The blockage of the Suez Canal by Ever Given has allegedly caused severe delay for over 400 ships. It is without doubt a heavy blow to the global supply chain. Tremendous losses of time were incurred for both ships got held up and those chose to divert around the Cape of Good Hope. This article is prepared, from the perspective of the English law and practice, to discuss whether a delay claim against the Ever Given is possible for these ships and cargoes on board.

I.      Background

The container ship Ever Given ran aground on March 23, 2021, blocking the Suez Canal until March 29. It is estimated that the canal handles 12% of global trade. Some calculates the blockage is costing 400 million dollars per hour, and the costs to global trade could add up to 10 billion dollars each day as the canal carries an average of 5.1 billion a day on the west side and 4.5 billion a day on the east. To be clear, the estimation is based on the approximate value of goods and does not equal the actual loss suffered by ship and cargo owners.

II.     Applicable law

Members and cargo owners affected by the blockage, as a non-contractual party, may seek to bring a claim in tort against the Ever Given for consequential damages. Pursuant to the principle that the substantive law of the place where the tort occurs applies, the Egyptian law may be applicable here. However, both parties can choose to bring the claim to the English courts by jurisdiction agreement, as agreed in ASG 2 Collision Jurisdiction Agreement by both parties of a collision incident.

Damage to the waterway of the canal is generally deemed as physical damage and the repair costs incurred are direct loss, while damage caused by interruption of canal operation is consequential economic loss. The damage and losses occurred as a result of the delay would normally be regarded as pure economic loss (Spartan Steel and Alloys v. Martin & Co Ltd (1973) QB 27).

III.      Loss damage of affected ships and cargoes

As defined by common law, a tort is an action in negligence and is established with four elements, including duty of care, breach of that duty, causation, and damage. If the defendant has duty of care to the plaintiff and breaches his duty, as long as it can be proved that the defendant’s careless conduct causes damage to the plaintiff, the defendant will be liable to negligence. To prove there is a liability for negligence in the case of Ever Given, these elements shall be established.

1.      Duty of care

Duty of care would be established by satisfying a threefold test:

if the consequences of the defendant’s behaviour were reasonably foreseeable;

if the defendant has a sufficient relationship of proximity with the plaintiff;

and lastly, would it be fair, just and reasonable to hold the defendant liable (Caparo Industries plc v Dickman [1990] 2 AC 605).

Accordingly, it is not likely that Ever Given has the proximity with over 400 ships and it would not be fair, just and reasonable to impose a duty of care.

Also, in a recent judgement it was held by the court that there is no general duty of care not to inflict pure economic loss on others (NATIXIS SA v MAREX FINANCIAL AND ANOTHER [2019] 2 Lloyd's Rep. 431).

2.      Causation

Further, even there is a duty of care and breach of the duty, whether the grounding incident is the reason for the cargo delays shall be determined from both factual and legal perspectives using common sense.

In factual causation according to the but-for test, the route would not have been blocked and delays would not have occurred but for the existence of the grounding incident.

Legally, the damage should be a direct and natural consequence of the action. In Anglo-Algerian S.S v. Houlder, the defendant’s ship damaged the lock gate out of negligence and as a result the plaintiff’s ship was held up for two days. The judge denied the plaintiff’s claim by arguing that the negligence of the defendants was too indirectly related to the alleged interference with the plaintiff’s rights and to their loss to constitute a good cause of action.

Hence, even it was the Ever Given master’s fault in causing the incident, there is hardly a legal causation between the negligence and the cargo delays.

3.      Remoteness of damage

Generally, the court would not support compensation for damage that was too remote a consequence of the breach, meaning the defendant must have reasonable foresight for the type of damage, not necessarily how or how severe the damage may be incurred.

Even duty of care and causation can be established, are the delays of other ships and cargoes too remote a damage? Some believe that physical damage to the canal and loss due to suspended operation should be foreseeable at the time of the grounding, but the delays seem to be too remote to have a reasonable foresight.

According to the academic analysis, if the incident is indeed caused by the master’s improper operation (negligent tort), the damage of cargo delays can hardly be supported in English law as pure economic loss. For the benefit of public interests, if such a huge amount of pure economic loss is payable by the limitation fund, compensation for those directly affected by the incident will be diluted.

Negligence was not in the end established in the Manor case where the plaintiff’s ship was delayed due to the grounding of the defendant’s ship. The judge was content to note that no similar case had succeeded and implied that he would not have allowed it to succeed in his case.

IV.      Pure economic loss

Ms Aleka Sheppard mentioned in Modern Maritime Law and Risk Management that “while the out of pocket expenses and consequential financial loss are part of recoverable damages, the courts generally will not give redress to any party claiming loss of income, wasted expenditure or loss of profits, when such loss is purely economic loss”. English law has traditionally refused recovery for pure economic loss consequent on damage caused by negligence for fear of opening the floodgate, according to the Mineral Transporter case.

Likewise, claims for pure economic loss are hardly supported in the Chinese law scenario. According to one of the cases made public by the Shanghai Maritime Court last year, a cruise ship was delayed for entering and departing from the port because the containers on Shun Gang 19 fell overboard into the sea. The cruise company filed a claim for its loss and was eventually rejected by the court.

However, it is noteworthy that economic loss in oil spill claims may be recoverable. Hotels, restaurants and amusement parks by the sea may not be polluted, but their operation may be affected due to the drop in flow of customer traffic. Although pure economic loss is not specified in CLC 1992, it is stated in the Claims Manual of the IOPC Funds that compensation is payable for loss of earnings caused by oil pollution and costs of reasonable measures take to prevent or reduce economic losses. For example, a Shetland fisherman got compensated for his loss for being prevented from fishing in the area of sea (Landcatch Ltd v. IOPCF (1998) 2 Lloyd’s Rep 522).

V.       Conclusion

The Ever Given incident has again reminded the industry of risks posed by large-sized vessels. The severe cargo delays and disruption in operation are without doubt a lesson to be learnt. Since it is not easy to claim for losses based on tort, it is important to effectively prevent the risk or find other ways for compensation. Delay insurance is available on the market for the recovery of losses caused by blockage of channels, with a cover period of 7-10 days. For cargo interests, it is advisable to carefully review relevant cargo insurance clauses and arrange additional cover when necessary.

The above is only a general analysis of the case based on current information for members’ reference only and does not represent any view of the Association.