Shipping and Maritime Disputes Case Studies

We were instructed by a contractor in a Lloyd’s Salvage Arbitration concerning the salvage of a specialised vessel that suffered a severe fire. One issue the Tribunal had to determine was the Sound Value of the Vessel at the date of the casualty. As the vessel was highly specialised and there were no reported sales of comparable vessels, it was not possible to determine a market value.

We advised the Contractor on the measurement of value. In particular, we considered the Value in Use of the Vessel. This is a measurement concept used in financial reporting. We also considered the newbuild or replacement value for the vessel.

We advised on multiple applications for document disclosure from the vessel’s owners, based on our understanding as accountants as to the type and scope of documents that should exist and be available. From this, we were eventually able to determine the likely earnings and operating costs of the vessel.

We then prepared a Value in Use estimate using a Discounted Cash Flow (“DCF”) calculation. This was discussed and agreed with the other experts instructed by the other parties to the arbitration.

We advised a refinery faced with a claim for breach of contract for the supply of petroleum products. The Claimant claimed for the loss of profit that it alleged it would have earned through the distribution of the quantities of produce that it claimed should have been supplied.

Our analysis showed that the loss of profit claimed was fundamentally inconsistent with the cost structure implied by the Claimant’s business plans and the limited commercial activity undertaken by the Claimant previously. As a consequence, the quantum of claim was reduced to circa 10% of the amounts claimed.

Our client was the owner and operator of a number of Very Large Crude Carriers (“VLCCs”) which were operated in a shipping pool managed by a third party. After withdrawing their vessels, the owners were sued by the pool manager claiming for the gross revenues that the vessels should have earned for the remainder of the contractual membership period.

We built a model to reproduce the distribution of funds through the pool. Together with the minimum revenue guarantee provided by the pool manager to our owners, we were able to demonstrate that the net benefit to the claimant was less than one third of the amounts claimed.

We were instructed by insurers pursuing allegations of the deliberate scuttling of a vessel in order to benefit from the insurance proceeds.

We were able to analyse various financial statements of relevant companies associated with the owner to show that the reported net assets of the shipowner’s group were substantially overinflated as a result of a number of contraventions of accounting rules.