Shipping Business during Pandemic: New Accidents and Challenges

There is no denying that the main event of the first half of 2021, closely followed by the entire maritime community, was the grounding of the container ship EVER GIVEN (IMO 9811000, flag of Panama), which took place on 23 March 2021. The incident was reported in all the business media, as it brought a new perspective to the role of shipping for the global economy and order. The container ship was on its way from the port of Tanjung Pelepas (Malaysia) to Rotterdam via the Suez Canal, through which, according to various estimates, up to 30% of the world’s container cargo traffic passes daily. The 400-metre-long ship was carrying around 20,000 TEUs worth. The blockage of the Suez Canal led to a queue of 400 merchant ships that were unable to enter the canal at the scheduled time and had to wait their turn in the Red and Mediterranean Seas. During the week after the accident freight rates for transportation of oil products almost doubled. Even after the ship was moved and traffic on the canal resumed, the Egyptian authorities, who own the canal, reported that they had detained the ship and filed a claim for USD 900 million, including USD 300 million in “loss of reputation”.

Claims from Shippers and Consignees

Pursuant to paragraphs (a) and (d) of Article 10 of the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, 1924 (the Hague Rules), the provisions of the Convention shall apply to any bill of lading relating to carriage of goods between ports of two different States if the bill of lading is issued in a Contracting State or the carriage is from a port in a Contracting State. As Malaysia is a party to the Hague Rules and m/v EVER ­GIVEN has left a Malaysian port, there is no doubt that the provisions of the Hague Rules limiting the carrier’s liability can be applied to all bills of lading issued for the cargo carried by this vessel. In this regard, it is worth noting that under paragraph 2 of Article 4 of the Hague Rules, neither the carrier nor the ship shall be liable for loss or damage arising out or in consequence of: (а) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship; (d) Act of God. The first case concerns a so-called navigational error on the part of the captain, while the second concerns force majeure, the occurrence of which the carrier will still have to prove. Please note that under the Hague Rules, whenever loss or damage has arisen as a result of unseaworthiness, the burden of proof regarding the exercise of reasonable care rests with the carrier or other persons claiming exemption from liability.

General Average as a Way to Share the Costs of Salvaging the Vessel and Cargo

One week after the accident, on 1 April 2021, the owner of the m/v EVER GIVEN (Japanese company Shoei Kisen Kaisha) declared a general average and appointed the world-renowned Richard Hogg Lindley (also known as Charles Taylor) as the average adjusters. Please be reminded that a general average in maritime law means the distribution of salvage costs between the shipowner and the cargo owner. The basic rules on general averages were laid down in the so-called “York Antwerp Rules”, which were first drafted back in 1890 and have been amended several times since. The practical effect of this action on cargo owners is that they will have to make a specified monetary payment (fee) before the container is released. The amount of this payment (deposit) will have to be calculated by the adjusters. The liner bills of lading contain a direct reference to the York Antwerp Rules as the international act to be applied in the event of the shipowner’s declaration of general average. Considering that 800 people, 11 tugboats and two dredgers were involved in the salvage operation of the m/v EVER GIVEN and further considering the claim from the Suez Canal Authority of USD 900 million, which includes direct losses in the form of channel dues, the amount of the fee for each salvaged container could be from several thousand to several tens of thousand US dollars, depending on the value of the salvaged cargo. This could lead to recipients massively abandoning low-value cargo, which has not been insured. The last time when a giant container ship declared general average was in March 2018 following the fire with m/v Maersk Honam. In that case the cargo owners had to pay 54% of the cargo’s value to get the container. That percentage consisted of 42,5% of the cargo value for the security and 11,5% as a deposit on the general average.

Responsibility of the Suez Canal Authority

Until official conclusions are published as to the causes of the EVER GIVEN accident, we cannot overlook the possible responsibility of the Suez Canal Authority. In legal terms, it is a state authority with legal personality, which came into being on 26 July 1956 as a result of the nationalization of the Suez Canal Company. The Suez Canal Authority has administrative and financial autonomy and is obliged to maintain the stated depths and technical characteristics of the canal in proper condition. In 1975, Egypt enacted special Law No. 30, regulating the rights and obligations of the Suez Canal Authority as well as the legal status of the canal itself (in addition to the Convention signed in Constantinople in 1888). According to Law No. 30, the Administration is responsible for managing navigation on the canal, maintaining the hydraulic structures in good condition, operational dredging and dealing with operational issues. The above-mentioned functions are made possible by the channel dues paid by each vessel for passing through the Suez Canal. One of the questions raised by maritime experts is whether a temporary ban should have been imposed on the passage of vessels such as EVER GIVEN due to expected adverse weather conditions (strong sandstorm). Another issue is the assessment of the actions of the pilot (as an employee of the Suez Canal Authority) who was on board the vessel at the time of the accident. If the investigation concludes that the Suez Canal Authority did not take reasonable steps to prevent the accident, the case could take an unexpected turn.

