Casualty Notice: "EVER GIVEN"

The "EVER GIVEN", a 2018 built container ship, flying the Panamanian flag, has grounded in the Suez canal. As we are fielding so many questions from interested clients, we thought it a good idea to summarise the position in one easy to follow guide.

As has been widely reported, the "EVER GIVEN" has been released and is now en-route at circa 10 knots to Northern Europe, with the present stated destination of Rotterdam.

The "cash deposit" for the GA claim has been set at 25% of cargo values.

We represent insurers of over $125m of cargo, as well as some uninsured cargo, and are advising clients on the provision of GA security, reserving, how to deal with any loss/damage to cargo and of course potential defences to the GA claim.

As matters progress, we will also advise clients on the Limitation Proceedings before the Admiralty Court in London, as required.

If you require assistance and have not already instructed us, please do contact us.

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Update: 14th May 2021

1.     The “EVER GIVEN” remains under arrest by the SCA, who have reportedly stated on Egyptian TV that they are willing to reduce their demand from $916m to $600m.

2.     Owners remain unwilling to settle at that level, and have challenged the arrest in the local courts.

3.     The local Court has rejected Owners’ challenge, although an appeal is now underway.

4.     The next Hearing is scheduled for 22 May 2021.

5.     In the meantime, certain carriers have circulated warnings to their customers that any cargo on board the vessel is at risk of being sold by the SCA, should an agreement not be reached with the Owners of the “EVER GIVEN”.

6.     It is our view that any sale of the cargo is unlikely at this time, although it may be necessary to take steps to prevent a sale should the current impasse fail to be resolved.

7.     We presently represent substantial quantities of cargo (over $100m). Instructions continue to arrive daily.

8.     We are advising clients on the GA claim, policy coverage questions and on options available to protect their interests, particularly should the SCA move to sell the cargo on board the vessel.

9.     We have the largest group of maritime lawyers in the world, providing input on this unprecedented case, including master mariners and specialists in GA, salvage, recovery and policy coverage issues. We are also well placed to lodge claims against the limitation fund in court in London should that prove necessary.

10.  If you have insured cargo and require assistance please do not hesitate to contact us.

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Update: 15th April 2021

1.     The vessel remains in the Great Bitter Lakes.

2.     As has been widely reported the vessel has been arrested by the SCA who have quantified their claims at $916m, including a $300m claim for "loss of reputation".

3.     We infer that of the balance of $616m left after the $300m claim for "loss of reputation" is accounted for, the majority of that may well be claimed to be in respect of salvage.

4.     Given the quantum, it appears unlikely that these claims are precisely calculated.

5.     We expect that there will be a considerable period of time whilst the claims are negotiated, during which time the vessel will be detained.

6.     We are concerned that if the delay becomes very protracted, there may be arguments about the contracts of carriage becoming frustrated or terminated. Obviously this would need to be analysed on a case by case basis.

7.     It looks practically very difficult if not impossible to separate ship and cargo. According to our in-house master mariners, none of the container ports in Egypt are sufficiently deep to take this vessel. The only port sufficiently deep is an oil terminal which lacks container cranes. Whilst the arrest is in place the vessel will have to remain in Egyptian waters.

8.     We presently represent substantial quantities of cargo. Instructions continue to arrive daily and based on our experience in other cases we project the value of the cargo we will represent on this case at something in the region of $100m.

9.     We are advising clients on the GA claim, policy coverage questions and on options available to protect their interests.

10.  We have the largest group of maritime lawyers in the world, including master mariners and specialists on GA, salvage, recovery and policy coverage issues, providing input on this unprecedented case.

11.  If you have insured cargo and require assistance please do not hesitate to contact us.

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Update: 9th April 2021

1.     The vessel remains in the Great Bitter Lakes more than 11 days after the refloating. To date we have no indication that the vessel will be unable to complete the voyage due to damage.

