Achieving the best outcome
in shipping disputes
Forensic Maritime Accountancy
PRECISE. PROVEN. PERFORMANCE.
Achieving the best
outcome in shipping
disputes
The very nature of shipping means disputes are often challenging and
complex. Such disputes need to be resolved quickly and achieve the
best outcome available – which requires experts that fully understand
the industry.
Moore Stephens is the world’s leading
calculating the net hire receipts after taking
financial advisor to the shipping industry.
into account the ‘available market’ rate, and
Since our first involvement with shipping in
then discounting this net income using
the 1930s we have built a team of partners
discounted cash flow techniques.
and professional staff with in-depth
“It is our extensive knowledge of the shipping
industry, the way it operates, its contractual
practices and economic dynamics which has
proved crucial in the successful resolution of
complex maritime disputes.”
knowledge and practical experience of the
These disputes are hotly contested cases and,
shipping industry. Many firms have forensic
in the absence of prescriptive case law, there
accountancy capability but Moore Stephens’
is significant scope for disagreements. In the
extensive knowledge of the industry, the
event that no ‘available market’ rate can be
way it operates, its contractual practices
agreed, the damages calculation turns on an
and economic dynamics has proved crucial
assessment of the vessel’s trading profits.
in the successful resolution of numerous
complex maritime disputes.
Our extensive knowledge of shipowning
operations and our OpCost reports have
In addition to our practical experience of the
been key to providing robust evidence.
shipping industry, our forensic maritime
We have acted as expert witnesses in
accounting team has considerable experience
many charterparty disputes and have
of the judicial process and working with legal
given seminars on the subject to the
teams in preparing written expert witness
legal profession.
reports and giving oral evidence in
arbitrations and trials both in England and
Salvage
overseas. We focus on providing clear,
Since our involvement in the landmark
concise, jargon free evidence and recognise
‘Nagasaki Spirit’ case we have amassed
the need to respond immediately to urgent
considerable experience in providing expert
requests for assistance and are able to
accountancy evidence in marine salvage
prepare an expert witness report in a matter
cases. Initially, our involvement was the
of a few days or even hours if required.
assessment of ‘fair rate’ under Article 14 of
the 1989 Salvage Convention, and we have
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Forensic Maritime Accountancy
Expert advice
dealt with a dozen such cases since. The
Time charter damages
introduction of the SCOPIC clause into
Following the important ‘Kildare’ case the
Lloyd’s Standard Form has meant that
calculation of damages requires that credit
Article 14 is largely a thing of the past, but
be given for accelerated receipt of the
our experience has resulted in us assisting in
income arising from a prematurely
assessing the appropriate revisions to the
terminated time charter. This involves first
SCOPIC rates.
Forensic Maritime Accountancy
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We have assisted with several major salvage
In valuation work, a sound understanding
trade finance and cross border issues.
cases where brokers had been unable to
of the relevant accounting standards
Following Navigator Gas Transport Plc’s
determine the value of the vessel. Our
needs to be blended with an appreciation
default on US$300m of high yield debt, we
deep knowledge of shipowing operations
of the issues in a shipping context. The
prepared financial projections and scenario
and discounted cash flow valuation
Moore Stephens Corporate Finance team
analysis in a successful application before
techniques combined with our OpCost
regularly carries out pre-lending reviews
the US Bankruptcy Court in New York.
data has provided unique authority to our
and due diligence investigations, and are
expert evidence.
frequently called upon to carry out rapid
In other cases we have been appointed
security for costs reviews at an early stage
receivers of cargoes of wheat and rice
in proceedings.
bound for Iraq, flour bound for Libya and a
Our long standing involvement in the
yacht in Turkey. We have also been
salvage industry was key to our
appointment to audit the wreck removal
Misrepresentation
appointed by the court in the compulsory
costs of Costa Concordia, which were in
Misrepresentation claims in maritime
liquidation of a UK chartering company.
