The blockade caused by the cargo ship Ever Given in Suez Canal while cruising through the Nile waterways carrying close to 200,000 tons of cargo has been receiving worldwide attention despite the ship having become partially afloat. The debate in all likelihood will continue for some time because of the complex issues the episode will bring to the fore.
Foremost is the loss created by the blockade? There are estimates that each day of the blockade would have already caused a loss of US$9 billion (www.trendsnafrica.com could not verify the veracity of these estimates). Many ships were stranded and are waiting for their turn to pass through the stretch of 193 km that connects the Mediterranean Sea with the Red Sea to cut short their turnaround time and cost of haulage. One can assume the quantum of losses that would have been incurred by the shipping lines. The cascading effect caused by the disruption in merchandise trade is another factor. Given that between 10% and 15% of the global merchandise trade passes through the Canal, the losses can be extrapolated. Nearly 19,000 ships, or an average of 51.5 ships per day, passed through the canal in 2020, according to the Suez Canal Authority (SCA).
Debates in the coming days, months and even years would be who would pay for the millions of dollars losses incurred by the shipping companies and other stakeholders. Taiwan’s Evergreen Line, which chartered the Ever Given, claims that it is not responsible for the liabilities and casts onus on the shipowner Japan’s Shoei Kisen Kaisha Ltd. The shipowner has expressed his regret about the impact of the incident but says charterers need to deal with the cargo owners. The Suez Canal’s own policies give it an exemption from the liability, even though its pilots were cruising the ill-fated cargo ship and are directly responsible for the upkeep of the Canal including dredging. Also, the strong wind that had blown when the ship was grounded gives the impression that it was a case of force majeure, a ground that can give the Suez Canal authorities a strong ground of defense.
Regardless of these, the blockage will unleash a flood of claims by everyone affected- shipping industry to those in the commodities business. They will seek payments from their insurers. The insurers of cargoes on board will in turn file claims against Ever Given’s owners, who will turn to their insurers for protection. As things stand now, the incident will let loose a legal battle for a ufficiently long time, going back and forth, perhaps at the end knocking at the doors of the International Court of Justice for a final say.
The Suez Canal witnessed several expansions to meet growing demands since its commissioning in 1869. As latest as 2015, there was an expansion when .35 kilometers of new channels were added to the canal to bring down waiting time for the ships. Will the Egyptian government continues with the expansion program at the same pace now is something which one should wait and see, especially there is a recent focus on building tunnels and pipes to evacuate oil and gas across continents. Authorities of Suez and Panama Canals know these developments but discounts that such diversion of traffic would be minimal since the bulk of cargoes passing through the waterways is solid merchandise trade. Yet, a few of the shipping lines may keep an option to haul their cargoes through the circuitous route of Cape of Good Hope, if such incidents recur. Ports en route will be happy to support such initiatives since that will help them become active.
There is also a debate focused on the Convention of Constantinople, the original treaty on Suez Canal signed between the UK, Germany, Austria-Hungary, Spain, France, Italy, the Russian Empire and the Ottoman Empire on 29th October 1888 for regulating the use of Suez Canal. Their argument is that the dynamics of the maritime trade had undergone a sea change and the Convention does not stand the scrutiny of time and therefore should be recast to reflect on the contemporaneous issues. Indeed, no one can brush aside the merit of their argument.
