Litigation management

The shipping industry is one of the most litigious in the world. Most classed ships are owned by international shipowners and trade internationally. Classification societies are regarded as a legitimate litigation target because of their size, assets, legal presence in overseas jurisdictions, insurance cover and general good financial strength. They are not immune from litigation.

How can Classification Society reduce the likelihood or risk of being sued?

• Employ good engineers, naval architects, and some lawyers;
• Maintain a good quality management system and regularly review this;
• Maintain technical records;
• Enter into written service contracts with clients which at least contain:

1. scope of work
2. enforceable limited liability clause
3. indemnity clause
4. jurisdiction clause
5. time-bars
6. force majeure clause
7. payment clause
8. relevant disclaimers

What should you do if sued?

• Notify your insurers.
• Find, select and manage external lawyers and expert witnesses.
• Negotiate the lawyers’ scope of work and fees - including any expert witnesses and other third parties. Obtain estimates and fixed fees. Avoid hourly rates, if possible. Do work in-house where possible.
• Respond promptly and carefully to complaints and threats of legal claims. Do not ignore them. Do not try to hide mistakes internally from managers, lawyers and insurers. Remember, once litigation is contemplated some documents may attract legal privilege. Check with your lawyers.
• Preserve and collect all relevant records, photographs and other data.
• Maintain access to all relevant employees and ex-employees.
• Keep insurers, managers and directors informed of all significant developments in the case.
• Follow the advice of your lawyers and other advisers.