The “EVER GIVEN” – grounding Suez Canal – March 2021
19th May 2023
Smit Salvage BV & Ors v Luster Maritime SA & Anr (The ‘Ever Given’)  EWHC 697 Admlty)
Today we look at what went wrong and the lessons to be learned when in March 2021 the owners of the EVER GIVEN sought to avoid a salvage claim and started negotiations for a commercial contract to refloat the vessel and unblock the Suez Canal.
The details are set out in a judgment of the English Admiralty Court handed down almost exactly two years later.
The owners, based in Japan, through the London representatives of their underwriters, initially sought to retain Smit for “technical assistance based on standard SCOPIC rates plus 15% uplift for out of pocket expenses” with salvage assistance if needed depending on how matters unfolded, this in order “to avoid an extremely expensive salvage award”. No-one would disagree that these were paltry terms. However, Smit are seasoned contractors and of course they were not going to decline becoming involved on an informal basis, as they quickly did. From their point of view, this usefully precluded the involvement of any competitors.
Almost immediately Smit were asked for urgent advice on deballasting and bunker removal, which are complex issues. However, it was clear that not only was the ship already deballasting but the SCA were actively arranging multiple tugs. Lesson one: with no one party coordinating there was great potential for confusion, but in fairness to all concerned it was still early days and early attempts to refloat may not have proven fruitless.
It was quickly agreed that Smit should mobilise from the Netherlands. The SCA recognised that for such an incident it was in their interests to allow a professional salvage company to become involved. Lesson two: the fact that Smit were permitted to send only a handful of staff on site later resulted in their not having the manpower locally to coordinate operations around the clock as they would have wished.
All the SCA craft were in canal waters to the north of the casualty. The vessel needed assistance by the stern to the south, and ultimately two very large tugs, which happened to be on passage in the Red Sea, were engaged. She might also need lightering. Lesson three: without a contract in hand, it is surely inappropriate that a salvor be expected to subcontract assets at potentially great cost – the day rate for just one of those tugs was US$100,000. Fortunately for the owners, Smit were willing to do so.
Such tugs faced risks of great concern to their owners. Assuming enormous forces would be applied (one of the tugs was of 285 tbp), the tug might run astern into the bank if the ship came off quickly or a tow wire broke. Alternatively, if the vessel got underway too fast, a tug pulled astern at speed risked being girted. A standard BIMCO contract such as offered to these tugowners contained knock-for-knock provisions whereby the risk and any expense including repair time falls onto the tugowner. Not surprisingly this led to fraught negotiation of terms. Lesson four: a best endeavours salvage contract gives a salvor much greater flexibility in relation to the terms on which sub-contractors may be engaged.
Owners and Smit quickly reached a consensus on basic terms as above, together with a 35% refloating bonus to be incorporated into an WRECKHIRE 2010 suitably amended. So far so good, but as the parties started to work on the detail, problems emerged and became intractable. Lesson five: there are too many uncertainties in these situations to be resolved within a fixed rate commercial contract. Those problems included the following.
- There was disagreement over in what circumstances and in respect of which costs the bonus would be applied.
- As the draft contract required pre-approval of engagement of assets, Smit were not free to act.
- With multiple stakeholders each having their say, decisions on owners’ side became tortuous.
- A WRECKHIRE is a “due care” contract. Owners sought to amend it to a “best endeavours” contract. Having had LOF declined, this was understandably unacceptable to the salvors.
- The proposed agreement was between salvors and shipowners. It became clear that as containers might have to be handled, damage or delays could give rise to claims from cargo interests against salvors. Smit sought to preserve their rights to claim salvage against cargo, if only to defend themselves. Owners sought a waiver of claims against cargo. This was not resolved.
- Smit required prompt payment terms. However, leading underwriters in Japan covered only part of the risk. They sought extended payment terms enabling contributions to be collected from the following market which was unworkable.
- Whereas under LOF, security is collected on standard forms and held for the salvors’ benefit, under a WRECKHIRE bespoke LOU terms were needed, and not surprisingly unresolved differences arose as to a suitable wording.
Ultimately the parties were unable to agree on the terms of a contract, the ship was refloated and a common law salvage claim is now proceeding in the same court led by Smit. The owners meanwhile settled with the Suez Canal Authority who played a major part in the operation, at what was reportedly an eye-watering figure.
One reason owners’ representatives pushed back against agreeing an LOF was that “obtaining security from thousands of cargo owners is a Herculean task”. However, owners declared GA and did precisely that for their claim for contributions from the numerous cargo owners. Had LOF been agreed, the adjusters tasked with this job would simply have been instructed to collect both forms of security simultaneously, as is generally done.
It is fortunate that no catastrophe occurred, but this case is a good example of the issues highlighted in the International Group’s Report on Delays in the Provision of Salvage Services published in 2022.
A shorter version of this article first appeared in the publication “International Tug & Salvage” – click here to read it.