2.     We have read the press reports where the Egyptian Authorities have stated the vessel will not be permitted to leave until compensation is agreed.

3.     We stress we are not privy to the negotiations which are on-going between ship interests (and their insurers) and the Egyptian Authorities. However, as we have mentioned at point 7 in our update of the 7th April, there are claims for damage to the canal, the losses suffered arising from the blockage of the canal, any fines that may be levied, and of course for salvage. Of these, salvage is in principle claimable in GA, but the others are most likely to be outside the scope of GA.

4.     We can see that there may be difficulty in identifying how much of whatever is eventually paid to the Egyptian Authorities relates to salvage (and is then claimed in GA) and how much is for non-GA items.

5.     Although it presently seems likely that Owners will fund the salvage payment in the first instance, there is a concern about the implications if this does not in fact occur (for example if the sums sought by the Egyptian Authorities are deemed too large for the Owners or the major lines to fund).

6.     In principle, the Egyptian Authorities could bring a common law salvage claim directly against all the property.

7.     Practically speaking this would be a major issue, because such a claim would be subject to Egyptian law and jurisdiction. Furthermore, in previous cases we have seen, there would be a requirement to either pay a cash settlement or provide security by way of a bank guarantee from an Egyptian bank which would be a major logistical exercise.

8.     There would also be the practical difficulty in exercising a lien on the salved property. We can envisage the ship and cargo being held for an extended period whilst security was collected from thousands of different cargo interests. Since discharge of cargo from this particular vessel would be very difficult indeed within Egypt, it may well be the salvage lien is exercised with the cargo to remain on board, with the net result being the ship is not allowed to depart for an extended period.

9.     We stress that we do not expect this scenario to play out, but it does highlight the importance of Owners resolving the claims swiftly.

10.  We are continuing to receive instructions on a daily basis. If you have insured cargo please do not hesitate to contact us.

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Update: 7th April 2021

1.     The vessel remains in the Great Bitter Lakes. We understand it has modest damage and inspections and any patching will be undertaken there.

2.     A flag state investigation is underway, as is an investigation by the SCA.

3.     It looks unlikely that the cargo will have to be transhipped. That is positive as a transhipment would be logistically difficult with the market already being short of capacity, as well as the relatively few ports able to take a vessel of this size.

4.     It seems likely that ship interests may fund the salvage in the first instance and seek to recover same in GA.

5.     We expect that as well as the salvage claims made by the SCA (and Smit) the SCA will be claiming for the damage to the canal, loss of revenue and potentially imposing a fine.

6.     We also expect that some delicate negotiations will be taking place between the SCA and shipowners, H&M insurers and P&I insurers.

7.     There will be an interesting dynamic as to whether the sums paid are categorised as salvage (in which case recovery pro-rata to values will be sought from cargo in GA and H&M will obviously pay the proportion due from ship), or categorised as payments for the damage to the canal/loss of revenue and/or fines in which case they will fall for P&I and will not be part of the GA. Since the SCA is likely to be the recipient of all those sums they may be less interested than cargo interests in the technical categorisation of any sums paid. As you will have read below, the total claims are put forward at $1 billion although no doubt the final settlement figure will be substantially less.

8.     We anticipate the vessel may well remain in Suez for a period of time until these claims are resolved.

9.     We have reviewed the GA security wording and made our recommendations to our clients. Guarantees are required from insurers but Bonds are not required for insured cargo.

10.  Owners commenced limitation proceedings before the Admiralty Court in London, on the 1st April. The fund would be approximately $114 million. As mentioned below at point 8, legal representation will be required if clients wish to be involved in any limitation proceedings.

We are presently acting for many large insurers who have substantial commitments on this vessel. If you would like us to assist you (including assistance from our in-house master mariners) in dealing with the issues arising from this incident please do not hesitate to contact us.

