Who pays for Suez blockage? Ever Given grounding could spark years of litigation
After hauling its 220,000-ton bulk down the Suez canal a week after blocking the essential waterway, the Ever Given container ship is likely to become the centre of a protracted battle over who will pay for its rescue.
The 400-metre-long vessel was aground on the banks of the Suez canal for a week, causing an estimated £7bn loss each day in trade owing to ships stuck on either side, and up to £10.9m a day for the canal. “We managed to refloat the ship in record time. If such a crisis had occurred anywhere else in the world, it would have taken three months to be solved,” said Osama Rabie, the head of the Suez Canal Authority (SCA).
But questions about who will walk the plank financially are likely to entangle insurers and investigators, possibly for years. Investigators boarded the ship, now at anchor in the nearby Great Bitter Lake, on Tuesday, to find answers on what caused the grounding and who is ultimately responsible.
The Ever Given’s technical operator, Bernhard Schulte Shipmanagement (BSM), has repeatedly blamed strong winds. “Initial investigations rule out any mechanical or engine failure as a cause of the grounding,” it said. Observers pointed to the “sail effect”, when containers piled high on top of a large vessel are more susceptible to strong winds.
Others have disagreed, with reports including that the Ever Given lost power. The SCA said initially the ship lost the ability to be steered in high winds and a dust storm, although Rabie later added that “technical or human errors” may be to blame.
The Japanese firm Shoei Kisen Kaisha, which owns the Ever Given, apologised for the “tremendous worry” caused to other vessels stuck in the canal.
Sal Mercogliano, a former merchant mariner, a maritime historian and associate professor at Campbell University in North Carolina, said conflicting reports about the reasons behind the grounding were related to who was ultimately held responsible.
“If it was a mechanical or a human error, then all of a sudden BSM and [the Taiwanese operator] Evergreen Marine become responsible,” he said. But, he added, “if there was a danger of wind, the [canal] pilots shouldn’t have brought the Ever Given into the canal. That’s on the pilots to bring her in. Remember, she was only in the canal for about five miles when this happened. She had just started her voyage.” The SCA’s rules, however, state that the vessel is “wholly responsible” for any damage, unless the ship’s operators can prove it occurred by accident.
James Davey, of Southampton University’s Institute of Maritime Law, categorised five potential areas of litigation: damage to the vessel; damage to its cargo; the cost of the refloating and salvage operation; the SCA’s financial losses including damage to the canal itself; and losses to the other delayed vessels.
“The cost of refloating and salvage is likely to be enormous,” he said, adding it would probably be shared between the insurers of the ship and of the cargo. There was also the extremely expensive question of who would foot the bill for damage to the canal itself.
“Because there are hundreds of millions of pounds involved, this will take a long time,” he said.
The law firm Clyde & Co estimated that the Ever Given may be worth up to $110m, while the value of the cargo could stretch to another $500m. “This case may well involve the largest salved fund of any container ship casualty to date,” it said.
Capt Jamil Sayegh, a former master mariner now with the Lloyd’s agency in Beirut, said the ship’s captain was unlikely to face criminal responsibility, but could be liable if he were found to have been negligent. He said the future of the Ever Given would be one of complicated overlapping legal battles, where each of the 20,000 containers on board the ship could have eight or nine different interests, in addition to the $9.6bn (£6.994bn) of cargo on the 300 waiting vessels. Fitch Ratings called it a “large loss event for the reinsurance industry”.
Sayegh said the grounding would be a case study – “a lot of litigation will follow”. Most third-party claims were expected to fall to the Ever Given’s insurer, the UK Protection and Indemnity Club, which said this week that “all valid claims will be considered by the vessel owner, the UK Club and its legal advisers in due course”.
The result could mean tens of billions of dollars and years of litigation. Sayegh said the firm “has busy years ahead, and so do maritime lawyers”.