Summary:
The Suez Canal blockage, a disastrous situation that caused severe negative effects for both Egypt, and the entire world Economy; this severity is owing to the fact that the Suez Canal contributes two percent of the Egyptian GDP, also the Canal is the route for twelve percent of the international trade of goods consequently; the blockage caused by the drifting of the ship Ever Given has hurter Egypt and the international economy, plenty of economic losses, with almost four hundred delayed ships. On each day of delay, twenty percent of the world trade was delayed, which in turn necessitated a number of other damages; the loss of one million barrels of oil and 8% of liquefied natural gas pass through the Canal each day. The Canal itself lost
US$ 14,000,000 to US$ 15,000,000 million for each day of blockage, beside the daily losses for the Canal the overall losses and damages were evaluated to be US$ 916,526,494 that included the compensation amount for all the Canal damages e.g. waterway damages, rescue reward, resume compensation. After negotiation the compensation amount was reduced to become US$ 550,000,00 million, even after this reduction, the amount of compensation it still a tremendous amount of money that were demanded; therefore in this paper I will try to read the accident that took place on 23 March 2021, in this essay the case will be examined by breaking it down; to demonstrate what happened so far and to understand its complexity, also to expand more on liabilities for the parties involved both hypothetical and the already existing liability claims proceeded in courts. Lastly, to provide some perspective from different “national and international” areas of law on the accident of Ever Given obstructing the Suez Canal.
Facts of the Mater and Involved Parties:
On 23 March 2021 at 7:40 P.M. an obstruction occurred at the Suez Canal and lasted for six days and seven hours. This obstruction happened after the grounding of the ship Ever Given due to strong wind that directed the ship to drift and its bulbous bow to strike and stuck into the side of the Canal making it impossible to pull the ship out without dredging the sand around the bulbous bow to reduce the dilation stress, this drifting cased the entire Canal blockage for nearly a week. Beside the strong wind as an explanation, there are other reasons that were introduced to explain the physicality behind the incident some are scientific e.g., Bank effect, Bernoulli's law, and others are technical e.g. human or technical errors, these technical and human errors were mainly claim by the Suez Canal Authority.
The timeline of the incident is as follows:
21 March 2021: Ever Given’s shipping agent requested the ship passage within the south convoy.
23 March 2021: The ship drifted, and the Canal was closed until 29 March 2021.
23 March 2021: Ever Given’s shipping agent requests assistance in towing the ship.
25 March 2021: A record on the Canal’s waterway damages was placed, against the owners of the ship and its captain. The Suez Canal authority interfered to save and float the ship, with the use of all needed equipment, machines, and manpower. Also, a letter of seizing protest against the Shipowners was made, holding them accountable for all the waterway direct and indirect damages caused by the ship drifting. The floating of the ship took six days of careful work to save the ship with the least damage to it or its cargo of seventeen thousand and six hundred and eighty-five full containers and five hundred and twenty empty ones; The total value of the shipment is estimated to be US$ 2,000,000,00.
29 March 2021: The opening of the waterway with no wastage to any of the ship containers. Conducting this rescue operation resulted in the death of one of the rescue crew and the severe injuries of other crew members, besides human casualties and injuries, the dredgers and the Suez Canal equipments were exposed to grave danger and deterioration. The Cost for the successful ship floating was estimated to be US$ 916,526,494, that includes all the direct and indirect damages caused by the blockage.
12 April 2021: The head of the Ismailia Economic Court issued a seizure order on the ship to ensure the recovery of the amount of losses and damages US$ 916,526,494.
13 April 2021: Ever Given was seizured.
22 April 2021: The Shipowners deposited the grievances letter with the number twelve of the year 2021 to the Ismailia Economic court office requesting: the approval of the overall grievances and cancelling the seizure of the ship, also obligating the Suez Canal authority with all fees and lawyers charges.
26 April 2021: The Chairman of the Suez Canal Authority permitted the leaving or replacement of the Ever Given’s crew members.
4 May 2021: The Ismailia Economic Court refused to cancel the seizure of the ship.
26 May 2021: The Suez Canal Authority decreased the compensation for losses to US$ 550,000,00.
27 May 2021: The Chairman of the Suez Canal released the official findings on the reasons behind the drifting of the ship Ever Given, that is; Strong wind and bad weather.
4 July 2021: The reaching of a settlement between the Suez Canal Authority and Ever Given Shipowners, stating that the sum of US$ 550,000,000 will be paid, also purchasing a new dredger to SCA.
