BLOCKAGE OF THE SUEZ CANAL: LIABILITY SCENARIOS AND FORESEEABILITY OF THE EVENT
The Suez Canal has been blocked for about a week in both directions due to the stranding of a large container ship operated by Taiwanese transport Company Evergreen (400 metres long and weighing about 224,000 tonnes), the Ever Given, which ran aground transversely while crossing the busy canal. The blockage has had, and will continue to have, serious consequences on the global market, despite the ship’s recent removal from the Canal: the Suez Canal is used by 12% of the world’s commercial shipping traffic and its blockage has already caused daily damage of $9.6 billion in the first week.
It is well known that the risks to which goods transported by sea may be exposed induce those involved in maritime shipping to stipulate maritime insurance policies, the purpose of which is to indemnify the insured party against loss or damage following the occurrence of accidents. From the first data released, it seems that the Ever Given is insured for 3.1 billion dollars and, although the sum may seem huge, it could be insufficient to cover the claims that could come from a huge number of parties directly and indirectly damaged by the event, due to the considerable delays in the delivery of goods, their possible deterioration, the heavy travel costs for those who decided to divert some of the ships to the Cape of Good Hope (with a diversion that implies 9. 000 km more to travel), the damage caused to the canal by the ship’s movement and the possible legal action that could be taken by the Egyptian authorities for the loss of profit due to the interruption of navigation in the Canal, unless they are found to be partly responsible for the accident (the canal authority, which collects almost six billion dollars a year, has admitted that it has started losing one hundred million dollars a day).
Indeed, the reason for the accident is still unclear, but an initial analysis suggests that the wind and the sandstorm, which have reduced the visibility in the Canal, were not the only reasons for the accident, leaving open the possibility that human error may have contributed to the grounding of the cargo vessel, which would also change some aspects of compensation for damages caused and carrier liability (see, for example, art. 17 Rotterdam Rules about the absence or presence of fault).
What is certain is the leading role that will be played by the insurance companies of those involved who have insured their vessels for such events, which will then take recourse proceedings (subrogation under Article 1916 of the Italian Civil Code) to recover the amount paid to their insured, if it is ascertained that Ever Given carrier or the owner and manager of the Canal itself is responsible.
We can foresee that the impact will primarily be on the shipowner’s H&M insurance which cover for the costs arising from the salvage operations, while the P&I (Protection and Indemnity) insurance cover will come into play for damages that may be claimed by the Canal authorities.
Another point is based on the predictability of such an event: between 2013 and 2016 there was an average of 12 navigation accidents per year within the Canal and it appears that groundings (such as the Ever Given incident) are the most common cause, 25 in the last 10 years. It is easy to see that with navigation so heavily dependent on such narrow canals, the potential for such accidents is always there.
Such an event had already been simulated several times by various scientists, including the University of Plymouth team. The severity of the accident is due to the size of the ships using the canal, with more than a third of the accidents in the last 10 years involving container vessels. The Ever Given is 400 metres long, 59 metres at its widest point and 16 metres deep below the waterline. This makes it one of the largest container ships in the world, capable of carrying more than 18,000 containers. When operating within such narrow boundaries, ships of this size need to maintain a certain speed to keep their steering effective. So it is clear that with the capacity to carry over 150,000 tonnes of cargo, these ships cannot stop suddenly. If something goes wrong, the crews have very little time to react before the ship runs aground.
This accident highlights how the dependence of international trade on ever larger ships needing to navigate narrow shipping lanes, built in an earlier era and therefore designed for use by medium-sized vessels, is becoming increasingly risky. It is even conceivable that accidents such as these could be in future deliberately triggered to cause targeted or widespread disruptions to global and local trade.
Even before the Ever Given ran aground in the Suez Canal, the global trade network was already showing signs of stress from the year-long economic disruption of the coronavirus pandemic. The fear now is that the Suez accident could intensify Europe’s logistical challenges, resulting in cancelled sailings, container shortages and higher freight rates. In terms of the impact on the global supply chain, the accident reveals the immediate consequences of blocking one of the world’s major shipping lanes and highlights the extent to which global trade has become dependent on mega-ships, with their pros and cons.
Dott.ssa Giulia Gioffredi
Trainee Lawyer – Milan – Italy