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Maritime issues in asset recovery

September 11, 2020
Michael Redman

According to international law firm HFW, London hosted 1,737 international maritime arbitrations in 2019—a 14% uptick from 2018, accounting for 80% of matters globally. Though Hong Kong, Singapore and the UAE continue to compete for cases, London remains the definitive center for maritime disputes.

Given the uptick of maritime arbitrations seated in London, we expect to see a concurrent increase in the need for award evaluation and enforcement. Both Burford’s advisory and investment businesses are well versed in maritime issues and have the international resources and relationships to help clients navigate (pardon the pun) choppy waters. In what follows, we provide an introductory background on marine arbitrations and highlight the role that asset recovery can play in their settlement.

What makes maritime arbitration unique?

Maritime arbitration is, in many respects, no different than mainstream international commercial arbitration, with a core focus on the international trade of goods and services among private and public entities. Maritime disputes typically fall into two groups: Contractual claims and maritime accidents.

What is a contractual claim?

Contractual issues often arise from general cargo claims, in which the shipper of a product has a claim against the ultimate recipient or vessel owner. Most disputes arise from non-payment, delay or non-execution of charter parties or damage of goods after transport.  

What is a maritime accident?

Parties involved in a maritime accident rarely, if ever, have an existing contract. Therefore, liability is the central issue in these types of disputes.

The role of protection and indemnity insurance (P&I) clubs

Unique to maritime law is the role of P&I clubs—insurers specific to the marine industry. A P&I club is a mutual insurance association that covers only its members, which may include ship-operators, owners or charters. Unlike traditional marine insurers, P&I clubs only serve their members and tend to cover more third-party risks. These insurers often finance disputes, and in some instances, may bring claims themselves. In the legal finance context, P&I clubs are relevant, as they may pay for the fees and expenses of a maritime arbitration, and they are likely to be involved in any dispute-related negotiations.   

Asset recovery’s role in maritime arbitration

Another unique feature of the maritime industry is the prevalence of poorly capitalized single-purpose companies. Almost by definition, these companies are likely to be potential debtors unable to satisfy legal debts. Given the risk profile of maritime contractual counterparties, asset recovery is a valuable tool for clients in two crucial stages of a maritime arbitration: Preliminary evaluation and judgment/award enforcement.

  1.  Evaluation

Burford’s team can determine the relative risk and reward of pursuing arbitration by:

  • Assessing the likelihood that the other party will agree to respond to notification of arbitration or engage with the process
  • Determining the other party’s ability and willingness to pay any eventual award
  • Preparing an enforcement strategy should it become necessary and no voluntary settlement is established
  1. Enforcement

We work with external legal counsel in various jurisdictions to enforce a final award. Generally, the same principles that apply to the enforcement of a commercial award also apply to the enforcement of a maritime award. They include:

  • The preparation of detailed asset reports and counterparty intelligence
  • The formulation of an enforcement strategy
  • The ongoing execution of the strategy, including intelligence to broaden the potential routes to recovery and settlement, which is particularly suited to enforcing awards under Admiralty Law

Burford’s experience with maritime disputes  

Burford’s asset recovery and advisory team understands the frequent roadblocks faced by clients engaged in maritime disputes, and we have the expertise to both evaluate risk and enforce awards. Depending on the nature of the case and the client’s needs, Burford can provide asset recovery services in a contingent or consultancy arrangement.