excess of US$ 1 billion involving several
disputes usually come about in the
hundred thousand transactions.
acquisition of a business where the
Liner operations
purchasers believed they were misled about
Assessing liner operations, particularly in
Forward freight agreements
future financial performance. Moore
relation to the container trade, represents
First traded in the early 1990s, trading on
Stephens can carry out a valuation of the
perhaps the greatest challenge
forward freight agreements (FFAs) has
shipping business at the time the acquisition
to the forensic maritime accountant. An
grown substantially since. Frequently used
took place. On one occasion our Corporate
understanding of the shipowner’s operating
by shipowners, Moore Stephens routinely
Finance team was able to carry out a limited
costs is just one element of the complex
assesses the value of FFAs in our clients’
review of a five vessel group within 48
costs to be evaluated in any assessment of
balance sheets.
hours of instruction.
the quantum of lost profits. The expert
The extreme volatility in the shipping market
Insolvency
sharing agreements, slot charters and
in 2008 had a consequentially dramatic
Our Restructuring & Insolvency team has
the cost associated with intermodal
effect on the FFA market. Inevitably,
worked on a significant number of major
freight transport.
disputes have arisen and we have been
maritime recovery cases. We were
called upon to give expert evidence on the
appointed by the English High Court as
value of substantial portfolios of FFAs.
receivers over assets of a major bunker
“A thorough understanding of
discounted cash flow techniques is
therefore essential.”
requires a clear understanding of vessel
supplier based in the UAE, where realisation
Valuations of shipping businesses
of the assets, which exceeded US$77
Valuations usually arise through the
million, required knowledge of oil trading,
acquisition or disposal of a business or
in a shareholders dispute. Whilst vessel
valuations are usually provided by
shipbrokers, valuing a shipowning business
is more complex. For example, financing
structures can be complicated and will
impact on both profitability and solvency,
and consequently its inherent risk. Other
common issues include the treatment of
OpCost
OpCost is Moore Stephens’ unique benchmarking tool for vessels’ operating costs,
currently covering 26 vessel types. Originally designed as a pure benchmarking tool,
OpCost has been invaluable when working on cases where a vessel’s operating costs
are unknown or are in dispute. It has been particularly helpful in valuations under
Lloyd’s Form ‘Sound Value’ and in time charter damages cases where ongoing
profitability has to be calculated.
finance leases and operating leases.
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Key global shipping
and transport contacts
A thorough understanding of container
Agents
As with much of our forensic maritime
shipping was at the heart of the headline
Disputes involving agents for tramp
cases, this work requires an understanding
case Yeheshkel Arkin v Borchard Lines
operators usually concern dubious or bogus
of the whole of the owner’s shipowning
Limited and others where we were called
upon to provide expert evidence for the
successful defence team relating to
allegations of dominant position and
predatory pricing.
charges alleged by the owner. Such cases are
operations and quite possibly the insolvency
usually minor and can be resolved without
regulations in the jurisdiction in which the
involving a forensic accountant. Of much
vessel operated. Whilst scuttling cases are
greater significance is where liner agents are
rare, we have to date been instructed on
handling both the income and the expenses
nine cases, including the famous Ikarian
Reefer case.
of an owner’s vessels. In one particular
Taxation
dispute we were asked to review a multi-
We have an in-depth knowledge of all
port passenger ferry operation to determine
Oil spill clean-up operations
aspects of UK and international shipping tax
whether the agent’s charges and payments
The cost of cleaning up an oil spill is always
including tonnage tax, VAT, employment
of income receipts were appropriate.
significant. In one case we were asked to
and corporate tax issues. We also deal with
assist a P&I Club which was incurring costs of
the personal taxation of non-UK domiciled
Scuttlings
over US$1 million each day. Our instructions
individuals, PAYE and NIC issues as well as
At first glance it may not be obvious what
were to review the internal control
financial planning.
assistance an accountant can provide when
procedures to ascertain whether the
a ship owner has allegedly scuttled one of
clean-up cost payment process was
In the Arkin v Borchard case we were
its ships. Although technical and scientific
appropriate and robust in both design and
called upon to give expert evidence
evidence will be required to establish
practice. In another major spill we were
regarding the UK taxation position of
causation, Moore Stephens is often called
instructed by the International Oil Pollution
a container line operation.
to investigate whether there was financial
Compensation Funds to consider the salvors’
motive behind the scuttling.
charges for a major incident in the Far East.
