The Ever-Given Mela – IV

This article is a continuation of our three earlier articles (The EVER-GIVEN Mela, The EVER-GIVEN Mela-II & The EVER-GIVEN Mela-III) on the  grounding of EVER-GIVEN at the Suez Canal on 24^th March 2021. The EVER-GIVEN was released from its arrest on 07^th July 2021 after a settlement was reached between the Owners and the Suez Canal Authority. The details of the settlement are, unfortunately, being kept confidential at the present moment.

1. The EVER-GIVEN arrived at Rotterdam, The Netherlands on 29^th July 2021. After completion of her operations, she sailed to Felixtowne, United Kingdom and where she arrived on 03^rd Aug 2021. Subsequently, the EVER-GIVEN will be dry docked for repairs at Dunirk, France. It remains to be seen whether any cargo or other interests initiate any action either at United Kingdom or France to seek security from Owners. However, given that Owners have filed a limitation action in the English Courts (see Para 4 below), it does appear that any such action would result in the claim ranking against the limitation amount.
2. We recently chanced on an article published by R.C.G.Sarllⁱ and which touches on the various issues related to the General Average (“GA”). In particular, he touches on the potential defenses which could be raised by the cargo interests against the GA together with the incorporation of the English Arbitration Clause in the GA Guarantee’s.
3. We had, in our earlier article, The EVER-GIVEN MELA – IIⁱⁱ suggested that cargo interests should give due consideration to the law and dispute resolution clause provided in their B/L prior to any agreement to vary this, say by, agreeing to an Arbitration Clause in the Average Guarantee’s.
   1. While Cargo insurers may have taken legal advice prior to signing any GA Average Guarantee’s, our concern is on the uninsured cargo interests, and who may lack the resources or understanding to take such a considered option. Given that the basis of GA is founded on equity, if an Arbitration Clause is incorporated in the GA Bond (we have not had the opportunity to sight the wordings of the Bond requested by the Average Adjusters), we would be troubled, particularly when use of such an arbitration clause is not a norm in the industry.
   2. The adjustment of General Average is invariably conducted on the basis of York Antwerp Rules (“YAR”) (in this case the 1994 rules). If it is desired that arbitration should be the preferred mode for dispute resolution for disputes arising from GA, then, it would be best for this to be provided in the YAR instead of being imposed by one party on the other. If the imposition of law and dispute resolution clause is considered as “duress”ⁱⁱⁱ, it is certainly possible to challenge the application of the arbitration clause. We would prefer to avoid such controversies, and which would in-turn, bring dis-repute to the institution of GA.
   3. We note that the wordings of the Average Guarantee provides for the agreement to be governed and construed in accordance with English Law with the dispute resolution method as Arbitration to be conducted on LMAA Rules. Under English Law, there is an implied rule that the arbitral proceedings are confidential in nature. This being the case, parties to the arbitration would not be entitled to reveal details of the matter to third parties and nor can they use the documents disclosed or produced for arbitration for any other purpose. While this implied rule may be an advantage in commercially sensitive matters, we submit that in issues like the EVER-GIVEN grounding where the issues are of general public interest, it would indeed bring dis-repute to arbitration if used as a tactical muzzle i.e. to avoid disclosure of information related to the grounding together with the settlement reached with the SCA.
4. We understand that Owners have applied to the English Courts for a limitation decree and which would entitle them to limit liability at SDR 81,563,858 (approx. USD 116 million). Article 3 A of the 1976 Limitation Convention provides that the Convention shall not apply for Salvage or contribution in GA. Accordingly, if cargo interests are able to deny the Owners entitlement to seek GA contribution either on the basis that the incident was not  GA in nature or due to an actionable fault, then the loss would have to be borne by Owners themselves. In this case, it does not turn much given that the expenses appear to have been borne by the Owners in the first instance and who wish to now recover from the other interested parties.
5. We understand that the cash deposit sought from the un-insured cargo interests is 25% of the CFR value. Accordingly, if we base the GA Claim to be approx. 25% of the total values^iv, the estimated total amount would be as follows:
   1. Cargo: USD 500 – USD 600 million – say USD 550 million
   2. Vessel: USD 125 million
   3. Containers: USD 30 million
   4. Other Intangibles including crew^v: ??
      Total: USD 705 million
      25% of the above (USD 705 million) would equate to USD 176.25 million or so.
      While the settlement made between Owners and SCA is, as of now, shrouded in secrecy, based on various newspaper reports, it appears that a settlement was reached with the SCA at a figure below USD 200 million^vi. If this is correct (settlement below USD 200 million), it does co-relate with our calculations listed above. We are aware that our calculations may be well off the mark given that it is based on estimates.
      

