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Collisions in the Suez Canal: revisiting genuine and reasonable need for security

31 March 2021
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On 15 July 2018 the container ship Aeneas came to a halt in the southern section of the Suez Canal. It had suffered engine failure and lost propulsion. At the time, the Aeneas was at the head of a convoy of eight southbound vessels and its breakdown set in motion a chain of events which resulted in multiple ship collisions and, for a while, chaos in the canal.

On 5 October 2020 Admiralty Judge of the High Court of England and Wales J Teare found that the eighth and last vessel in the convoy, the Panamax Alexander, was wholly responsible for the collisions. Unlike the other vessels in the convoy, the Panamax Alexander had failed to moor in response to the breakdown up ahead and, in doing so, had collided with the seventh vessel in the convoy, the Sakizaya Kalon. In turn, these two vessels had collided with the next vessel in the convoy, the Osios David.

Unsurprisingly, the collisions in the Suez Canal generated multi-million-dollar claims. When the stakes are as high as they were in this case, it is inevitable that parties will turn their attention to South Africa in the hope of obtaining security for their claims. Those who are regularly engaged in shipping litigation in South Africa will be familiar with the arrest-friendly regime embodied in the Admiralty Jurisdiction Regulation Act. Among other things, the law provides for the arrest of property for purposes of providing security for a claim, either commenced or contemplated, which is or may be a subject of an arbitration or court proceedings anywhere in the world.

More often than not, the property arrested is not the ship which is the subject of the dispute, but rather an ‘associated ship’ (ie, a sister ship which is owned or controlled by the same beneficial owner as the ship related to the claim). One of the requirements which a party must meet, when seeking to arrest for security for foreign proceedings, is a ‘genuine and reasonable need’ for security.

Not long after the incident in July 2018, the Osios David’s owners obtained an order in the Durban High Court for the arrest of the Panamax Christina for the provision of security for proceedings to be held in London arising out of the collisions. The arrest was premised on the allegation that the Panamax Christina was an associated ship of the Panamax Alexander and that the Osios David’s owners had a genuine and reasonable need for security. In the event, on 5 September 2018 the ship was arrested at Richards Bay Harbour and was released five days later against the provision of a protection and indemnity (P&I) letter of undertaking.

The Panamax Christina’s registered owners (Wonder Shipping SA) set about challenging the arrest and sought to have it set aside by the Durban court.

Partner Jeremy Prain wrote an article on this decision for ILO.