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Update: 1st April 2021

1.     We understand Owners have declared General Average.

2.     GA security will need to be provided in order to release the cargo. It is likely that security direct from underwriters will be acceptable. We can advise on the wording of the GA security.

3.     The investigation into the casualty is on-going, with involvement from the SCA, the Panamanian flag state, and other interested parties.

4.     The vessel remains at anchor. Initial indications are that the vessel is damaged but is likely to be able to continue the voyage once inspections and investigations are concluded.

5.     It remains to be seen whether difficulties will be experienced in releasing the vessel from claims brought by the SCA. Press articles indicate they are claiming losses of $1 billion although we are not able to verify whether that is in fact the position.

6.     In any event, it is likely Owners will have to pay a substantial amount for the salvage efforts, to SCA, Smit, or both. These costs will form part of the GA claim.

7.     We believe Owners, concerned about claims from large numbers of parties in multiple jurisdictions, will commence limitation proceedings in the Admiralty Court in London and open a limitation fund here. If there are losses suffered by cargo interests (for example, if sums have to be paid in salvage) then legal representation will be required to lodge claims within the limitation fund as part of any recovery action.

8.     In such a case, where legal action is almost inevitably going to be required, clients will benefit from our economy of scale. By way of illustration, we represented well over $100m of cargo on the "MAERSK HONAM" which was a slightly smaller vessel than the "EVER GIVEN".

We are already assisting many cargo insurers. If you have insured cargo on board the "EVER GIVEN" please do contact us.

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Update: 29th March 2021

We continue to receive numerous communications from clients on this case.

As you will have seen, thankfully the vessel has now re-floated on the spring tides, mentioned at point 3 of our message of the 26th below.

The next steps are in our view likely to include the following:

1.     The vessel will be removed to a safe location for assessment.

2.     Hopefully it is not significantly damaged and will be able to continue the voyage. We have seen reports of some water in the forepeak, and no doubt that will be investigated and it is the case, then if necessary class approval is likely to be sought by Owners to sail.

3.     In previous cases, we have seen time taken whilst Owners negotiate with the SCA to settle the costs for the assistance provided. It may be the case in this instance, or they may have already made arrangements. In some cases, the salvors have agreed to cover these costs and include them in their salvage claim.

4.     It is also possible the SCA may levy a fine on the vessel. This in turn could take some time to resolve.

5.     It seems to be a relatively low probability based on the limited information available at present, but if there is significant damage then the Owners may be compelled to tranship the cargo. Bearing in mind the cost, the lack of alternative tonnage and the sheer size of the vessel which means that port of refuge options are very limited, we anticipate this would be a last resort, but would significantly increase the cost and delay if it transpires it is necessary.

6.     Clearly substantial costs have been incurred to re-float the vessel. It remains to be seen whether Owners will absorb the salvage costs in the first instance and attempt to recover them in GA, or whether the Salvors will simply claim them directly against all the salved property.

7.     We anticipate a detailed investigation will follow which will determine the cause. Evidently the cause will impact upon the legal liabilities of the ship and cargo interests.

8.     If you have insured cargo on board the vessel we are well placed to assist you (along with our existing clients) with any GA, salvage and recovery issues.

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Update: 26th March 2021

No doubt you are well aware of the physical situation "on the ground". The key points in our view, from a cargo perspective, are as follows:

1.     Numerous tugs have to date failed to dislodge the vessel, which remains "firmly aground".

2.     The tugs provided by the SCA are usually charged at a tariff rate and are extremely expensive. The total expenses likely to be claimed for the tug assistance to date will, we expect, run to millions of dollars.

3.     A Spring tide is expected on Sunday/Monday which may help the refloating efforts.

4.     We understand that salvage services are being provided under LOF with Nippon Salvage and Smit being the contractors. Even if the Owners absorb this cost it will almost inevitably result in a GA claim brought by the Owners.

