- Date
- 27 January 2024
Full Disclosure:
The Houthi Attacks
By Jaysen Sutton |
Hi Reader šš½,
The Story: Many products arenāt made in the same country in which they are sold. They must be transported to their destination, by land, air or ship.
Ships travelling from the East to the West often pass through the Suez Canal, one of the most important shipping passages in the world. This makes up about 12% of global trade.
The Houthis, a rebel group in Yemen, have been attacking ships in the Red Sea, and in particular the Bab el-Mandeb Strait, a key passage point into the Suez Canal. The US and the UK have launched military responses in return.
What you should know for your interviews: Supply chains were severely impacted during the pandemic. This is another demonstration of how global issues impact the commercial world.
Many shipping companies and oil tankers have stopped travel through the Red Sea, including Maersk and BP. Some have chosen to travel around Africa, but this comes at the cost of a 25% longer journey, the risks of delay and a decline in shipping capacity.
Consumers may feel this impact through higher shipping costs and longer delivery times for products. The supply chain issues have led companies like Volvo and Tesla to delay production in their factories.
Relevance to law firm interviews: You should keep in mind that some law firms specialise in shipping, including Stephenson Harwood, Reed Smith, HFW, Clyde & Co and Watson Farley & Williams. Their clients will be faced with the uncertainty of an escalating conflict and they will need to price these newfound supply chain risks into their financial forecasts and decision making.
Shipping lawyers will closely review the contracts between the owner of a ship and the party hiring the ship (the āchartererā). This contract is called the charterparty.
A close review of the contractual terms will be important here: On what grounds can the charterer divert their route? Can force majeure clauses be relied on? Is there a provision that governs the outbreak of a war?
Moreover, tensions over shipping delays often lead to lawsuits. Towards the end of 2023, legal disputes in the shipping industry had already hit their highest level in seven years.
Finally, itās important to consider the impact on the global economy. The current economy was celebrating from what seemed to be a slowdown in inflation, with many companies predicting lower freight costs. But this may not be the case any more; oil prices have risen and container shipping costs have reached their highest level since the pandemic.
Have any thoughts? I'd love to hear your perspective below!
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