Suez jam launches rafts of lawyers
Claims from weeklong blockage could take years to settle
● The immediate crisis of the Suez Canal blockage may have ended, but the battle over damages from the waterway’s longest closure in almost half a century is just beginning.
The long-term cost of the canal’s estimated $10bn-a-day (R148bn) closure will likely be small, given that global merchandise trade amounts to $18-trillion a year.
Yet with cargoes delayed for weeks if not months, the blockage could unleash a flood of claims by everyone affected, from the shipping lines to manufacturers and oil producers.
“The legal issues are so enormous,” said Alexis Cahalan, a partner at Norton White in Sydney, which specialises in transport law. “If you can imagine the variety of cargoes that are there — everything from oil, grain, consumer goods like refrigerators to perishable goods — that is where the enormity of the claims may not be known for a time.”
The Ever Given was successfully pried from the sand on Monday, and traffic has resumed through the canal.
But the blockage, which began a week earlier, was the canal’s longest closure since it was shut for eight years after the 1967 SixDay War and offered a reminder of the fragility of global trade infrastructure and threats to supply lines already stretched by the pandemic.
Egyptian authorities were desperate to get traffic flowing again through the waterway that is a conduit for about 12% of world trade and about 1-million barrels of oil a day.
‘Quite a job’
It could take weeks for the situation to be fully resolved, according to Arthur Richier, senior freight analyst at energy market intelligence firm Vortexa.
Freight rates for the affected shipping routes are already rising due to lower availability of tankers as some stay stuck and some are taking the longer route around Cape Town.
“Co-ordinating the logistics of who gets to go through first and how that’s going to be sorted out, I think the Egyptians have quite a job on their hands,” said John Wobensmith, CEO of Genco Shipping & Trading in an interview with Bloomberg Television.
To prevent future disruptions and help accommodate
higher volumes of shipping traffic, authorities could consider widening the Suez Canal, he said.
The canal’s blockage will reduce global reinsurers’ earnings, which have already been hit by winter storms in the US and flooding in Australia, as well as the pandemic, according to Fitch Ratings.
Prices for marine reinsurance will rise further as a consequence, it said. Fitch estimates losses may amount to hundreds of millions of euros.
In a potential merry-go-round of legal action, owners of the goods on board the Ever Given and other ships could seek compensation for delays from their insurer, if they have one.
Those insurers for cargo on board can in turn file claims against Ever Given’s owners,
who will then look to their insurers for protection.
Taiwan’s Evergreen Line, which chartered the Ever Given, says Japan’s Shoei Kisen Kaisha — the ship’s owner — is responsible for any losses.
Shoei Kisen has taken some responsibility but says charterers need to deal with the cargo owners.
Evergreen is being represented by Ince Gordon Dadds, an international law firm based in London that focuses on shipping and trade, according to people familiar with the matter who asked not to be identified because they aren’t authorised to speak to the media. The law firm and Evergreen declined to comment.
An official at Shoei Kisen said the company hasn’t received any compensation claim from anyone yet. The firm doesn’t have an estimate on the amount of potential claims and is still examining what it is responsible for. The ship’s hull is insured through three Japanese companies.
Responsibility for the giant ship’s grounding will be determined after an investigation, the chair of the Suez Canal Authority, Osama Rabie, said.
He said the canal authority was not at fault and the ship’s captain — not the pilot — was responsible for the vessel.
Inspections of potential damage are continuing to the Ever Given, which has been moved north to the Great Bitter Lake. Those checks will determine whether the vessel can resume its scheduled service, and what happens to the cargo on board, Evergreen said in a statement.
The enormity of the claims may not be known for a time Alexis Cahalan
Partner, Norton White