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AMU Business Legal Studies Original

Freeing Cargo Ship from Canal Opens Multinational Litigation

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The massive 220,000-ton Ever Given freighter was freed from the banks of the Suez Canal on March 30. But it “could soon find itself stuck again — this time, because maritime lawyers are prepared to go to battle over who should be held liable for the grounding of the mammoth container ship,” The Washington Post reported on April 3.

Freeing one of the world’s largest container vessels was a costly and time-consuming endeavor.

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Charlotte Cook, head trade analyst at VesselsValue, told USA Today there were more than 300 ships waiting in and around the Suez Canal to transit the manmade waterway. “This means that despite a successful operation to move the grounded vessel, we could still be looking at a possible five- to seven-day wait for the buildup to clear,” she said.

The disruption costs the canal as much as $15 billion per day, Suez Canal Authority chairman Osama Rabie told the BBC. 

One Lawsuit Has Already Been Filed, but It Surely Won’t Be the Last

An investigation into the incident will determine whether technical or human errors occurred, the chairman added. And at least one lawsuit has already been filed, but it surely won’t be the last.

APUS Legal Studies students and faculty especially will find the following intriguing.

The Ever Given, like so many ocean-going freight carriers, flies the flag of Panama, its country of registration. The vessel, however, is owned by two Japanese firms, Luster Maritime and Higaki Sangyo Kaisha, both subsidiaries of holding company Shoei Kisen Kaisha (itself a subsidiary of Japanese shipbuilder Imabari), as the Post explained.

Now Luster Maritime and Higaki are the plaintiffs in a lawsuit against the operator of the vessel, the Taiwanese transport company Evergreen Marine. In addition, the ship’s technical manager is Bernhard Schulte Shipmanagement, a German entity that isn’t a party to the lawsuit but was responsible for hiring the Indian crew.

The Suit an ‘Early Stab’ at Limiting the Owners’ Liability

The Post called the suit an “early stab” at limiting the owners’ liability. But it “highlights the labyrinthine ownership structure of container ships, and how difficult it can be to determine who should be held responsible when something goes wrong at sea.”

“Even figuring out which nation’s courts have jurisdiction could be a complex ordeal,” the Post added.

Egypt’s Probe Involves the Ship’s Captain and Crew and the Vessel’s Data Recorder

Egypt has already launched its own probe. It will involve interviewing the ship’s captain and crew and reviewing the vessel’s data recorder. Panama’s maritime authority has also pledged to carry out its own investigation, as has the German ship management company responsible for hiring the Indian crew.

So, investigations and any further legal actions could be a multinational affair involving Egypt, Taiwan, Japan, Germany, and Panama. If these investigations come to contradictory conclusions, the legal wrangling could get even more complicated.

Egypt’s Suez Canal Authority is seeking $1 billion U.S. in compensation. “This is the right of the country,” Rabie told Bloomberg News. He added that Egypt had also suffered damage to its reputation and “should get its due.”

The $1 billion represents lost revenue from tolls the authority would typically collect from ships passing through the canal in a six-day period, the cost of the equipment and manpower used to free the ship, and the damage done to the waterway in the process, Rabie said.

He didn’t indicate where the money would come from. Shoei Kisen Kaisha told Bloomberg that the company expects to discuss compensation with the canal authority.

Rabie’s position is partially based on one of the world’s oldest — and most arcane — maritime laws.

All Ships Sailing in International Waters Are Governed by ‘Admiralty Law’ or Law of the Seas

All ships sailing in international or any navigable waters are governed by what is called “admiralty law” or the law of the seas, which include international agreements and treaties, some of them ancient rulings.

“While there were unwritten customs of maritime behavior among the Egyptians, Greeks, and Phoenicians, the earliest formal codes were established on the island of Rhodes as early as 900 BC, and the law continues to evolve into the modern-day,” writes the maritime law firm Schecter, Shaffer & Harris.

“From the budding laws of the sea in the Mediterranean, the early European maritime laws were further formalized by 1152 AD. These were summarized in the Black Book of the Admiralty in 1336 and were heavily influential in shaping Admiralty Law from that point on.”

One of the more unusual of these laws is known as “general average.”

The basic law of “general average,” is attributed to the inhabitants of Rhodes. “’Average’ here means any loss sustained by a vessel or its cargo. When one segment of a maritime venture is sacrificed to save the others, the average is described as general, and the owners of the property saved must help make good the loss. Thus, if cargo is jettisoned in a successful effort to refloat a grounded vessel, the owners of the vessel and the cargo saved are obliged to bear proportionate shares of the loss sustained by the owner of the cargo singled out for sacrifice.”

Ever Given’s Holding Company, Shoei Kisen Kaisha, Has Already Invoked ‘General Average’    

Ever Given’s holding company, Shoei Kisen Kaisha, has already invoked “general average,” or GA. The shipping news publication Lodestar, explains that this principle of maritime law states that the owner of cargo on board a ship should contribute to the cost of rescuing the vessel following a major casualty event.

The last time GA was declared was in 2018, following a shipboard fire. A shipper with a cargo worth $100,000 was required to pay a combined deposit of $54,000 to get its cargo released.

“This leaves shippers with uninsured cargo highly vulnerable to losing it,” as the ship owner can hold the goods under lien until the deposit is paid, Lodestar explained. Shippers with insured goods will have those deposits covered by their insurers. Individuals may not be so fortunate.

Rabie told Egyptian television on Wednesday that the ship would be allowed to continue on its way to the Netherlands if the investigation went smoothly and the amount of compensation was agreed on, the Associated Press reported. 

However, Rabie added, if the issue involved compensation, then the Ever Given and its some $3.5 billion worth of cargo would not be allowed to leave Egypt. Neither would its 25-member Indian crew who would be key witnesses in the investigation, the Times of India said.

David E. Hubler brings a variety of government, journalism and teaching experience to his position as a Quality Assurance Editor. David’s professional background includes serving as a senior editor at CIA and the Voice of America. He has also been a managing editor for several business-to-business and business-to-government publishing companies.

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