The Ever Given, one of the world’s largest container ships, became jammed across the Suez Canal due to high winds on 23rd March, 2021 and remained grounded for six days, blocking traffic in both directions and bringing the global economy to its knees. This blockage approximately cost $9.6 billion of global trade on each of those six days.[1]
Although, the operators attributed the blockage to high winds[2] but the Suez Canal Authority believed that there was an involvement of human error.[3] The vessel has since been held in a lake between two stretches of the canal as the Authority pursues a $916.5 m (£648 m) claim against its Japanese owner Shoei Kisen.[4]
This blockage has also given rise to several important questions regarding the legal rules that concern maritime behaviour. It has called for a revised look at the economic loss doctrine in maritime tort law. Shipping carriers passing through significant maritime choke points should be made accountable for the economic losses endured due to their negligent actions.[5]
Economic Loss Doctrine
The application of this doctrine dates back to nearly a hundred years. In 1927, the United States Supreme Court in Robins Dry Dock & Repair Co. v. Flint,[6] laid down the general proposition that claims for pure economic loss are not recoverable in tort. Although courts have sometimes ignored the decision, but it happens to still be a central feature of maritime tort law. This decision is favourable for Ever Given, but not the numerous vessels that were stranded on either side of the Canal and endured significant economic losses.[7] They also cannot recover from Ever Given, since the economic loss doctrine bars them from recouping damages that result from spoiled goods, missed delivery deadlines, or extra labour and fuel costs.
Need for Exceptions
It is obvious that there exist definite policy reasons for the economic loss doctrine, because shipping delays are a usual part of the maritime business, so the shipping corporations protect themselves from the risks through insurance. Large insurance companies will generally absorb the costs that emerge due to individual accidents, and also avoid the whole process of determining duty of care.
But the mishap in the Suez Canal demonstrates that not every blockade is same in nature. Some of them occur at significant pathways, where billions of dollars’ worth of traded goods transverses and rerouting is not an option. In these high-stake situations, the need for an exception to the economic loss doctrine is felt. Much more is needed to be done in order to prevent shipping carriers like Ever Given from negligently risking strong winds before it and caused blockades impacting the global economy.[8] Establishing an exception to the economic loss doctrine would move two ships with one boat.
Exceptions to the Economic Loss Doctrine
First exception that can be carved out is that waiving of the liability bar of the doctrine, so that innocent parties can recoup the cost of the damages caused by the tortfeasor. Negligence[9], duty, breach and harm caused shall be determined under a well-defined and established law regime.
Secondly, a choke point exception to the economic loss doctrine would promote socially optimal behaviour. Blocking a major shipping pathway imposes enormous spillover costs upon third parties, which usually the insurance corporations do not cover.[10] Vessels need to be more vigilant while traversing through choke points, as any negligent action can be financially catastrophic.
Even if the shipping carriers get themselves insured against such accidents, the positive behavioural incentives would still exist. Insurers might also extend reduced insurance premiums, such as additional safety training for the helmsmen. Indeed, risk management methods are a very common practice among maritime insurers.[11]
A widely used defence for the economic loss doctrine is that it becomes difficult to determine who should be recovering for economic losses because there does not exist a definite and concrete physical harm. But if the exception is limited only to ships that were en route through the choke point, and for whom rerouting is not an option, then it would help in preventing fake and weak tort claims. Modern day vessel tracking system will also come as great help in these situations.
The classic tort law principles of proximate cause and foreseeability can be applied, as they will promote the exception by distinguishing between marine blockades that are a foreseeable result of negligent action and those which are caused due to unforeseeable situations or act of God. Some courts have even propounded the idea of redrawing the boundaries of economic loss doctrine in the context of foreseeability.[12]
Carving out a maritime choke point exception to the doctrine would restrict recovery of economic loss to situations where the harm or danger was foreseeable and proximate in nature. Additionally, creating such an exception would not be an unprecedented act. A well-defined exception already exists for commercial fishermen,[13] which permits them to recoup damages caused by lost fishing opportunities.
Conclusion
The Ever Given fiasco in the Suez Canal provides us with a cautionary tale for vessels traversing through these significant choke points. Even if reputational damage has the power of restriction, more is required to steer a large vessel like Ever Given through these significant pathways. Enabling an exception to the economic loss doctrine could be a start, as it would hold vessels accountable for causing economic damage by their negligent actions. This would help in further improving maritime behaviour and third parties will be compensated as a result of the process.
† 2nd Year Student at National Law University, Odisha. Author can be reached at aritramitta10@gmail.com
[1]Mary-Ann Russon, “The Cost of the Suez Canal Blockage”, BBC News (9-5-2021, 11.19 a.m.) <https://www.bbc.com/news/business-56559073>.
[2] Vivian Yee and Megan Specia, “Scramble Against Time to Free Ship Stuck in Suez Canal”, The New York Times (8-5-2021), <https://www.nytimes.com/live/2021/03/27/world/suez-canal-stuck-ship>.
[3]“Suez Canal: Effort to Refloat Wedged Container Ship Continues”, BBC News (2-5-2021) <https://www.bbc.com/news/world-middle-east-56547383>.
[4]Reuters, “Ever Given owner says Suez Canal Authority at Fault for Grounding”, The Guardian (4-5-2021) <https://www.theguardian.com/world/2021/may/22/ever-given-owner-says-suez-canal-authority-at-fault-for-grounding>.
[5] The Economist Explains, “Why the Suez Canal and other Choke-Points Face Growing Pressure”, The Economist (4-5-2021) <https://www.economist.com/the-economist-explains/2021/03/26/why-the-suez-canal-and-other-choke-points-face-growing-pressure>.
[6] 1927 SCC OnLine US SC 212 : 72 L Ed 290 : 275 US 303 (1927).
[7] Isabel Debre and Samy Magdy, “Suez Canal Reopens after Stuck Cargo Ship is Freed”, Associated Press News (3-5-2021) <https://apnews.com/article/suez-canal-ship-freed-live-updates-48f856c9afed58feb908878c2a495287>.
[8] CBC Radio, “Ship Stranded in Suez Canal Could have ‘Massive Ramifications’ for Global Supply Chain: Historian”, CBC News (2-5-2021), <https://www.cbc.ca/radio/thecurrent/the-current-for-march-25-2021-1.5963388/ship-stranded-in-suez-canal-could-have-massive-ramifications-for-global-supply-chain-historian-1.5963826>.
[9] Legal Information Institute, <https://www.law.cornell.edu/wex/negligence> (last visited 5-5-2021).
[10] David Osler, “Almost all Suez Tailback Vessels Likely Lack Cover for Delays”, Lloyd’s List (7-5-2021), <https://lloydslist.maritimeintelligence.informa.com/LL1136251/Almost-all-Suez-tailback-vessels-likely-lack-cover-for-delays>.
[11]Steve Lander, “How to Reduce Marine Cargo Insurance Premiums”, Chron (7-5-2021), <https://smallbusiness.chron.com/reduce-marine-cargo-insurance-premiums-76975.html>.
[12] People Express Airlines Inc. v. Consolidated Rail, 100 NJ 246 (1985).
[13]Robert J. Rhee, “A Production Theory of Pure Economic Loss”, 104 Nw U. L. Rev. 49 (2010), <http://scholarship.law.ufl.edu/ facultypub/485>.
