets off into separate corporate entities following high-profile pollution incidents, but they are still ship operators, or at the very least charterers. "The major oil companies - Texaco, Exxon - all need admiralty assistance," says Silva.

So is the maritime bar in Houston booming? It would appear so, yet a cautionary note is in order. It is provided by George Chandler, who heads up the Houston office of specialist maritime law firm Hill Rivkins & Hayden. Flicking through the MLA guide, he comments that almost all Texas law firms have a listing. "About twenty of those you see fairly regularly in connection with maritime cases. There are about thirty in here who are associated with maritime work, but are rarely seen in practice. But only four or five firms have maritime law as their principle focus," he says.

Chandler does not deny that there is a considerable volume of maritime work in Houston, and admits that there the workload is sufficient for local practitioners to specialise in shipping work. "Although principally a New York firm, one of the reasons we have an office down here is the amount of Houston work we get," he says. He does feel, though, that the Texas market has a long way to go, certainly if it is to match New York.

One area that is clearly underdeveloped in Houston is maritime arbitration. Since his arrival three years ago, Chandler has been active in organising a local arbitration platform. He sent out thirty letters to local practitioners to test the water. Twenty-nine replied positively. The remaining respondent voiced support for the initiative, but was too busy to contribute. The Houston Maritime Arbitrators Association (HMAA) now boasts sixty active members. The HMAA is an open church. "Our membership is open to anyone who wants to join. We are trying to facilitate rather than act as a gatekeeper," Chandler says. He admits the project is still in its development phase. At the time of writing, association members were engaged in three arbitrations.

If Houston is to wrest the mantle of leading US Gulf maritime centre away from New Orleans, HMAA success is imperative. According to Sam Giberga, the New Orleans Board of Trade has had a board of maritime arbitrators for nearly twenty years, a substantial head start on its rival.

How things pan out along the US Gulf Coast remains to be seen. The cards appear to be stacked in the favour of the brash Texan newcomer, though. Houston is already the most significant city on the southern seaboard. And, like New Orleans, it too has ambitious plans for expanding its already substantial port. Unlike New Orleans, it can use public money to do so. New Orleans is dependent on private investors for its Millennium Port. If it fails to find them, the New Orleans maritime bar might see a growing Texan market - aided by the oil industry - steal its prominence.