Amidst the Ripples of Blockage: Navigating Claims due to Delays
The recent events concerning the grounding of the Ever Given and the blockage of the Suez Canal have caused many cargo and vessel interests to devote more consideration to possible claims for the resultant delays that continue to ripple through global trade routes. While each potential dispute will, of course, depend on its facts, past case law does provide some basic guidance, where United States law applies.
Under United States law, freight and demurrage usually remains immediately due and owing, without regard to any counter-claims, rights to offset, or purported breaches of the contract of carriage, whether based on delays or otherwise. See, NPR, Inc. v. Avant Import & Export, Civ. No. 95-1417(HL), 1996 U.S. Dist. LEXIS 20242, *9 (D.C.P.R. Dec. 3, 1996) (“[N]otwithstanding that a charterer may have powerful counterclaims [, these] are matters which must be dealt thereafter. [The charterer] is not entitled to set them off against the freighted demurrage.”) (citing Metallgesellschaft A.G. v. M/V Captain Constante, 790 F.2d 280, 281 (2d Cir. 1986)). “The rule [requiring the payment of demurrage despite possible claims related to the cargo] protects and promotes the commercial viability of shipping enterprises by allowing a shipper to collect his freight [and/or demurrage] immediately upon delivery rather than after a lengthy delay and litigation over whether a cargo owner is entitled to deduct his claim for damages.” Greenstone Shipping Co. v. Transworld Oil, Ltd., 588 F. Supp. 574, 584 (D. Delaware 1984) (“[A] rule to the contrary would require a shipper to bear the risk and expense of carrying cargo to its destination without any assurance the risk and expense undergone would be compensated . . . and would allow a cargo owner to withhold freight by simply raising a damage claim.”); see also, M/V Ira, S.M.A. No. 3874 (N.Y. Arb. Feb. 10, 2005); Team Tankers A/S, S.M.A. No. 3622 (N.Y. Arb. May 15, 2000); M/V Golden Chariot, S.M.A. No. 3072 (N.Y. Arb. May 12, 1994); M/T Enerchem Avance, S.M.A. No. 2907 (N.Y. Arb. Oct. 8, 1992); The Mary Ellen Conway, S.M.A. No. 1965 (N.Y. Arb. Apr. 30, 1984).
And facing an assortment of claims, from their own contract partners as well Egyptian authorities, the owners of the Ever Given have reportedly declared general average, “an ancient maritime doctrine making all participants in a maritime venture ratably responsible for losses incurred for their common good.” Atlantic Richfield Co. v. United States, 640 F.2d 759, 761 (5th Cir. 1981). Sacrificed cargo may qualify for recovery as a general average loss, where there is a common peril or danger that is “immediately impending;” a voluntary sacrifice for the common benefit; and the successful avoidance of the peril. See, Navigazione Generale Italiana v. Spencer Kellogg & Sons, Inc., 92 F.2d 41, 43 (2d Cir.1937); see also, York/Antwerp Rule A (2004) (“There is General Average when, and only when, an extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.”).
But generally speaking under United States law, claims purely for delay damages against one vessel, such as the Ever Given, by interests associated with other vessels, such as those adversely impacted by the grounding, would be problematic, to be sure. The Supreme Court’s ruling in Robins Dry Dock v. Flint, 275 U.S. 303, 48 S. Ct. 134, 72 L. Ed. 2d 290 (1927), established a somewhat unique, “bright line” aspect of maritime law which “bars recovery for economic losses caused by an unintentional maritime tort absent physical damage to property in which the victim has a proprietary interest.” G & G Steel, Inc. v. Sea Wolf Marine Transp., LLC, 80 Fed. Appx. 103, 210 A.M.C. 2403 (2d Cir. 2010). “Although criticized from time to time, Robins Dry Dock remains good law, and there is no question but that ‘the Supreme Court should retain
the exclusive privilege of overruling its own decisions.’” Allders Int’l (Ships) Ltd. v. United States, No. 94 Civ. 5689 (JSM), 1995 U.S. Dist. LEXIS 5696, 1995 A.M.C. 1660 (S.D.N.Y. Apr. 28, 1995) (quoting Federal Commerce & Navigation Co. v. M/V Marathonian, 528 F.2d 907 (2d Cir. 1975)), aff’d, 1996 U.S. App. LEXIS 2481 (2d Cir. 1996)); see also, Agwilines, Inc. v. Eagle Oil Shipping Co., 153 F.2d 869, 872 (2d Cir. 1946) (Hand, J.) (“In the face of this decision we cannot see how we can do otherwise than affirm the decree; if any change is to be made the Supreme Court must make it.”). And, generally speaking, a claim for delay damages arising from the alleged negligence of another vessel would certainly appear to fall within the ambit of the Robins Dry Dock Rule. See, American Petroleum and Transp., Inc. v. City of New York, 37 F. 3d 185 (2d Cir. 2013) (claim for delay damages against operator of draw bridge denied under Robins Dry Dock Rule).
