After facing unforeseen events like the Ever Given and COVID-19, the bigger issue is what supply chains will do to decrease risk and increase resiliency.
Supply chains around the globe are governed by commercial contracts that require parties to perform certain acts, such as delivering goods, supplies, and equipment, within specific timeframes. What happens when unforeseen events intervene to make compliance impossible?
The incident involving the Ever Given, the 20,000-TEU containership that was stuck in the Suez Canal mud for six days, provides a recent example. The blockage left over 400 other vessels in the lurch, most waiting for the Ever Given to be dislodged and some making their way around southern Africa’s Cape of Good Hope. It took several more days for the backlog to be cleared once the Ever Given was freed.
The ultimate effects of the Suez snafu will likely take some time to play out. Increased port congestion thanks to late arrivals and a further squeeze on container availability could have a negative impact on supply chains down the line. Longer term will be the economic damages suffered by companies, and the claims they are likely to make, as a result of the late arrival of cargo.
The COVID-19 pandemic has disrupted business activities on an even more profound scale, upending commercial transactions and leading to a myriad of legal claims. The disposition of many claims surrounding both situations will likely hinge on the applicability of force majeure—a legal doctrine that can excuse parties from contractual obligations when circumstances beyond their control intervene. Experts say that the doctrine could be applied even if a contract does not specify navigational problems or diseases as force majeure events. Going forward, supply chains must consider how they will cope with these kinds of extraordinary disruptions if and when they arise in the future.
Force Majeure and the Ever Given
The Evergreen Marine report that the Ever Given was “suspected of being hit by a sudden strong wind, causing the hull to deviate,” suggests that force majeure will likely be invoked by parties attempting to wriggle out of contracts. When force majeure comes into play, “obligations under bills of lading and charter parties” could be suspended, said Régis Broudin, global head of marine claims at Allianz Global Corporate & Specialty, “conceivably leading to termination of contracts.”
Building construction depends on timely deliveries, so force majeure will likely be invoked in litigation seeking damages caused by delays that negatively impacted projects. In most cases, according to Eric Ruzicka, a partner at the international law firm Dorsey & Whitney, force majeure “clauses will be silent on the specific question of whether shipping delays are excusable force majeure events.”
Courts considering similar claims “have generally held that extraordinary shipping delays may constitute force…
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