6. It is a well-established fact that following a casualty, crew are invariably used as a bargaining chip and are restrained / prohibited from signing out from the vessel^vii. This obviously puts immense pressure on the Owners given that they have a duty to their employees for their safe upkeep. Hence, prior to making any settlements, Owners would also factor their duties to the crew. This being the case, Owners should also contribute to any General Average, particularly when payment of the settlement sums has benefitted in the release of the crew.

   1. It appears to us that the English Common Law excluded “lives” preserved by a GA from contributing given that it would be impossible to assess them at a pecuniary value^viii. However, this argument does not now hold good given that Owners generally have a contractual liability to their crew for a pre-determined amount^ix. This being the case, it would be incorrect to exclude “life” from contributing to a GA.

   2. If it is desired that “lives” should not contribute to GA, then it should be provided in the YAR instead of any specific domestic law. This is because GA is in the realm of transnational law and accordingly it would be best if it is expressly provided for in the YAR.

   3. In the conceivable near future, vessels may be autonomous and in which case the issue of “lives” may not arise. However, recovery of vessel would allow Owners to benefit by say the use of software / licences already paid for and used on board the vessel. Accordingly, we submit that these items be collectively and loosely called as the “intangibles” for which the Owners should also contribute in any GA’s declared.

7. In conclusion, while the saga of the EVER-GIVEN grounding has come to an end, issues related to this incident are yet to be dealt with. It would be best for these issues to be studied and debated so that the  interested parties are  able to consider appropriate strategies to avoid recurrence. Otherwise, this would again be a missed opportunity to deal with such issues.

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^i.R.C.G Sarll is a Barrister and one of the editors of Lowndes and Rudolf – The Law of General Average and The York Antwerp Rules, XV edition.
^ii.See 2 c of The EVER-GIVEN Mela – II.
^iii.Please see article on undue influence and duress in contract and which can be viewed at https://www.inbrief.co.uk/contract-law/duress-undue-influence-in-contracts/
^iv.As estimated in our article The EVER-GIVEN Mela.
^v.We do not believe that the Average Adjuster would consider these intangible interests but we think that these should also be factored in the calculations.
^vi.See article on Ever Given: And now for the aftermath published in the Lloyd’s List dated 26 July 2021.
^vii.We understand that two crew members of the EVER-GIVEN were allowed to sign off to return to their homes due to urgent personal circumstances. We however believe that similar number crew would have been signed on so that the vessel has her full complement of crew. Unfortunately, our websearch does not provide any reports confirming this.
^viii.See 17.81 of Lownders & Rudolf on General Average and York Antwerp Rules, XV edition.
^ix.Owners contractual responsibility is provided in the 2019-2022 IBF Frame work Agreement and which can be viewed at https://www.itfseafarers.org/sites/default/files/node/resources/files/IBF%20FRAMEWORK%20CBA%202019-2022.pdf. Our rough calculation is that the Owners exposure should be around USD 11.5 to USD 15 million. While this may not make a significant impact to the reduction in the contributions due from other interests, we would prefer that the principles on which contributions sought are sound and applied accordingly.