The potential liabilities for the ‘Ever Given’ incident presages claims worth millions
Determining the causes of the accident will make it clear who can claim from whom, where, what procedure to use, and the applicable law. Parallel claims are foreseeable including possible action for recovery from the various insurance companies involved. Currently, the ship and its cargo are under arrest.
In the early hours of March 29, 2021, ten or so tugs managed to partially refloat the Ever Given, which had run aground 6 days earlier in the Suez Canal, blocking the movement of ships in both directions. The Ever Given is one of the largest mega container ships in the world, measuring 400 meters long, 59 meters wide, 15.7 deep and having the capacity to carry over 20,000 TEU.
The huge amount of attention paid in the media to the Ever Given story has again reminded public opinion of the crucial importance of sea carriage (which moves around 90% of the world’s trade) for keeping supply chains running and supplying food, power, raw materials, as well as manufactured goods and components of all kinds throughout the world. The spotlight has been placed again on the worldwide and strategic importance of the Suez Canal which is used for around 10% of the world’s shipping trade. And similarly it has refueled media interest in the debate on megaships and whether bigger ships mean bigger risks.
Several theories have been brought to the table over the causes of the incident. Some blame the strong winds and the “sail” effect of the ship and its cargo. Others, engine failure resulting in loss of control over the ship. Other sources point to human error by the crew. And in certain circles the finger is pointed at the pilots and tugs that assisted and supported the ship. Lastly, a few have even argued that it was caused by the interaction of waters in a narrow channel.
Note that none of these possible causes are mutually exclusive, so it could have been a combination of all or a few of them to a greater or lesser extent. In addition to which, other possible causes could come out of the official and private investigations that are under way. When the final cause or causes or component causes of the accident are known, this would clarify, if indeed there are claims to be made, who may claim from whom, where (country), the procedure that would need to be followed (arbitration or judicial) and the applicable law (international or domestic). In any event, several parallel claims worth millions are expected, including potential cases of action for recovery from the various insurance companies involved.
Despite the step taken in Egypt to arrest the Ever Given ship and its cargo, the ship-owner has declared general average. In view of the thousands of cargo interests and the high cost of the bill of the salvage carried out, it will very probably take several years to settle. Consequently, the consignees of goods carried on the Ever Given will not receive them until their insurers (if any) or they themselves contribute to the declared general average.
In relation to the potential claims for possible delays in the delivery of goods carried by the large number of ships that had to be diverted along alternative routes, due to the blockage of the Suez Canal, it must be clarified that, in principle, under the York Antwerp Rules all of this would fall outside the declared general average.
The Hague-Visby Rules, which apply in the immense majority of cases to the carriage of goods by sea worldwide, do not expressly consider that delays in delivery of goods are indemnifiable, in that they only specify indemnity for loss or damage to carried goods. Whereas the minority Hamburg Rules, which have been ratified by very few countries, and the Spanish Maritime Shipping Law do expressly consider that delays in delivery of goods are indemnifiable. It needs to be explained that, even though Spain ratified the Hague-Visby Rules, the later Maritime Shipping Law expressly considered that delays were indemnifiable, by setting out a liability system in this respect that is clearly taken directly from the Hamburg Rules.
Liability for delay as defined in the Hamburg Rules and in the Maritime Shipping Law is limited to 2.5 times the freight payable for the delayed goods, but cannot exceed the total freight payable under the contract of carriage. If liability is incurred for a ship failure and for delay, the aggregate liability for both is limited to the figures determined for limiting the responsibility for loss or damage. However, the limitation of liability described above will not apply if it is proven that the delay concerned was caused with intent by the shipper/carrier or recklessly and with knowledge that damage would probably result.
These comments need to be suitably taken into account by the consignees of goods delivered with delay and by any insurers who have covered that delay, in case they are considering claiming for it. In practice, however, many goods are not usually insured, and if they are, the policies do not generally cover delay with a few exceptions, so any potential standing to sue for the insurers of goods would, in principle, be exceptional and limited.