Egypt: Tug of war over compensation

Karima Abdel-Ghani, Thursday 6 May 2021

Maritime experts explain to Al-Ahram Weekly the ins and outs of compensation claims after the Ever Given, a massive container ship, blocked the Suez Canal for six days

photo: AP

The Suez Canal was in the limelight when, on 23 March, one of the largest container ships in the world, the Ever Given, got wedged diagonally in the canal for six days, blocking all traffic.

The freeing of the 1,300-foot-long ship did not, however, end the saga. Egypt has impounded the vessel in the Great Bitter Lake, midway along the Suez Canal, and is demanding $900 million in compensation.

 “The vessel will remain here until investigations are complete and compensation is paid,” said Osama Rabie, chairman of the Suez Canal Authority (SCA).

On Tuesday, an Egyptian economic court rejected a legal appeal by the ship owner against a ruling preventing the 400-metre-long vessel from leaving before the payment of $900 million in compensation for the losses incurred by the six-day blockage.

The ship’s owner Shoei Kisen Kaisha, and the company’s insurers, say the sum being demanded is exaggerated.

Captain Nehad Khalil, a marine and IT support expert, says “it is normal under such circumstances that the SCA would impound the Japanese-owned, Panamanian-flagged ship, after it blocked traffic in the waterway.”

“The incident resulted in financial losses for the SCA and for vessels that were stuck in the canal.”

According to SCA reports, it appears that during the manoeuvre that led to the grounding the captain had a different viewpoint from the pilot aboard the ship provided by the SCA. The pilot’s opinion is advisory and the ship remains the responsibility of the captain, Khalil explained.

In addition to investigating the incident, estimating the cost of rescue and responding to the demands of ships that were trapped in the canal, the SCA is negotiating with the parties that contributed to dislodging the Ever Given even though, according to Khalil, these talks should be conducted by the ship’s owning company, not the SCA.

The Ever Given’s insurance company requested two tug boats from the Dutch company Smit Salvage be hired to wrench the rear of the ship from the canal bank. The SCA also sought the help of a specialised vessel owned by Boskalis to hasten the freeing of the ship.

According to the International Salvage Union, under the 1989 Salvage Convention salvors respond to incidents at their own risk in the expectation of a fair reward if they are successful.

The amount Egypt has requested as compensation also includes damages to the canal banks which need to be reconstructed where the Ever Given was grounded.

In addition to losses the SCA incurred during the six-day saga, some vessels changed their course, opting to reroute through the Cape of Good Hope. According to Khalil, Egypt is shouldering the expenses of these spoilt deals and has added their cost to the compensation claim.

Khalil, who has participated in several investigations of a similar nature, says they don’t usually take this much time. In normal circumstances the investigators listen to records registered during the 12 hours before and four hours after the incident. In the case of the Ever Given, 24-hour records are being heard six times, after which a list of questions for the crew is being compiled.

Mohamed Dawoud, deputy president of the Arab Academy for Science, Technology and Maritime Transport, says it is totally legitimate for the SCA to impound the Ever Given. The SCA exerted huge efforts to refloat the ship and protect it from any damage, shouldered enormous losses as a result of the ship blocking the canal, and is meeting the compensation demands of other vessels that were stuck in the canal.

He added that the SCA offered all necessary facilities during the rescue operation and has had to estimate the cost of their provision. Dawoud believes SCA head Rabie is willing to negotiate with insurance companies and representatives of the ship owner but says they have not yet demonstrated that they are willing to negotiate, meaning they are the parties responsible for the length of time the Ever Given and its cargo are spending in the Great Bitter Lake.

There are, says Dawoud, two types of vessel insurance. The first covers damages to the body of the ship and delays in cargo transport. The second, which applies in the Ever Given case, is provided by the International Group of Protection and indemnity Clubs, an association comprising the largest 100 maritime companies in the world. The club alleviates the impact of costs on the owner who is required to pay compensation.

The parties that should be conducting the investigation in such cases, says Dawoud, are the authorities of the state in which the incident took place — the SCA and the Marine Safety Authority — together with the insurance companies, the accreditation authorities, and representatives from the flag state, in this case Panama.

In the majority of cases the International Group of Protection and Indemnity Clubs deposits an amount of money in a bank affiliated to the country where the incident took place to unfreeze the impounding on the ship so it can continue on its way. If talks fail to satisfy all the parties involved, arbitration is conducted in the UK by arbitrators specialised in maritime accidents who make a final decision on the sum awarded in compensation.

*A version of this article appears in print in the 6 May, 2021 edition of Al-Ahram Weekly

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