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Legal and Contractual Consequences of the Suez Canal Blockage by MV Ever Given

From March 23, 2021 through March 29, 2021, MV Ever Given – one of the world's largest container vessel owned by a Japanese firm and chartered by the Taiwanese shipping company Evergreen Marine – has been wedged in the Suez Canal, causing a knock-on effect that involved more than 400 ships.

The accident caused huge delays and is estimated to result in billions of dollars of costs for the maritime industry, already massively affected by the coronavirus pandemic. Furthermore, after the successful operation to free the ship, long investigations and legal battles are expected to take place.

From a legal perspective, a flood of complaints is expected to come from the owners of the cargo carried by MV Ever Given and from the other vessels that have been caught in the bottleneck. Such claims are likely to be legally grounded on cargo-delivery delays, seeking compensation for damages arising of delays in production, loss of perishable goods or business-interruptions.

The Suez Canal Authority, while denying any kind of responsibility, may potentially seek compensation for the damages suffered by the Canal and for the loss of revenues due to business interruption.

Such claims would be addressed mainly to the Japanese ship-owner, although the latter already pointed out that all cargo-related liabilities should be borne directly by the charterer (i.e. Evergreen Line), which is the sole responsible thereof. However, the ship-owner and the charterer will try to sustain the occurrence of a force majeure event considering that – as stated by the Suez Canal Authority – the ship could not steer its way out of the dust storm and high winds. If they will be able to satisfy the burden of proof required, also on the basis of the applicable contracts, the relevant damages should be borne directly by the damaged parties and no liabilities should be ascribed neither to the ship-owner, nor to the charterer.

Furthermore, there is an open debate about the applicability of the legal concept of General Average – as set out in the Antwerp and York Rules of 2016 – which requires those involved in the trade to take collective responsibility for the losses (in proportion to the value of their cargo). Cargo-interests (e.g. shippers of the goods, receivers, etc.), in order to contest the application of the aforementioned institute, should prove the unseaworthiness of the vessel.

However, the main legal battles will be played in the field of insurance companies. The ships stalled and the owner of the cargo of Ever Given will claim indemnification towards their own insurers, which will, consequently, seek for compensation against the Japanese ship-owner, who, from its side, will turn to its insurance company. This knock-on effect would have a huge effect on the insurance market, by causing a significant reduction in the global reinsurers' earnings and, therefore, a fast rise in the prices for marine insurances.

This case entails various issues and involves different fields. On one side, the legal liability of the involved entities still have to be clarified. On the other side, there might be an impact also in the future negotiations of the terms and conditions of carriage contracts and – as a consequence – in all the legal-contractual chain. 

DISCLAIMER: the content of this news is for informational purposes only and neither represents, nor can be construed as a legal opinion