We are back after the Christmas and New Year break and, as usual, we start the year with enthusiasm for what lies ahead. That said, we are back into uncertain times due to the alarming spread of the Omicron variant. Once more we are back to home working with staff only coming into the office as necessary. Hopefully, that won’t last too long and we will soon be back to something approaching normal – as was the case in November of last year.
In terms of what lies ahead, we predict more shipping disputes due to ongoing volatility. We also expect to see many cases from the early stages of the pandemic come to arbitration. It is noticeable that certain aspects of the shipping market did very well in 2021. The big winners were the container and bulk sectors. Less lucky were tanker operators who suffered from declining demand for oil in the first half of 2021.
One of the impacts of a buoyant market is that parties are more inclined to arbitrate. One recent case involves disputed off-hire where a container vessel was allegedly off-hire for 10 days at US$61,000 per day. A year ago, that same vessel was earning US$30,000 a day. A client is more likely to pursue a claim for US$610K than for US$300K. The same goes for disputes over ship sales and newly constructed vessels where values have improved markedly over 2021.
In terms of operational issues, 2022 is expected to be better as ship owners and operators have learned to deal with the effects of the pandemic. However, the global lockdowns which affected ship movements, crews, and the ability of parties to perform contracts caused many legal issues and the damages flowing from those events are, in some cases, substantial. The legal issues arising from cases of force majeure and frustration are likely to come before Courts and Tribunals over the next few years.
Finally, we expect world trade to continue to improve as the economy improves. That will inevitably lead to more shipping casualties. Whilst shipping is a highly regulated industry, it needs specialist experience and input. The resources needed to properly man, equip and supply vessels to enable them to carry out their functions in a safe and efficient manner are finite. The global pandemic has affected and continues to affect this. We expect to see an uptick in global casualties not just caused by more ship movements (as one might expect) but also caused by increased pressure on ship owners and their on-shore management and by the ongoing global supply chain issues. The insurance markets are already pricing that in when it comes to anticipated premiums for 2022.
To sum up, we expect 2022 to be a strong year for shipping and we look forward to assisting our clients when it comes to the inevitable legal issues that will arise.