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Saturday, May 1, 2021

Evergiven refloated but arrested ! by SCA

Ever Given is a Golden-class container ship, one of the largest in the world. The ship is owned by Shoei Kisen Kaisha (a shipowning and leasing subsidiary of the large Japanese shipbuilding company Imabari Shipbuilding), and is time chartered and operated by container transportation and shipping company Evergreen Marine, headquartered in Luzhu District, Taoyuan City, Taiwan.  Ever Given is registered in Panama and its technical management is the responsibility of the German ship management company Bernhard Schulte Shipmanagement (BSM). Truly international !!

On 23 March 2021, while on a voyage  from Tanjung Pelepas in Malaysia to Rotterdam in the Netherlands, the ship ran aground in the Suez Canal, blocking it. The ship remained in place for six days before salvage crews freed it on 29 March 2021.  .. .. that garnered global attention and concern.

After its successful salvage and refloating – generally, the vessel should have continued its journey delivering its consignments to consignees at designated ports – that would have been a happy ending .. .. but it appears that the ship is mired neck-deep in legal hassles too, arising out of the unfortunate agrounding !


Media reports suggested that on  7th  April, the owners of the container vessel “Ever Given” received a claim from the Suez Canal Authority (SCA) for the sum of US $916 million. Further reports stated that SCA had not provided a detailed justification for the extraordinary magnitude claim lodged.  It was also stated that  the owners and their insurers have been negotiating in good faith with the SCA. On 12 April, a carefully considered and generous offer was made to the SCA to settle their claim. Now comes the news that the ship stands arrested and that she  will be held in Egypt until compensation is paid, and that her crew will be unable to leave the vessel during this time.

                 The grounding at the   Suez passage, resulted in no pollution and no reported injuries. The vessel was re-floated after six days and the Suez Canal promptly resumed their commercial operations.  The claim presented by the SCA also does not include the professional salvor’s claim for their salvage services which owners and their hull underwriters expect to receive separately. The P&I aspects of the claim are relatively modest, with the exception of a claim for loss of reputation, out of the nearly one billion dollars demanded by the Suez Canal Authority (SCA) as compensation for the ‘Ever Given’ mishap, 300 million dollars has been claimed for ‘loss of reputation’.

Factually, an Egyptian judge granted permission for the SCA to seize the vessel after it lodged a $916m compensation claim against its Japanese vessel owner, Shoe Kisen.  According to some reports Egypt ratified the Brussels Convention 1952 and has not ratified the International Convention on the Arrest of Ships 1999. An arrest could be applied for security owing to a claim, which would come within the ‘maritime claims’ as defined in the 1952 Arrest Convention, a concept that the Egyptian Maritime Law has adopted.  Generally, the concept of arrest is to determine a security on the creditor over the ship that is related to his or her debt. Therefore, there are no restrictions on a third party applying an arrest for security on the ship subject to his or her debt. Meanwhile, the shipowners could raise the defence on his or her liability under bareboat charter party or time charter party before the court if an arrest has been successfully applied.

Ship arrest is a process by in which a ship is prevented from trading or moving until the matter in question is decided. It is an exclusive jurisdiction that is granted to an admiralty court to detain a vessel to secure a maritime claim. Article 2 of the International Convention Relating to the Arrest of Sea-Going Ships, 1952 defines the term arrest as the following:

"(2) "Arrest" means the detention of a ship by judicial process to secure a maritime claim, but does not include the seizure of a ship in execution or satisfaction of a judgment." A ship arrest may be exercised under the authority of a court having admiralty jurisdiction, for the following reasons: loss of life; loss of property; salvage; collision; execution of a decree; violation of customs, usages, regulations or norms. 

A statement on the website of the vessel reads that :   Evergreen was informed by the Japanese shipowners of M.V. Ever Given today (14th April) that the Vessel had already been officially arrested by the Court in Egypt on April 13, 2021. In accordance with the information from U.K. P&I Club, the protection and indemnity insurer for the Vessel, the shipowners received a claim from Suez Canal Authority (“SCA”) for the sum of US$ 916 million on April 7, 2021, to cover losses during Ever Given’s grounding in the Suez Canal. The amount includes a US$ 300 million claim for salvage bonus and a US$ 300 million claim for loss of reputation and so on. During the meeting between the shipowners and SCA on April 12, 2021, no consensus was reached as SCA’s claims are largely unsupported and lack any detailed justification. The following day (13th April), SCA immediately filed an application to arrest the Vessel and this has been granted by the Court. In order to lift the arrest order as soon as possible, Evergreen is urging all concerned parties to facilitate a settlement agreement to be reached. Meanwhile, Evergreen is investigating the scope of such a court order and studying the possibility of the Vessel and the cargo on board being treated separately. Evergreen assures to do its utmost to complete the mission entrusted by its customers with all due dispatch and to keep all adverse impacts to minimal level.

The SCA says it intends to maintain the vessel’s arrest until the claim is paid, a position that has caused fury among the ship’s insurers and ship managers, and led charterer Evergreen to investigate whether it could use a court order to treat vessel and cargo separately. The SCA claim includes $300m for salvage and $300m for “loss of reputation”, which appears set to be rejected by the vessel’s insurer, the UK P&I Club, which revealed it had already made a compensation offer to the SCA this week. 

Ian Beveridge, CEO of the vessel’s manager, Bernhard Schulte Shipmanagement (BSM), also voiced his concern over the arrest. “The SCA’s decision to arrest the vessel is extremely disappointing. From the outset, BSM and the crew on board have cooperated fully with all authorities, including the SCA and their respective investigations into the grounding. “This included granting access to the voyage data recorder and other materials and data requested by the SCA,” Mr Beveridge added.

Evergreen said it had begun to look at other ways to free cargo trapped on board, adding: “In order to lift the arrest order as soon as possible, Evergreen is urging all concerned parties to facilitate a settlement agreement to be reached. BMS said the Ever Given’s classification society, the American Bureau of Shipping, had completed its inspection following the incident and it had “been declared suitable for onward passage to Port Said, to be assessed again before departing for Rotterdam”.

Arresting the “Ever Given” and not releasing the vessel until the money is paid sounds like a hostage situation. The maritime industry has a long tradition that when a vessel is arrested, the vessel’s insurer will issue a letter of undertaking, which promises to pay up to its policy limit the court’s judgment or the agreed settlement. I understand that there is USD 2.2 billion in total P&I insurance. After the acceptance of the LOU, the vessel is released to continue its voyage.   LoUs are, in effect, a form of guarantee issued by the Club – an undertaking to pay to the claimant the sum adjudged by a court to be due to them, or the sum agreed under settlement terms.  

Admiralty law is that body of law governing maritime offences and activities. It would encompass marine commerce, navigation, shipping, sailors and transportation of passengers and goods by sea.  Marine or for that matter Law is all about terminology. In rem is Latin for “in a thing” – an action ‘in rem’ is towards some specific property rather than being a claim for monetary compensation against a person, which would be ‘in personam’. An action of a suit on a ship would action in rem.  In rem action, the jurisdiction of Court would be where the property actually is.  The ship owner  is obliged to provide medical care to seaman and provide basic living expenses during the period of convalescence. They owe a duty of reasonable care to passengers as also to goods. 

So more to be read and understood as the ill-fated vessel is mired in legal hurdles though it has been successfully refloated.

With regards – S. Sampathkumar