Ever Given owners seek to cap Suez limitable claims at $115m (source Lloyd’s List)

Shipping companies’ move to apply International Convention on Limitation of Liability is ‘absolutely what everybody would do in their shoes,’ lawyer hit by notice of limitation agrees

Big question is whether limitation will provide protection from vast number of claims expected after casualty, including billion-dollar compensation bid from Suez Canal Authority

THE head owner of Ever Given — whose grounding shut down the Suez Canal for six days last month — is seeking to cap limitable claims at just $115m.

That is far below the $916m compensation sought by the canal authorities and unknown substantial claims from other impacted ships.

Resort to the International Convention on Limitation of Liability for Maritime Claims 1976, known in industry as LLMC 76, was widely expected in shipping law circles.

However, the key wording is ‘limitable claims’. The extent to which Egyptian demands are in fact limitable is unclear, and likely depend on local law, legal experts said today.

The move comes after a prominent London-based shipping law firm earlier this month formally served notice of limitation proceedings on a lawyer acting for another owner hit by the fallout from the casualty.

‘It is certainly not our understanding that this is going to be a catastrophe. The P&I elements are substantial but not ridiculous, so from our perspective, it is a manageable pool claim,’ insists International Group chief executive

HFW is acting for Ever Given’s joint owners, Luster Marine and Higachi Sangyo Kaisha, both associated with Japan’s Shoei Kisen Kaisha, in all matters except for the salvage operations of professional salvor Smit.

Taiwanese boxship major Evergreen operated Ever Given on charter under the technical management of Bernhard Schulte Shipmanagement.

“Anyone who has a claim against the owners have been referred through the liability insurers [the UK Club], giving us formal notice that a limitation fund has been established in London,” said the lawyer.

Under the LLMC, a ship may limit liability according to tonnage, except where it is proved that loss resulted from “personal act or omission, committed with the intent to cause such a loss, or recklessly and with knowledge that such loss would probably result.”

Breaking limits only occurs with extreme rarity. The Atlantik Confidence incident of 2013, in which a ship was deliberately scuttled by way of insurance fraud, is probably the only recent case.

A High Court order allowing Ever Given’s owners to set up a limitation fund was granted on April 8, in the amount of 81,563,858 special drawing rights, which equates to roughly £83m, or $115m.

The move was not unexpected, the lawyer added. “This is entirely reasonable. This is what the convention allows owners to do, so shipowners do not face unlimited liability,” he said. “That’s the whole point of it… It’s absolutely what everybody would do in their shoes.”

His assumption is that similar notices will have been served against other owners who have notified claims, including some whose ships were delayed in tailbacks in both directions.

Under a limitation fund arrangement, claims that can be proved are paid out from the fund pro-rata, making vessel arrest largely superfluous.

Indeed, the version of LLMC76 obtaining in the UK, known as the 1996 protocol, disallows arrests in signatory countries, which include Ever Given’s next three European ports of call.

‘We are pleased to inform the world that the crew of the Ever Given is in good spirits, and doing well,’ says ITF regional official Mohamed Arrachedi

The obvious question is whether the limitation would include any fine or claims by the Suez Canal Authority. If the SCA is deemed a third party like all others and its claim constituted the lion’s share of the fund, little money would be left over for anyone else.

But shipping barrister James Turner QC of Quadrant Chambers argued that such a tactic would be unlikely to work.

“First, you can’t limit in respect of direct salvage claims. Second, unless it is a disguised property damage claim, a fine will not be the type of claim that can be the subject of limitation. Nor, I think, is reputational damage, since reputation is not property,” he said in an email.

“Third, Egypt is a party to the 1976 convention but not the 1996 protocol, so the constitution of a fund in London will not affect the position in Egypt.”

Ever Given and its 20,000 teu-worth of cargo have been arrested by the Suez Canal Authority, which is seeking $916m in compensation, including $300m for loss of reputation and a further $300m by way of ‘salvage bonus’.

It is now at anchor in the Great Bitter Lake. The status of the crew is unclear; only two have been allowed to leave the vessel for compassionate reasons, and while local sources insists the others are not legally under arrest, it seems they must remain on board.

The owners have filed an appeal before the Ismailia court of first instance against the vessel and cargo arrests, which will be heard on May 4.

HFW declined to comment.