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The Suez Canal incident claim and the ICS student

Posted on Friday, August 20, 2021

ICS arbitrator on the Suez Canal Evergiven case

 

How the Suez Canal incident claim relates to what you learn when studying shipping with the Institute?

 

We asked one of our Members Jagan, (Jagannath Muthu FICS) an Arbitrator, Mediator & Claims Adjuster and Tutor at the Singapore Branch of the Institute of Chartered Shipbrokers, what the relation is between the two.

"Many of the ICS exam subjects touch on key topics and will help a student understand the intricacies involved in international trade. Of course, the syllabus for Legal Principles of Shipping Business tackles issues related to the Suez Canal incident but so do the course books for Shipping Business, Shipping Law and Marine Insurance.

Students will learn that an incident like this will often involve a vessel owner declaring General Average. General Average is a principle of maritime law that essentially establishes that all stakeholders, be it owners, charterers or cargo interests share any damage or losses that may occur as a result of voluntary sacrifice or have incurred extraordinary expenses to save the adventure (in this case, completion of the voyage).

General Average is invariably adjusted based on the York-Antwerp Rules and is contractually incorporated either in the Charter parties or the Bills of Lading issued. Rule A of the York Antwerp Rules 2016 defines General Average  "There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety to preserve from peril the property involved in a common maritime adventure."

An Average adjuster is invariably appointed by the vessel owner who will ascertain the applicable costs and expenses incurred and adjust these to each stakeholder involved in the adventure. As this process is time-consuming, owners of Ever-Given are entitled to security from the cargo onboard the ship and, prior to effecting delivery, will seek an Average Bond from the cargo owner and an Average Guarantee from the cargo insurer, if insured and if uninsured, a cash deposit in lieu."

 

We also asked Jagan, based on his knowledge, what is the current update on the Suez Canal claim?

"I've written a series of articles on the progress of this claim which you can read in detail here:

The EVER-GIVEN Mela (https://nau.com.sg/the-ever-given-mela/), The EVER-GIVEN Mela - II (https://nau.com.sg/the-ever-given-mela-ii/), The EVER-GIVEN Mela - III (https://nau.com.sg/the-ever-given-mela-iii/) and the last as The EVER-GIVEN Mela - IV(https://nau.com.sg/the-ever-given-mela-iv/).

In short, the EVER-GIVEN was released from its arrest on 07 July 2021 after a settlement was reached between the Owners and the Suez Canal Authority (SCA). The details of the settlement are, unfortunately, being kept confidential at the present moment.

After her release, the EVER-GIVEN continued with her voyage to Rotterdam, The Netherlands and subsequently to  Felixstowe, United Kingdom. The EVER-GIVEN was to be dry-docked for repairs at Dunkirk, France. We understand that the EVER-GIVEN appears to have completed its repairs as reports indicate that she is on her journey back through the Suez Canal.

Given the number of parties involved in a vessel of EVER-GIVEN's size, the issues involved would be complex. The amounts demanded by SCA for Salvage were perhaps never even contemplated before! One of the ways is for these costs to be shared on the basis of General Average.

While there is a basis for such "ransom" demands to fall for consideration under General Average, the issue would be whether the demands by SCA are valid and whether they were undertaken purely for the benefit of the completion of the voyage.  The adjustment of the General Average, would take a few years which means that parties will only become aware a few years down the line of the basis and the costs being shared under General Average.  Additionally, given that information on the settlement with SCA is being kept confidential, it would hamper the development of General Average to deal with container casualties which is indeed complex given the number of parties involved together with their contractual relationships."

 

How has being involved with the Institute helped you or your colleagues in your understanding of shipping claims like this?

"The Institute's exams prepare a person for an all-round knowledge of International Shipping and its practices. While basic knowledge could be learned by studying for the Institute's examinations, one may need to study further for specialising on say claims which could be done through an LLM in Maritime Law. Shipping claims have unique challenges and it is not one size fits all given that it is not restricted to one jurisdiction but can arise in any jurisdiction where the vessel is transitting. While most of the parties dealing with shipping claims are legally trained, they may face difficulty in understanding the commercial practices. This is where the Institute's exams are particularly an advantage given that textbooks are written by professionals involved in the industry keeping in mind what would be relevant. Additionally, before becoming a member, one has to work in the industry and therefore the knowledge gained while writing the exams is complemented with hands-on experience in the industry.

The camaraderie shared by members, be it at a local level or internationally, also assists in developing a member. A Member can ask another Member for guidance both personally and professionally. For instance, if I have a claim arising in another jurisdiction whose practices are alien to me, I will search for a Member and give him/her a call to discuss to better understand the situation. By the same token, I do get calls from Members from other branches and welcome the opportunity to share. This is the advantage of being part of the Institute where you can lean on the professional expertise of each other."

 

Jagannath Muthu FICS

Jagannath Muthu FICS

Arbitrator, Mediator & Claims Adjuster and Tutor at the Singapore Branch of the Institute of Chartered Shipbrokers

 

 

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