7 July 2021: Ever Given Left the Suez Canal after 106 days of seizure to its destination Rotterdam port in Holland.
The aftermath of the Suez Canal is the delay or the change of route to more than four hundred ships; that costed Egypt an amount of Suez Canal passing fees, and an additional amount of oil for the ships that changed route to the Cape of Good Hope.
The parties involved in the case can be divided into the following personal:
First: Ever Given (A container ship) holding the IMO 9811000, and the MMSI 353136000, with the length of four hundred meters “exceeding the width of the Suez Canal at the point of obstruction by eighty-seven meters’’ and the beam of fifty-nine meters. The ship raises the flag of Panama, and owned by Shoei Kisen Kaisha, also part of the Evergreen fleet, a Taiwanese container transportation company “that command a number of ships confusingly named Ever with a second name starting with G’'. Ever Given is represented by Luster Maritime, owner of ninety present of the ship and Higaki Sangyo owner of ten percent. Luster Maritime & Higaki Sangyo are the claimant, that represented the ship during the hundred and six day of seizing by their representatives Mr. Tackomy Hai Jaki and Mr. Hedfomy Hai Jake as the owners of the ship. The ship's year of build is 2018.
Second: the Suez Canal Authority, the main aggrieved from the incident.
Third: The Pilot/s, fourth; Water bodies chief of police, fifth: The representative of the Maritime Authority, and Lastly: The four hundred trapped ships may also be part of future claims.
Applicable law in case of judicial procedures' engagement:
Laws that are applicable between the Suez Canal authority and Ever Given are: “Decree Law No. 30 of 1975” The Organization of the Suez Canal Authority that states that the SCA is responsible for the maintenance of the Canal “This also means that no other Egyptian authority will join the producers”, Egyptian Maritime Law Number 8 of year 1990, Egyptian procedures Act, Brussels Agreement, and the International Convention on Salvage 1989.
In case of a conflict arises between Ever Give and the pilot, the Egyptian Maritime Law will be the applicable law with its article two hundred and eighty-two to Article two hundred ninety-two.
Another potential liability and cases of claim is going to be between Ever Given and the delayed Ship, in this conflict if it took place, there are several international treaties, the most frequently used of them is the Convention on Limitation of Liability for Maritime Claims that was done at London on 19 November 1976.
As there are three possible claims the competent jurisdiction for claims against Ever Given toward the pilot, or the Suez Canal authority, or the opposite, is the Court of First Instance at the Ismailia Economic court. Lastly, in case of a claim between Ever Given and any of the trapped ships is going to be the Court of First Instance at the port where the location of the records of Ever Given are kept following the rule of the flag of the Ship.
Litigation vs. Arbitration:
In both arbitration and litigation the Shipowners are liable for the damages caused directly or indirectly by a ship itself or any of its personal and the liability also extend to consequential losses. The right amount of compensation is going to be decided by a technical committee assigned by the SCA to calculate the amount.
The Compensation Claims Made by SCA and the Financial Loss:
The right amount of compensation is going to be decided by a technical committee assigned by the SCA to calculate the amount; therefore the amount of compensation was firstly decided to be US$ 916,526,494 separated into: US$ 272,300,000 for dredging work, US$ 300,000,000 as a rescue reward, and US$ 344,200,000 for the Canal’s waterway damages. The previous amount of compensation was then reduced to be US$ 550,000,000 after negotiation.
Is the passage of the Canal a legal act or a material fact?
According to SCA’s navigation rules, all ships from all over the world can pass through the Canal if they are following:
Safety of life at sea (SOLAS).
I.M.D.G. Code if the ship is carrying dangerous cargo.
MARPOL 73/78.
Convention on the international regulations for preventing collisions at sea, 1972 (COLREGS).
All law, orders, and regulation issued by the Egyptian government.
Beside these preliminary requirements, the ship must indemnify the SCA or any of its personnel from any liability that may take place during the passage, and that the ship will take full responsibility for any liability for damages that may take place in relation to its use of the SCA’s services. The ship crew also must treat the pilot with an equal foot. Lastly, the ship must confirm that it has assigned an agent on land before passing the Canal;
The above rules conclude that the SCA only provides a passage service under the conditions of indemnifying it and holding the service receiver full accountability for all damages that happen due to the use of the Canal.
Is the Fees of Canal passage a passage contract or a fact?
The Fees for passage through the Canal is a fixed amount, measuring it is based on some variables, e.g. ship type, statues, cargo size. The tolls' table for the fixed fees can be found on the SCA’s website under the subsection (Tolls Table).
