West Of England Club looks at legal implications of Suez blockage

West of England’s Suumit Madhu, Senior Underwriter, and Enam Hussain, Head of Claims (Eastern Team), have provided a detailed look at the legal issues relating to the grounding and blockage of the Suez Canal by the Ever Given.

The writers look at deviation, delay, and charterparty/contractual issues including time charters, voyage charters, force majeure and frustration of contract.

On Deviation, the writers observed that the carrier contracted to transport cargo from the place of delivery or loading to the place of discharge or delivery and was obliged to proceed with due dispatch on the usual route without any unreasonable deviation or delay. If this route was blocked, such as was the case with the Ever Given, a deviation can rise where the vessel geographically departs from the usual route to arrive at the intended destination.

The Hague Visby Rules say that “any deviation in saving or attempting to save life or property at sea or any reasonable deviation shall not be deemed to be an infringement or breach of this Convention or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom”.

The writers observed that different jurisdictions had different interpretations of this, which leads to uncertainty. “The consequences of an unreasonable deviation may be loss of rights and limitations under Hague Visby Rules and, potentially, the loss of P&I cover for any amounts over and above those that would have been payable if those rights and limitations had been maintained”, West said.

The writers said that, in their view deviating from the geographical route of transiting through the Suez Canal due to a vessel aground was not a deviation for their own operational and commercial benefit, but to prosecute the voyage safely and effectively. There is therefore prima facie no breach per se of the contract of carriage. “We have therefore agreed in principle to hold our Members covered without any additional premium where Members vessel have had to deviate (for example around the Cape of Good Hope) to arrive at their intended destination.”, West said.

However, the writers noted that the circumstances of each deviation and contract of carriage were different. Members should therefore consult with their usual Club contacts prior to any deviation in the normal manner.

Members with vessels affected by the grounding and blockage might naturally question whether they can bring a claim for the financial consequences of that delay.

The writers observed that the Suez Canal Authority (SCA) was a public authority that enjoyed “a body corporate” and held all authority in the management of the Suez Canal, without any restriction by the governmental systems.

The SCA has the sole powers in the issuance of the rules of navigation in the Suez Canal as well as the relevant regulations related to organizing traffic within the Suez Canal.

On charterparty and contractual issues, the writers said that the legal position of the parties with reference to the protections outlined in this circular would vary on a case-by-case basis, depending on the specific contract in question and the facts.

The relevance of the contractual/common law protections would crucially depend on the objectives of charterers and/or owners, the most important being whether they wished to continue operating the vessel under the charterparty.

Where the vessel was currently located and whether performance was still possible would also determine the relevance and success of invoking any of the protections, which the writers list in the full article.

West of England then once again reminded members of the importance of procedure.

Members should take into account the following:

  • Notice: When invoking a particular clause, a party must carefully check whether a notice is required under the charterparty and when it must be served by. Some clauses contain stringent conditions that need to be complied with for the relevant clause to be effective.
  • Mitigation: owners and charterers must work together cooperatively in order to find solutions, where possible, that can mitigate any losses or delays caused by the event.
  • Gather evidence: It is important for parties to collect all contemporaneous documents and all communications related to the event in order to demonstrate the mitigation steps taken and extent of losses suffered should the matter result in a dispute later down the line.

https://www.westpandi.com/publications/news/march-2021/ever-given/