The Suez Canal Blockage: Who Bears the Cost?

A blog post by Liberta Rrahimi, Junior Associate.

On March 23, 2021 the Suez Canal became blocked after the Ever Given, a 400-meter-long cargo ship ended up wedged diagonally across one of the world’s main trading arteries.[1] After six days of rigorous efforts by salvage authorities, the Suez Canal was finally refloated, but not without long-lasting effects.[2] Major damages have been caused by this blockage, severely affecting global trade and powerful economies around the world.[3]

Due to the Suez Canal being one of the world’s busiest shipping channels for oil, fuels, grain and other trade linking the East to West, the blockage costs 12% of global trade and was holding up trade valued at over $10 billion per day.[4] Predictably, disputes over how much damages are owed and by whom followed. Egyptian authorities have already expressed that this crisis has cost the government up to $90 million in lost roll revenue as hundreds of ships waited to pass through.[5] Costs continued to add up quickly between repairs to the cargo ship, the Suez Canal and up to $10 billion worth of time sensitive cargo that went bed or missed deadlines.[6]

Investigators want to know who will be held accountable.[7] Although shipping customs are that damage to the ship will fall to the insurers of the ship’s owner, there are still open questions as to the cargo.[8] Most insurance policies do not cover these damages for delays, which may lead to an increase in individual lawsuits against the ship owner.[9] Officials in Egypt have seized the ship over a dispute on how much compensation the country is owed following the shutdown.[10] A court in Ismailia made the ruling to allow the seizure until investigations are complete and compensation is paid, which can take years of litigation.[11]

[1] Antonia N. Farzan, Egypt seizes the Ever Given, saying its owners owe nearly $1 billion for Suez Canal traffic jam, The Washington Post (Apr. 13, 2021, 4:46 PM), https://www.washingtonpost.com/world/2021/04/13/ever-given-seized-egypt/.

[2] Noah Manskar, Egypt seizes Ever Given, demands $900M for Suez Canal blockage, New York Post (Apr. 13, 2021, 4:53 PM), https://nypost.com/2021/04/13/suez-canal-egypt-seizes-ever-given-demands-900m-payment/.

[3] Id.

[4] Motoko Rich et al., Clearing the Suez Canal Took Days. Figuring Out the Costs May Take Years., The New York Times (Apr. 13, 2021, 4:58 PM), https://www.nytimes.com/2021/03/31/business/suez-canal-ship-costs.html.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Amira Fekki & Rory Jones, Egypt Seizes Ever Given Ship in Suez Canal, Demands Compensation, The Wall Street Journal (April 13, 2021, 5:11 PM), https://www.wsj.com/articles/egypt-seizes-ever-given-ship-in-suez-canal-demands-compensation-11618321419.

[11] Noah Manskar, Egypt seizes Ever Given, demands $900M for Suez Canal blockage, New York Post (Apr. 13, 2021, 4:53 PM), https://nypost.com/2021/04/13/suez-canal-egypt-seizes-ever-given-demands-900m-payment/.

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