Legal Liabilities Against Ever Given:
Ever Given may face some liabilities, many of them are potential, and some are not, like the case of compensating the Suez Canal damages, and other claims presented by the SCA. The potential liabilities could be one or some of the following situations:
Liabilities for the delayed cargos, the delayed cargo are not Ever Given’s cargo but also the cargos for the trapped ships due to the incident, these trapped ships may request compensation for this delay. Another liability that already proceeded in the Egyptian court is compensating SCA for the damages and the losses for the stopping of the Canal, which was finalized by an agreement on compensating Egypt with the amount of US$ 550,000,000; the SCA liabilities is argued under four bases: Liabilities for the damages of the waterway and the rescuing cost and what followed it from other damages to the SCA equipment, additional damages to the waterway body due to dredging, costs for workers at site, finally a rescue reward.
Legal Liabilities Against The Suez Canal Authority:
According to law Number 30 of 1974 the Suez Canal Authority is responsible for the maintenance of the Canal, this may drive some claims against the SCA out, from both Ever Given and the other delayed ships, claims such as: the SCA should have prevented Ever Given from entering the Canal or at latest should have advised with that earlier; as the discussion between pilots was in Arabic not in English, yet the SCA didn’t intervene to inform Ever Given about the sandstorm even though Ever Given was at a speed of thirteen knots following the pilot recommendation that made the ship exceed the speed limits at the Canal with five knots. Another claim would be the inability for the SCA to allow the early entrance of mega container ships like Ever Given. Potential claims may also argue to prove the improper dredging of the Canal; on the condition that it could be closed by just one container, and that the dredging of the Canal didn’t take into measures the laws of physics, that assist in avoiding accidents that may occur; because of the interaction between different ships and the body of the Canal. The Suez Canal could be liable for leaving the Canal closed for six days, causing losses estimated to be $14,000,00 per day for the world economy and the delay of twelve percent of international trade. However, Ever Given and the trapped ship chose to play along without charging any claims against the Suez Canal Authority.
Legal Liabilities Against The Suez Canal Pilot:
The Egyptian Maritime law indemnify the pilot from any liability; as the charge of the ship during his/her assistance of the ship is kept to the captain and the captain can refuse any piloting advices that could be harmful to the ship, its cargo, or causes accidents like the one took place; therefore the pilot has no liability that can deem him/her responsible under the Egyptian jurisdiction; otherwise The pilot is liable for any act that is not part of his/her piloting service, such criminal action; beside the pilot liability for criminal action, some claims presented by the Ever Given lawyer may stand as strong argument; as it indicates a great deal of negligence from the pilot, these claims are: the pilots use of Arabic languages instead of English, their request to speed Ever Given to thirteen knots instead of following the standard speed of the Canal at eight knots; this exceeding of speed limits made the ship fragile to the strong storm. Another claim is that the pilot's ordered the captain to change the ship rudder left and right radically, something that is unfamiliar during the piloting producers at the Suez Canall.
Compensation Claims by SCA to Repair Damages Resulting of the Canal blockage:
SCA has demanded US$ 916,526,494 as an amount of compensation for the damages caused by the accident:
A US$ 272,333,621 Fees for refloating Ever Given divided into;
US$ 95,931,253, The cost for the dredging operation done by two dredgers, the cost for cancelling the dredgers contractual agreements to operate in the saving of Ever Given, the cost for the damages that were cased to the dredgers for conducting the rescue operation, surveying work, lastly the returning of the soil as it was before removing it to free the bulbous bow.
US$ 176,000,000, The cost for the participation of fifteen marine locomotives and twenty-one Launches, the cost for the marine locomotive assisted Ever Given after the floating, the emergency rent of marine locomotive paid by the SCA budget, the fines that SCA will be burden with as a result of the stopping of the Canal for six days and the delay of almost four hundred ships.
US$ 300,000,000 as a rescuing reward.
US$ 344,192,873 as compensation for the waterway damages including physical and moral losses.
US$ 20,000 logistic service for workers at site.
This amount of compensation was decided by a technical committee assigned by the SCA to calculate the amount. However, this amount was reduced to US$ 600,000,000 then to US$ 550,000,00; this reduction is due to Ever Given owners Luster Maritime & Higaki Sangyorefusal to settle the dispute at the first amount as they considered it a grandiose sum of money, also that there was no contractual agreement between them and SAC, so the SCA would use as a base for demanding such amount of compensation; other reasons that influenced this amount of reduction, is the Suez Canal is responsible for the maintenance of the Canal, and it is not allowed for any ship to vulture to rescue any ship; as this is a responsibility for SCA only; also that the rescue reward is only demandable if the ship was in a situation that was eventually going to end with inevitable distraction, and that was not the case for Ever Given, this concludes that the SCA didn’t have a strong argument to request the Rescue reward; therefore this amount was reduced US$ 300,000,000.
