The ‘Ever Given’, the containership that blocked the Suez Canal in March 2021, is now finally on its way after being detained for over 3 months. However, legal issues in relation to the incident are expected to drag on.
On 7 July 2021 the ‘Ever Given’, the now infamous 20,000 TEU container ship that blocked the Suez Canal (‘Canal’) after a 6 day grounding in March 2021, finally resumed its journey towards Rotterdam. The ship had been arrested and was released, after agreement was finally reached on a reported $550 million compensation of the Suez Canal Authority (SCA) by Japanese owner Shoei Kisen Kaisha.
On 23 March 2021 while traversing the Canal, a fully laden Ever Given lost manoeuvrability and drifted towards the Canal’s western bank, just before a sharp turn to the eastern bank where it embedded its bow. At the time the vessel was boarded by two pilots, under compulsory pilotage stipulated in Article 6(1) of the SCA’s Rules of Navigation. The SCA’s accident investigation report is yet to be published, however testimonies during Court proceedings between the owner and the SCA suggest the two pilots argued over a second course correction, the vessel ultimately falling victim to a bank effect created by its’ first manoeuvre. Though the cause of the accident remains disputed (owners initially argued for strong winds), the end result, played out in front of the world media, caused full obstruction of the Canal and a queue of over 400 vessels.
The legal proceedings
Through a combination of tug pull and dredging, the Ever Given was finally dislodged 6 days after its grounding. It was not however allowed to resume its journey given the SCA commenced arrest proceedings in the Court of Ismailia, claiming a combined compensation of $900 million for lost revenue, a ‘salvage bonus’, and ‘loss of reputation’. An initial appeal against the vessel’s arrest proved unsuccessful, and the Ever Given was detained in the Great Bitter Lakes for over 3 months. Meanwhile, owners took two important legal steps to limit their exposure and losses. On 1 April 2021, they (i) initiated limitation proceedings in London, and (ii) declared General Average (GA).
The limitation proceedings before the Admiralty Court, brought under the International Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 76), resulted in a 8 April Court order to establish a limitation fund of $115 million based on the vessel’s tonnage. Though the limitation fund bore little effect to the SCA compensation claim (this was anticipated for a variety of legal and practical reasons), it is expected to fare better over 3rd party claims from owners/charterers/cargo interest of the other vessels affected by the Canal blockage. Any such claims will be met with notices of limitation of proceedings, aiming for successful claimants to be paid pro-rata from the limitation fund. Importantly, Article 1 of LMCA 76 also protects the vessel’s charterers Evergreen, while Article 13 protects the shipowner’s vessels from future related arrests.
While limitation proceedings attempt to limit exposure to 3rd party claims, GA aims to ensure contribution from cargo interest, to the expenses incurred by owners to protect their common interest. GA is a concept unique to maritime law, and is based on the principle of the ‘common maritime adventure’. Suppose under rough seas the Master is forced to jettison some of the ships’ cargo to save the ship and the rest of the cargo. Under GA (‘average’ in this context means ‘loss’), the shipowner and the cargo interest (including that of the jettisoned cargo) must contribute to make good on that loss pro rata, based on the value of their respective property at the termination of the voyage. GA is currently governed by the York-Antwerp Rules (YAR), which do not have the force of an International Convention therefore must be expressly incorporated.
The concept of GA is broad and expanding, and commonly includes groundings (e.g. damage to the vessel/cargo, cost of reloading/storing cargo), fire (e.g. damage to ship/cargo during efforts to extinguish the fire), heavy weather/collision (e.g. towage, port of refuge expenses, shifting of cargo), as well as payments relating to salvage. The latter is crucial in the context of the Ever Given, with arguments going back and forth as to whether the Ever Given was actually ‘salvaged’, and/or whether the vessel’s detention by the SCA over compensation could plausibly equate to a ‘ransom’ situation, the latter covered under GA. On the former argument, Rule A of YAR states the following requirements:
"There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure."
Both claimants/cargo interest and owners/insurers possess powerful weapons in their legal arsenal. Accordingly, cargo interest may attempt to rely on the vessel not being ‘seaworthy’ or properly ‘maned’ under Article III (1) (a) (b) of the Hague-Visby Rules (HVR), in order to prevent owners from seeking GA contribution. If defences fail, the shipowner maintains a lien over the cargo until sufficient security is granted, either in the form of a reputable insurer’s guarantee, or a cash deposit.
On the flip side, owners may themselves rely on the HVR and specifically Article IV (2) (a) to shield against 3rd party claims, under which:
“IV 2. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:
(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship.”
In sum, the Ever Given may now well be on its way, but the legal fallout from its grounding is really only just beginning. We continue to monitor this fascinating legal case and shall provide updates accordingly.Back to News