Shipping pools
Africa
Asia
Greece – Piraeus
Where a number of shipowners enter
South Africa – Durban
Hong Kong
their vessels into a pool operated by a
Jochen Faber
[email protected]
Helen Tang
[email protected]
Costas Constantinou
[email protected]
charges or where a pool member wants
Americas
Singapore
to withdraw some or all of its vessels.
USA – New York
Chris Johnson
[email protected]
separate manager, disputes usually relate
Monaco
to complaints about the manager’s
Pooling arrangements often have ‘capital’
hire payments with underlying calculations,
which apply discounted cash flow
techniques. A thorough understanding of
these complex interest-based techniques
is essential.
“In valuation work, a sound
understanding of the relevant
accounting standards needs to be
blended with an appreciation of the
issues in a shipping context.”
Michael Halkias
[email protected]
John Repetti
[email protected]
Andrew Gallagher
[email protected]
Netherlands – Rotterdam
Europe
Michael Bick
[email protected]
UK – London
Brazil – São Paulo
Michael Simms
[email protected]
Sérgio Lucchesi Filho
[email protected]
Cyprus – Limassol
Christos Christodoulou
[email protected]
Norway – Oslo
Bjørn M. Naustheller
[email protected]
Middle East
UAE – Dubai
John Adcock
[email protected]
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About Moore Stephens
Moore Stephens is a top ten accounting and
advisory network, with offices throughout the
UK and member firms across the globe.
Our clients range from individuals and
entrepreneurs, to large organisations and
complex international businesses. We
partner with them, support their aspirations
and contribute to their success. In-depth
understanding of our clients allows us to deliver
focused accounting and advisory solutions,
both locally and globally.
Clients have access to bespoke services and
solutions, including audit and assurance,
business support and outsourcing, payroll and
employers’ support, business and personal
tax, governance and risk, corporate finance,
forensic accounting, wealth management, IT
consultancy, and restructuring and insolvency.
Our success stems from our industry focus,
which enables us to provide an innovative and
personal service to our clients in a range of
sectors.
Contact information
If you would like further information on any item within this
brochure, or information on our services please contact:
Phil Cowan – Partner and Head of Transaction
& Dispute Services
[email protected]
Merryck Lowe – Partner, Transaction & Dispute Services
[email protected]
Peter Daniel – Consultant, Transaction & Dispute Services
[email protected]
David Chopping – Partner, Technical
[email protected]
Moore Stephens globally
Moore Stephens International is a top ten
global accountancy and consulting network,
headquartered in London. With fees of over
US$2.66 billion and offices in 106 countries,
clients have access to the resources and
capabilities to meet their global needs.
By combining local expertise and experience
with the breadth of our UK and worldwide
networks, clients can be confident that,
whatever their requirement, Moore Stephens
provides the right solution to their local,
national and international needs.
Moore Stephens LLP, 150 Aldersgate Street, London EC1A 4AB
T +44 (0)20 7334 9191
www.moorestephens.co.uk
We believe the information contained herein to be correct at the time of going to press, but we cannot accept any responsibility for any loss occasioned to any person as a result of action
or refraining from action as a result of any item herein. Printed and published by © Moore Stephens LLP, a member firm of Moore Stephens International Limited, a worldwide network of
independent firms. Moore Stephens LLP is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Authorised and regulated
by the Financial Conduct Authority for investment business. DPS33090 January 2017