The year 1869 saw the opening of the Suez canal paving the way for greater connectivity between Europe, Africa and nations along the Indian Ocean. It is currently the gateway to around 13 per cent of global trade. So, when a freak accident happens along the waterway, leading to its blockage for seven days, it raises important questions, the answers to which would be crucial in determining the future of global trade and the liability facet.
WHAT HAPPENS WHEN THE SHIP ENTERS THE COASTAL WATER OR PASSES THROUGH A CANAL?
Before deliberating upon the consequences of the incident, it is important to understand the manoeuvring operation. Manoeuvring is an operation during which a vessel enters(or exits) the coastal waters of a country and proceeds towards(or departs) from the berth or jetty of a port. Such manoeuvring is also required when the ship crosses the canals and the traffic zones. It is the responsibility of the Captain [Master of the Ship] to devise a plan for safe navigation, for which, it is important to understand the effects of wind, tide, condition of the ship, equipment etc.
In some countries, the local maritime laws make it mandatory that their local marine pilot shall do the manoeuvring. The pilot plays a crucial role in the safe navigation of the vessels. The probable reason why some countries require their local pilot to manoeuvre the ship is that the captain or the crew may not be that well versed with certain port areas and the pilot’s knowledge of the local waters can manoeuvre the ship with ease.
Nevertheless, the people from the seafarer industry would agree that the quality of the pilotage varies from port to port. Some are extremely professional and some inexperienced. For a Ship Master, it becomes a cause of concern. If the pilot is not experienced or professional, no matter what, the ultimate responsibility as per the industry rules and laws are that of the Master. The Master remains responsible for the safe navigation and no incident can absolve him of the blame even if the negligence was of the local pilot from the country.
Another sad reality of the marine industry is corruption. One who is acquainted with any seafarer or the industry would certainly know that the staff at receiving or transit ports are not very cooperative and look for silly gifts including something as small as cigarettes. The Master of the Ship, being a stranger on the waters of the foreign territory, is to some extent at the disposal of the receiving port authority. Since it is his responsibility to navigate the ship safely and manage efficiently in such extremely high-risk situation.
The recent blockage of the Suez Canal certainly raises certain fundamental questions. Firstly, how did it happen? Was there an improper planning? Was there a technical challenge or was it because of the winds? All these questions are being discussed by the industry but what is the reality is yet to be known. Probably, a statement from the Suez Canal authority or the Ship Owners will clear the air.
WHO OWNS THE RESPONSIBILITY IN THE RECENT SUEZ CANAL BLOCKAGE?
Two factors are being considered as the likely cause of the accident. One is human error. Since the Suez is a narrow passage, it requires trained canal pilots to come on board and navigate the ship through the canal. In this case, the ship Ever Given was being piloted by two canal pilots of the Suez Canal Authority. Nonetheless, the rules of the Suez Canal Authority hold the Master (or Captain) to be solely responsible for the ship, thus absolving the pilots of any blame. The second possible cause for the accident appears to be “strong winds” and “stormy weather” as reported by the owners of the ship and the initial Suez Canal Authority’s assessments.
WHO TAKES THE LIABILITY OF DAMAGES?
The ship Ever Given is owned by a Japanese company Shoei Kisen Kaisha Ltd., but was operated by Taiwan based Evergreen marine. By strictly following the rules of the canal authority, supplemented by the principle of tortious liability, one could argue that Evergreen marine, being the operator of the ship, should be held liable for the damages. But, Evergreen holds the Japanese owner to be liable for the losses. In an interesting development, the Japanese owners of the ship have apologized for the disruption caused to the global trade, taking a part of the responsibility for the damages.
WHAT ABOUT LOSSES TO OTHER SHIPS?
There are two types of ships in this scenario. One, those who are stuck in and around the canal because of the Ever Given accident. The other is the ones that have to reroute through the Cape of Good Hope in South Africa. While the latter in this situation is grossly unlucky, the former would look to claim damages from Evergreen marine in the account of any losses. Although, this too is expected to be minimal as it is reported that most of the ships were carrying cargo and very few had perishable products such as fruits.
CAN THE JAPANESE COMPANY BE HELD LIABLE FOR DAMAGES?
Although the Japanese company Shoei Kisen Kaisha Ltd has apologized for the incident, it has asked the Taiwanese operator Evergreen marine to deal with cargo owners. Going by the Suez authority’s navigation rules, the liability would fall on Evergreen marine. Nonetheless, the Taiwanese company might take Shoei Kisen Kaisha Ltd to courts claiming damages. If the Suez authority does officially hold Evergreen marine liable, it might challenge the decision in an Egyptian court or may drag the case to any international tribunal.
WHAT COULD BE THE POSSIBLE SOLUTIONS IN THIS SCENARIO?
The given situation does not seem to have a perfect solution. The crucial task of pinning responsibility is itself complicated by multiple stakeholders, each of whose arguments have some merit. This further becomes complex by various compensation claims which are likely to arise in the future. Some would even question the Suez Canal Authority’s rules of navigation which completely absolve the pilots of any responsibility, holding the master of the ship responsible. Thus, this accident and the expected legal battles would define the contours of international trade in the future to come. It also highlights the need to have more standardized and synchronized regulations of global trade amongst the various nation-states.
WHAT KIND OF INSURANCE CLAIMS ARE LIKELY TO COME AT THE FOREFRONT FROM THE BLOCKAGE?
It is reported that any damage caused to the vessel may be covered by hull & machinery (H & M) insurance. The H&M insurance may cover the responsibility for the damage cost of the salvage operations, towing of the vessel etc. However, the claim will be dependent upon the magnitude of the operation. The other most likely claims that may arise relate to third-party for example any damage caused to the infrastructure or any claim from obstruction of the canal. Organizations such as Suez Canal Authority may also claim for the loss of revenues, business interruptions, loss of hire and so. However, the principle of the remoteness of damage may also be made applicable here. The question of whether the shipowner can be held liable for all the direct or indirect losses that have occurred to the multiple parties including the Suez canal authorities, the vessels who had to reroute, vessels that were stuck and so on is yet to be decided. Cargo related claims may also arise particularly if the cargo was perishable. The insurance claims and counterclaims would complicate the scenario and could lead to a long legal battle ahead.
A process called “General Average” has already been discussed which involves sharing the costs among all the stakeholders. General Average is an extraordinary legal principle used rarely, that occurs when one of the interests in the voyage is sacrificed for the common good of all. So, if a shipowner declares a ‘General Average’ then all the interested parties in the voyage become collectively responsible for the loss. The counter-argument to avoid the “General Average” is to prove the “unseaworthiness” of the vessel or that there was some willful conduct on part of the owner. Usually, ship owners do not avail of the general average principle if the expenses are manageable. However, the declaration of the General Average principle can bring multiple suits which will take years to settle the final claim.
This accident is historic and the consequences that have arisen and yet to arise are going to be discussed and debated not only in the maritime industry but also in the legal and economic fraternity.