This story originally published on Fairplay.IHS.com.
Donald Trump’s presidency should boost fee prospects within New York’s maritime services cluster, according to lawyers, bankers, owners, and other industry players interviewed by Fairplay.
Because Trump is not a political insider, his tenure implies a greater potential for change – for trade, geopolitical relations, regulations, sanctions, and taxation – than if an establishment candidate had won the US presidency. As a result, there is a far greater demand for insight on the potential consequences of his actions, as evidenced by surging subscriptions to media products such as The New York Times. An analogous trend in the shipping professional community is now being reported by US lawyers, who are being pressed by clients for their views on how the new administration could impact business plans.
“You would expect this with any new administration, but because the Trump administration is turning to less institutional hands, immediate advice is being sought,” said Holland & Knight partner Chris Nolan. “The amount of business increased exponentially come the second week of November – right after the election, certainly well in advance of January 20 [the day of the inauguration].”
“I think the role of the lawyer is to try and figure out what the changes mean, and whether they come by executive order or legislation, there are certainly going to be changes,” said Seward & Kissel partner Bruce Paulsen. “It’s like that old curse of ‘living in interesting times’.
“As all of these executive orders come out, if they affect our clients, there is potential for a lot of work based on what Mr Trump does,” continued Paulsen. “Under President Obama, there was a regulatory surge that provided a lot of work for lawyers – and now we’re going to have a different scenario, but perhaps also continuing legal work as we determine what the changes under the new government mean.”
Norton Rose Fulbright Americas head of shipping Brad Berman said in an interview with Fairplay that the Trump election is fuelling a broader legal trend towards risk-advisory services. “Even before the election, probably a year before, we and a lot of firms looked at the question of: ‘What are firms going to do in the future?’, because you’re not going to need lawyers to proofread things and so on, so you have to get a new job and ‘risk advisory’ became a mantra,” explained Berman.
Demand for risk-advisory services increased after the ‘Brexit’ vote and further accelerated upon Trump’s election. Just as shipping clients are seeking Brexit advice from UK attorneys, they are seeking advice on potential Trump impacts from the New York maritime law community, particularly those firms with offices in Washington, DC. “We’re selling it [risk-advisory services] and they’re buying it,” said Berman.
When asked whether the number of billable hours stemming from Trump-related risk-advisory services has risen, Norton Rose Fulbright Americas head of transport Brian Devine replied, “Yes and they’re better hours in my view. I think they’re more quality hours. People joke about lawyers being paper pushers, but these are real practical issues that people need to deal with and nine times out of 10, they need the answer yesterday. And this is not something you can learn on the spot.”
The trend towards risk-advisory services “has had a huge influence on what we do”, said Devine. “There’s a lot of concern [among clients] and I don’t think it’s the kind of thing where mom-and-pop shops with a couple of people who do very good quality cargo claim litigation are going to be able to compete with the bigger firms, because to do it, you’re going to need to see the whole world with the same set of eyes and you’re going to need to understand what’s going on everywhere and what the implications are.”
Nolan highlighted practical issues of the presidential transition that lawyers can assist shipping clients with. “Our Washington colleagues are telling us that the turnover at OFAC [the Office of Foreign Assets Control, which oversees sanctions] has been pretty significant, meaning that institutional memory has left the office. As new people come in, you don’t have the same relationships and you’ll have to start anew with some of the licenses, so it’s an added delay,” said Nolan. “You’d expect that with any change in administration, but these aren’t normal times, with the Cuba sanctions being upended last year [under Obama] and the influx of new people. It has led to more uncertainty than usual.
“Maritime is a highly regulated space,” continued Nolan, “so participants are already dealing with agencies like the Federal Maritime Commission, and they come to our firm and ask: ‘How is a new administration going to affect this? Who do we need to speak to? How do we need to prepare ourselves, not just for today, but for 18 months from now?’”
Meanwhile, the Trump presidency has already had a positive effect on equity markets, a plus for the New York investment banking community. Several shipping equities, particularly in dry bulk, have risen sharply since the election, making it easier for these shipowners to raise capital. As Scorpio Bulkers president Robert Bugbee told Fairplay, “Trump has come along and stimulated the US equity markets. The bane of all shipping is deflation and we’re seeing some tendencies now where you could have inflation, which is good.”
The new US president has also signed an executive order to decrease financial regulation. “If there’s a rollback of Dodd-Frank [a US financial regulation law], there is the potential for an enormous amount of advice around that for our bank clients and our other financial institution clients,” said Paulsen.
According to Devine, reduced financial regulation “will make a big difference to shipping and when we see the next big wave of offerings, the US is not going to be such a hard a place to do them. If you look at the Norwegian bond market and the thin prospectus you need there, compared to the US – that’s why it’s so popular [the Norwegian market]. You can get offerings done in a much shorter time and much more cheaply, with less paperwork, than in the US. So to the extent the regulations in the US are eased, that should impact shipping significantly”.
Trump has also promised major reforms in US tax policy, yet another change that should create significant business for attorneys, although in this regard, it is more likely that tax policy changes will impact cargo flows – for example, if taxes are changed to favour US exports over imports – than the tax bills of shipowners themselves.
“Lawyers will be quite helpful when it comes to things like taxation,” said Blank Rome partner John Kimball. “We have a tax group in the firm that could advise shipowners, although it’s not likely the Trump administration is going to have a big impact [on owners’ taxes] because of the way shipping is structured.”
Clay Maitland, an owner and managing partner of the Marshall Islands shipping registry, told Fairplay that new US tax policies might bring more shipowners to the New York and Connecticut maritime cluster. “If the EU tells the owners in Greece that they’re going to have to pay more taxes, and the US changes its tax code and allows Greek owners to bring their money in without incurring a tax, this becomes a more attractive place for them. Give Greeks a tax cut and they’ll be here, and that will affect the entire marketplace,” said Maitland.