As to other potential claims, even if not contractually incorporated, the provisions of the United States Carriage of Goods by Sea Act (“COGSA”) apply by force of law to "[e]very bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea to or from ports of the United States, in foreign trade." 46 U.S.C. § 30701. And where the parties are privy to a contract of carriage subject to COGSA, recoverable “’loss or damage’ includes loss or damage caused by delay.” Commercio Transito Internaziale Ltd. v. Lykes Bros. S.S. Co., 243 F.2d 683, 686 (2d Cir. 1957); see also, Sunpride (Cape) (PTY) Ltd. v. Mediterranean Shipping Co., No. 01 Civ. 3493, 2003 WL 22682268, 2003 U.S. Dist. LEXIS 20333, *26, 2004 A.M.C. 1 (S.D.N.Y. Nov. 12, 2003) (“[N]on-physical damage resulting from delay is cognizable under COGSA.”); Mitsui Marine and Fire Ins. Co. v. Direct Container Line, Inc., 119 F. Supp. 2d 412, 414 (S.D.N.Y. 2000) (“The concept of ‘loss or damage’ in COGSA Section 4 includes both physical damage and loss or damage caused by delay), aff’d, No. oo-9519, 21 Fed. Appx. 58, 2001 WL 1230662 (2d Cir. 2001)).
However, consequential losses caused by delay, such as claims arising from late delivery into declining market conditions without any actual physical damage to the cargo, are typically not recoverable under COGSA either, nor should reasonable delay constitute a “deviation” so as to vitiate carrier defenses. See, Maersk Line v. Firepower Displays Unlimited, No. 08 Civ. 20659, 2008 WL 4926969 (S.D. Fla. 2008) (no liability for arrival one month late); Fratelli Ricatto Import & Export Co. v. S/S/ Torm Brigitte, No. 99 Civ. 8721, 2000 WL 991654 (S.D.N.Y. 2000) (no liability for arrival three weeks late); Anyangwe v. Nedlloyd Lines, 909 F. Supp. 315, 1996 A.M.C. 1083 (D. Md. 1995) (no liability for arrival 19 days late); Quesboro USA, Inc. v. Lykes Bros S.S. Co., 93 Civ. 2239, 1995 WL 329301, 1995 A.M.C. 2054 (S.D.N.Y. 1995) (no liability for arrival one week late); Mojica v. Autoridad de las Navieras de Puerto Rico, No. 92 Civ. 2026, 1993 WL 724807, 1994 A.M.C. 1316 (D.P.R. 1993) (no liability for arrival more than a week late); Pioko Fashions, Inc. v. American President Lines, Ltd., No. 92 Civ. 1210, 1993 WL 597151, 1993 A.M.C. 2615, 2617 (W.D. Wash. 1993) (no liability for arrival two weeks late); Parnass Int'l Trade & Oil Corp. v. Sea-Land Serv., Inc., 595 F. Supp. 153, 1985 A.M.C. 485 (S.D.N.Y. 1984) (no liability for arrival 18 days late).
Even with respect to perishable cargoes, which, due to inherent vice, naturally decay and deteriorate over time, an appropriate “delay clause” in the contract carriage, expressly disclaiming responsibility for damages caused by delay, has on occasion been found to excuse the carrier from liability. In Maersk Inc. v. American Midwest Commodities Export Co's, No.97 Civ.0475, 1998 WL 473945, 1999 A.M.C. 268 (S.D.N.Y. 1998), for example, a shipment of table eggs arrived late. American Midwest, 199 A.M.C. at 269 n.6. "Because the eggs have a 'short shelf life,' the consignee was forced to sell several containers of eggs at below market prices." Id. Despite a conceded four week delay, the court found that, "pursuant to the terms of the bill of lading, Maersk is not subject to liability for any damages due to delay." Id. at 275; see also, J. Aron & Co. v. Cargill Marine Terminal, Inc., 998 F. Supp. 700, 1998 A.M.C. 2286, 2288-89 (E.D. La. 1998) ("There are no genuine issues of material fact to dispute that due to the inherent nature of grain, the cargos deteriorated during the delay [of several weeks] in delivery which was caused by the flooding. Clause 15 of the contract of affreightment clearly excludes liability for damage caused directly or indirectly by or resulting from or arising out of change due to natural causes in connection with delay in delivery of shipment.").
Since bill of lading clauses deemed to lower the carrier’s liability below that which COGSA guarantees are supposed to be void under United States law, these cases, holding on the one hand that COGSA damage can include losses from delay, while on the other hand holding that clauses excluding damages for delay do not violate COGSA, may be argued to present an inherent contradiction, depending on the circumstances. So it is reasonable to conclude that we have not seen the last of litigation in this area. If there is one lesson to be learned, however, it is that reliance on COGSA may or may not be sufficient, and particular attention should be paid to contractual arrangements. Just as shippers can attempt to negotiate certain delivery dates as “essential” terms, so can carriers continue to include delay clauses in their bills of lading to bolster their own chances of defeating such claims.