Egypt demands over $1B in damages after Suez Canal blockage

Egypt wants over $1 billion in compensation after a cargo ship blocked the Suez Canal for nearly a week, a top canal official has said. 

Lt. Gen. Osama Rabei, head of the Suez Canal Authority on Thursday warned the ship and its cargo will not be allowed leave Egypt if the issue of damages goes to court.

He said in a phone interview with a pro-government TV talk show that the amount takes into account the salvage operation, costs of stalled traffic, and lost transit fees for the week that the Ever Given had blocked the Suez Canal.

“It’s the country’s right,” Rabei said, without specifying who would be responsible for paying the compensation. He added that in the past, canal authorities and the ship's owners have had a good relationship.

The massive cargo ship is currently in one of the canal's holding lakes, where authorities and the ship's managers say an investigation is ongoing.

On Thursday, the ship's technical managers, Bernard Schulte Ship management, said that the ship's crew was cooperating with authorities in their investigation into what led to the vessel running aground. 

They said that Suez Canal Authority investigators have been given access to the Voyage Data Recorder, also known as a vessel's black box.

If the issue of compensation involved litigation, then the Ever Given and its some $3.5 billion worth of cargo would not be allowed to leave Egypt, he told the show’s host.

READ MORE: Suez traffic redirected to old channel as skyscraper-sized ship stranded

Multinational ownership

Litigation could be complex, since the vessel is owned by a Japanese firm, operated by a Taiwanese shipper, and flagged in Panama.

Bernhard Schulte has said previously that two Egyptian canal pilots were aboard when the ship got stuck. Such an arrangement is customary to guide vessels through the narrow waterway, but the ship’s captain retains ultimate authority, according to experts.

On Monday, a flotilla of tugboats helped by the tides, wrenched the Ever Given's bulbous bow from the canal’s sandy bank, where it had been firmly lodged. The tugs then guided the Ever Given through the water after days of unsuccessful attempts to dislodge the colossus that had captivated the world, drawing scrutiny and social media ridicule.

The Ever Given had crashed into a bank of a single-lane stretch of the canal about 6 kilometres north of the southern entrance, near the city of Suez. That forced some ships to take the long, alternate route around the Cape of Good Hope at Africa’s southern tip, a 5,000-kilometre detour that costs ships hundreds of thousands of dollars in fuel and other costs. Others waited in place for the blockage to be over.

The unprecedented shutdown, which raised fears of extended delays, goods shortages and rising costs for consumers, added to strain on the shipping industry, already under pressure from the coronavirus pandemic.

READ MORE: What the closure of the Suez Canal costs global trade

Future disruptions

Egypt's Suez Canal must move quickly to upgrade its technical infrastructure if it is to avoid future shipping disruption, shipping industry sources said, as the major trade route tries to bounce back from a costly six-day closure.

Egypt will get two new tugboats, one next week and one in August, Rabie said after the ship was finally freed, as well as taking the biggest dredger in the Middle East and arranging for a further five new Chinese tugboats.

But shipping industry sources said specialist equipment and associated procedures have long struggled to keep up with the ever increasing size of commercial vessels.

"The average size of most vessels has increased exponentially over the last 15 years. The ability to salvage these bigger ships has not," said Peter Townsend, a marine insurance industry veteran.

"The issue is getting containers off essentially a 20-storey high building at sea."

Michael Kingston, an international shipping specialist and an adviser to the United Nation's International Maritime Organization, flagged such problems in 2013, three years before the MSC Fabiola container ship ran aground, also blocking traffic for days.

"The obvious way to lighten a vessel ...

is to take the containers off. They had no way of doing it. No equipment was readily available," he said of the Ever Given incident.

READ MORE: Egypt orders lightening stranded ship's cargo in Suez Canal