The insurers of the Ever Given have reached an agreement in principle with the Suez Canal Authority on the release of the vessel. The ship that blocked the Suez Canal for six days in March has now been detained there for three months.
The main insurer, the UK P&I Club, is merely reporting that a tentative agreement has been reached without mentioning the word compensation. The group, together with other insurers and the shipping company, hopes to sign an agreement with the Suez Canal Authority (SCA) very soon and initiate the departure of the container giant.
The Evergreen ship, carrying around 18,000 TEU of loaded containers, has been impounded by SCA since it ran aground on 23 March and the six-day blockade of the canal that followed, demanding substantial compensation. The damage to shippers is certainly in the tens and possibly hundreds of millions. Part of the perishable cargo must probably be considered lost and many time-sensitive articles have lost a substantial part of their value.
In addition, shippers, or their insurers, must contribute to the salvage costs because the owner of the ship, the Japanese company Shoei Kisen Kaisha, has declared general average. What exactly is covered by this and what percentage of the cargo value shippers must contribute is subject to legal proceedings.
What is certain is that shippers will have to give a guarantee that these costs will be reimbursed before their containers are released. In comparable previous major damage cases, some shippers took their losses and did not collect their containers. This is especially true in situations where the cargo is not insured.
The parties have agreed that the negotiations on a solution will remain confidential, so the exact amount of compensation will probably never become public. As is well known, the Suez Canal Authority (SCA) initially demanded over USD 900 million in compensation. This was later reduced to 550 million, of which 200 million was payable in cash on departure of the ship and the rest in the form of guarantees.
The Taiwanese container shipping company and the insurer have not said a word about the amounts that have been offered so far. SCA chairman Osama Rabie said on Egyptian state television at the end of May that the shipping company had ‘only’ offered USD 150 million.
Many experts argue that the actual damage to SCA is limited. Salvage costs were borne by the ship and the cargo interests, while the damage to the banks of the Suez Canal was minor and recoverable. In addition, the loss of income from lost tolls was limited because only a few ships diverted to the alternative route around Africa via the Cape of Good Hope.
Picture by SCA.
This article first appeared in Dutch on NT.nl, a publication of SWZ|Maritime’s publishing partner Promedia.