Ukraine: Wreck Removal of DELFI Tanker: New Issues and Litigation

In September 2020, the bunker tanker DELFI, which sank off one of Odesa’s beaches in November 2019, was successfully keeled over and subsequently towed to the port of Chornomorsk. The lifting ­operation was the result of joint efforts by the Ukrainian Sea Ports Administration, companies Transship and Brooklyn-Kyiv. Contrary to the Harbour Master’s resolutions, the ship owner of DELFI did not raise the vessel on their own within the stipulated time, so the state, represented by the USPA, had to take care of the matter. Please be reminded that, under Article 125 of the Merchant Shipping Code of Ukraine, should the owner of a sunken vessel fail to raise it within the prescribed period, such a vessel becomes state property. However, the Code does not answer the question as to which legal act should confirm the transfer of ownership of the sunken vessel to the state, given that the rights to maritime vessels are subject to registration. Some of our colleagues insist on the need to establish such a fact in court: in their opinion, the USPA should apply to the court to establish the legal fact. In our opinion, such a decision is an unnecessary measure, as ownership in this case arises on the basis of a direct rule of law, and the contract for the lifting of the sunken vessel and the act of accepting the vessel as a party to such a contract may be the legal basis thereof. In April 2021 the commercial court satisfied the claim of the Ukrainian government against the owners of DELFI and recognized the tanker as state property. However, the mere existence of this dispute prevents the state (represented by the USPA) from disposing of the lifted property. Moreover, USPA still has to bear the costs for storage of the lifted vessel. In addition to the aforesaid court claim, Ukrainian courts are considering a claim of the Prosecutor’s Office for compensation of the damages caused by sea pollution (USD 16,000), as well as the USPA’s claim for recovery of the liquidation costs (UAH 2.7 million), which has already been satisfied by the court of first instance. There is obviously no “universal recipe” for preventing accidents such as DELFI. However, a situation in which a vessel without flag and class documents has been “operating” in Ukrainian territorial waters for several years without insurance is clearly beyond the realm of reason and requires a response at the highest level.

COVID-19 Pandemic: Shipowners Ask for Seafarers to Be Vaccinated

The vaccination campaign in Ukraine started only on February 2021. However, Ukrainian seafarers were not included in the list of priority groups to be vaccinated. Despite this, many shipowners are already asking to assign to their vessels the seafarers who have been vaccinated. By doing so, the shipowners want to prevent their vessels from spreading COVID-19 amongst the crew and the additional costs associated with it. On a separate note, some countries, such as the Philippines, have already made their seafarers a priority group for vaccination purposes. Since EU countries are far ahead of Ukraine in terms of vaccination rates and, in some of them, the vaccine is available to the general public, European seafarers have an advantage over Ukrainian seafarers in employment. Given that Ukraine is consistently among the top five countries whose seafarers work on foreign ships, we should learn from the experience of the Philippines and include seafarers in one of the priority vaccination groups.

Legislative Changes, which are Expected by the Maritime Community

First of all, we have to ratify the MLC Convention 2006, which acquired legal force in August 2013 and has already been ratified by 97 countries. We should adjoin to the Convention for Management of Ships’ Ballast Waters of 2004, which has already been ratified by 80 countries and requires from contracting states to ensure that their vessels comply with high standards and procedures for the management and control of a ship’s ballast water and sediments. We have to think of ratification of the Nairobi Convention on Wrecks Removal 2007, which provides a sound legal basis for coastal states to remove from their coastlines wrecks which pose a hazard to the safety of navigation or to the environment. In addition to ratification of the aforesaid international treaties, we have to implement in national laws P&I Club guarantees as alternative security for maritime claims. We should implement electronic tests for seafarers under the CES (Crew Evaluation System) standard, which are widely used in EU, and to ensure full-time operation of a so-called “single window system” during processing of arrival/departure of ships and cargoes in the ports.