The legal grounds and the impacts of seizing of Ever Given ship:
The seizure of Ever Given stood on the ground of the Egyptian Maritime Law more specifically Articles fifty-nine, sixty, and sixty-one, these articles text and explanation is as follows:
Article fifty-nine: Seizing of a ship may only be made by an order of the Chairman of the competent court of first instance or his representative, and such seizure may be ordered even if the ship is ready to travel.
Article sixty: “Ship seizing shall not be signed except for the fulfilment of a marine debt, and the debt shall be considered marine if it arises from one of the following reasons; Ports and waterways fee, expenses of removing hauling or lifting the wreckage of the ship and the goods. Damage caused by the ship due to collision, pollution or other similar marine accidents, loss of human life or bodily injury caused by the ship or caused by the ship or arising from its exploitation, contracts for the use or charter of a ship, insurance of the ship, contracts relating to the carriage of goods under a lease contract or a bill of lading, Loss of or damage to the goods and baggage carried by the ship, Rescue, Joint losses, towing the ship, piloting, supplying materials or tools necessary for the exploitation or maintenance of the ship regardless of the party from which the supply took place, building, repairing or equipping the ship and the expenses of its presence in the docks, the wages of the captain, officers, sailors and naval agents, amounts spent by the captain, shippers, charterers or marine agents for the account of the ship or for the account of its owner, dispute over ownership of the ship, disputing over the ownership of a common ship, its possession or its exploitation, or the rights of the joint owners over the sums resulting from the exploitation, and/or Marine Mortgages.”
One or a combination of reasons listed in article sixteen can be the grounds of seizing a ship; but the specific bases or reasons for the seizing of Ever Given as listed in article sixteen are; damage caused by the ship due to collision, pollution or other similar marine accidents, Rescue, Joint losses, towing the ship, and piloting.
Article sixty-one: “Anyone who adheres to one of the debts mentioned in the previous article may seize the ship to which the debt relates, or any other ship owned by the debtor if it was owned by him at the time the debt arose. However, it is not permissible to seize a ship other than the one to which the debt relates, if the bases are disputing over the ownership of a common ship, its possession or its exploitation, or the rights of the joint owners over the sums resulting from the exploitation, and/or Marine Mortgages, as mentioned in article sixteen.
These articles were the ground of seizing the ship Ever Given; but one of the argument attempting to weaken these grounds would be that the seizing of cargo is conducted by the Egyptian Procedures Act, not the Egyptian Maritime Law, following the rule of Procedures for reserving what the debtor owes to others, will lead to the conclusion that the cargo needs an executive deed to be seized; but this claim was debunked by the fact the seizing is for obtaining a maritime debt, therefore falls under the authority of SCA and the Egyptian Maritime Law not the procedures act.
Insurance Law Perspective:
Most Maritime insurance acts exclude the seizure of the ship by a third party from insurance, unless if was agreed upon before the seizure of the Ship. Examples of insurance acts that exclude third party actions towards the insured ship are: The Egyptian Maritime Law, and the British Marine Insurance Act 1906. The Egyptian Maritime Law Indicates in its article number three hundred and fifty-nine clause (d) that the insurer is not liable for any compensation due to the seizure of a ship or any amount of bail to remove the ship seizure Also the same article in clause (H) states that the insurer is not liable for any harm due to delaying.
The British Marine Insurance Act 1906 have the same approach as the Egyptian Maritime Law, and most insurance companies follow this act wording; in Article four, clause five of the act states that liabilities due to delay is not covered by the insurance unless it was amended previously.
International Salvage Law:
The international salvage convention 1989 and the Lloyd’s Open Form salvage contract may be of use in future litigation claims against SCA, in a more neutral location like London as the Egyptian Regulation may seem in favour of SCA in any conflict; therefore Ever Given may take further procedure based on international regulation. Other potential claims that will be conducted international are claims against the delayed ships against SCA and Ever Given.
Maritime law Perspective:
Egyptian Maritime law as previously demonstrated is providing a strong Argument for the Suez Canal Authority against Ever Given, in its third section more specifically articles fifty-nine, sixty, sixty-one, and sixty-two, and these are the article that SCA used as ground for its claims for seizing Ever Give; so far the Egyptian Maritime Law proved to be a great source for SCA arguments against Ever Given. One section that also proved to be useful for the SCA argument is section four regarding the pilot; this section indemnifies the pilot from any liabilities that may occur during his conduct for work, A strong regulatory section that lead to the lack of serious claim or separate claim against the pilot, but only some unimportant claims, that proved to be useless; because of the great deal of indemnification that pilots have.
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