NYCT LOSES LEGAL CHALLENGE

Global Container Terminals (GCT), which operates a terminal on Staten Island pursued an emergency restraining order to prevent A.P. Moller Maersk-owned Maersk Line and Hamburg Sud from exiting its facility for the APM subsidiary, APM Terminals in Port Elizabeth, New Jersey.

The decision to follow the legal path occurred when Maersk Line confirmed in April that its vessels and those of Hamburg Sud were planning to stop calls at GCT New York by May 1, 2020. The Danish company did also confirm that it was willing to pay a settlement of $5.5 million, including an early termination fee of $2.1 million and additional consideration of $3.4 million.

However, GCT USA President John Atkins claimed in a court filing that there is an agreement with the shipping lines that was due to run until the end of 2022, which could only be terminated early at the end of 2021, and only if six months’ notice is given.

THREE LINER SERVICES INVOLVED IN THE FIGHT

The liner services involved are the NAE operation which links the US East Coast with Manzanillo (Mexico) and Cartagena (Colombia), the ECSA option which is a North-South string between New York and Brazil, Argentina and Uruguay and the ECSA service which connects ports on the East Coast of South America to New York and Europe. Three in total.

Despite the hopes of GCT, it lost the first move in its process. A judge in a New York District Court ruled that Maersk Line (Hamburg Sud) can terminate the agreement with GCT and switch vessel calls to the AP Moller Maersk APM terminals facility in Port Elizabeth, New Jersey – in accordance with the desire of the shipping lines.

Maersk Line had already stated that the rationale to move these services is to improve operating efficiencies for each of the services and because space had become available at its New Jersey terminal after US$200 million invested in upgrades – which seems a logical and reasonable decision.

DETERMINED GCT

Despite the legal ruling, GCT seems determined not to lose the Maersk Line and Hamburg Sud business and is, reportedly, considering what other options may be open, in a statement subsequently released after the ruling. “While the federal court in New York determined that a preliminary injunction should not be issued, meaning that the damages suffered by GCT are compensable in monetary damages, GCT is continuing legal proceedings for full damages against Maersk in order to protect our business and the integrity of the contractual commitments by our customers. GCT is pursuing and will pursue all legal avenues to protect its interests relating to this wrongful action — a breach of agreement that Maersk has admitted in court documents.”

COVID-19 IMPACTS BOTH SIDES

There is no doubt that to any terminal operator the loss of liner services is a blow, in terms of both volumes and, ultimately, revenues. This is probably never more true than during the present COVID-19 pandemic in which volumes for 2020 are expected to be down, thereby meaning a drop in revenues too.

Yet at the same time, the desire of Maersk Line to move its services to its fellow AP Moller Maersk terminal is probably understandable from the liner operator’s point of view at this challenging time when volumes that are carried are also impacted by coronavirus.

So, based on the fact that a New York judge has ruled in favour of the shipping line in this instance seems to mean that round one goes to AP Moller Maersk. The desire of this shipping line to be able to have the freedom of choice is, of course, important and Maersk Line will feel it has offered a good compensation package to GCT in order to undertake the process.

However, the container shipping and port industry can certainly fall into the category of “never say never” so this saga may yet have further to run.