Newsflashes

Refloated "Ever Given" gives way to blocked ships and disputes

30.03.2021

The media has broadly reported over the past week how container ship "Ever Given" ran into trouble when attempting to sail through the Suez Canal on 23 March 2021. Strong winds, reportedly possibly combined with technical or human failures, caused the 400-metre-long ship to turn sideways and get stuck in a narrow section of the canal. All other vessels seeking to pass the canal were blocked and it has taken the canal authority almost a week to free the cargo ship. The Suez Canal is a crucial trade route, handling roughly 12% of global trade, and the blockage caused by the incident has significantly impacted and will continue to impact global trade as the shipping of goods and commodities is interrupted and delayed.

The supply-chain disruptions caused by the blockage are expected to spark a wave of claims and disputes around the globe on issues such as delays, non-performance, or price and fuel consumption increases due to longer shipping times, to name just some examples. A key legal question that is likely to arise in many of these disputes is whether parties may be excused from (timely) performance of their contractual obligations or be entitled to any other form of relief.

The answer will depend on

  • the type of the contract; each contract has to be carefully analyzed with a view to its qualification and particularities and, potentially, any applicable mandatory norms;
  • the provisions of the contract, in particular whether it contains a force majeure or hardship clause and how such clause is drafted;
  • the governing law of the contract. The governing law will determine how a contractual force majeure or hardship clause will be interpreted and the extent to which parties may be excused from performing or entitled to other relief under a contract even in the absence of specific contractual provisions.

The concepts of force majeure and hardship are recognised under Swiss law and applied by Swiss courts.

A force majeure event may lead to the termination of the contract or the suspension of the performance of contractual obligations until the event ceases to constitute an impediment of performance. Generally speaking, a circumstance may qualify as force majeure if it objectively prevents a party from performing its obligations, if it is unexpected and unforeseeable, and if it cannot be prevented by applying due care. Moreover, if the impediment can be overcome, even if financially more burdensome, the failure to perform may not be excusable.

Whether the "Ever Given" incident may qualify as a force majeure event will depend first and foremost on the parties' agreement. The starting point for any analysis is therefore whether the parties have defined events which shall be considered events of force majeure, and how such events were defined. If qualified as a force majeure event, a key question is likely going to be whether the incident was unforeseeable and could not be overcome. Depending on the wording of the applicable contractual provisions, a party seeking to rely on force majeure or hardship may further need to comply with specific conditions in order to be suspended or excused from performing its contractual obligations.

Depending on the circumstances, even if a party cannot successfully argue that it was excused from performing, the situation surrounding the "Ever Given" incident may still give rise to other forms of relief under concepts such as hardship or alike. Such relief might include modification or even termination of the agreement.

Other potentially relevant contractual or statutory elements, including questions of liability for delay, notification obligations, regulatory and insurance-related issues, go beyond the scope of this Newsflash, but will equally have to be analyzed on a case-by-case basis.

In sum, whether the "Ever Given" incident falls within the scope of a contractual force majeure or hardship clause or otherwise constitutes an excuse for non-performance under the governing law, will require a careful case-by-case analysis of the contract and the governing law. While the underlying facts may be essentially the same in the forthcoming "Ever Given"-related cases, the relief a party may be able to obtain may well differ depending on the legal framework in place.  

 

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