5.     To date the tug assistance has not resulted in re-floating. It remains to be seen whether the dredger on-site will remove enough material to refloat the ship. Dredging was certainly effective in the "APL PANAMA" grounding off Ensenada. However, this ship is very much larger and would have had considerable momentum when running aground.

6.     If dredging and excavating the earth around the grounding location does not succeed in re-floating the vessel, then lightering looks far from straightforward. The vessel is fully loaded and we would not expect there to be much ballast to discharge. Removal of bunkers could be another option. If cargo lightering were to be required, for example by floating crane onto barges, the crane would have to have very significant reach bearing in mind the height of the stacks and the breadth of the vessel. In extremis, on the "APL PANAMA" helicopters were used to remove containers, and subsequently a road was built, although a road doesn’t look feasible in this case.

7.     On re-floating, we can expect the SCA will levy a fine on the Owners as a result of the casualty. Depending on how quickly that can be negotiated, this may be a cause of further delay.

8.     Of course, there are major knock-on effects for shipping generally as a result of the blockage of the canal. These could well be very significant if the vessel is not swiftly refloated.

9.     If the vessel is not refloated in short order, it is possible that cargo interests will face claims for salvage, and we consider it likely that there will be claims for General Average.

10.  Owners of the "EVER GIVEN" may well face claims from owners of other vessels and/or the Suez Canal. There will be complex legal and jurisdictional issues arising in respect of those claims.

11.  In terms of causation, there were reports of a "power outage". Owners have pointed to "strong winds", which in our preliminary view seems improbable.

12.  It is likely that a very significant salved fund will be involved. In our past experience of mega container ship casualties, such as the "MAERSK HONAM", where we represented about one third of the total cargo, it is likely the value of the cargo will be in the $4-500m range. The value of the ship may be in the region of $110m. This case may well involve the largest salved fund of any container ship casualty to date.

13.  We have retained local lawyers "on the ground" in Egypt.

14.  We have already received instructions to represent cargo interests in respect of this casualty.

15.  If you have insured cargo and require assistance in dealing with potential claims for salvage, GA and recovery of any losses, please do not hesitate to contact us.

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We have received reports that the "EVER GIVEN", a 2018 built container ship, flying the Panamanian flag, has grounded in the Suez canal. Presently the vessel is blocking the channel, touching the banks on both sides. Efforts are being made to free the vessel. In our experience, there will be significant local costs incurred which may well result in a salvage claim and/or find their way into a GA claim.

If you have insured cargo on board this vessel and would like assistance with claims for salvage, GA and/or the recovery of losses, please do contact us. If security is required we can also assist.

There are a number of advantages of instructing us to protect your interests.

1.     Our in-house master mariners are part of our service and their assistance, together with our extensive track record in marine matters (over 1,000 years of collective experience) are key resources in dealing with cases such as these.

2.     We have been involved in more LOF salvage cases than any other law firm.

3.     We have the largest team of marine cargo claims lawyers in the world. We have been responsible for winning many of the leading pro-cargo Court judgments in recent years, including-
i. "VOLCAFE" – the Supreme Court judgement on burden of proof.
ii. "CMA CGM LIBRA" – our clients are the only cargo representatives to successfully defend claims for General Average in the High Court and Court of Appeal.
iii. "MAERSK TANGIER" – A recent key decision on the application of package/weight limitation under the Hague-Visby Rules. We were successful in the High Court and Court of Appeal.
iv. "AQASIA" – a decision from the Court of Appeal (confirming the High Court decision) that Hague Rules limitation does not apply to bulk cargo.
v. "HEUNG A DRAGON" collision with "ELENI", where the recovery obtained for our clients was three to five times that obtained by other cargo representatives.

We are well aware that our assistance needs to be cost-effective, and we will always discuss with clients to ensure our fee is proportionate.

If you have cargo on board please do contact us. If you need assistance in providing security, we can help you do that at a competitive rate.

This casualty notice is a free of charge service. If you feel a colleague would like a copy please do let us know.