Legal Risks in Cross-Border Maritime Supply Chains Post-Pandemic

Legal Risks in Cross-Border Maritime Supply Chains Post-Pandemic

Global trade relies heavily on maritime supply chains, which transport over 90% of goods worldwide by volume. The COVID-19 pandemic, starting in 2020, brought unprecedented challenges to this system, from port closures to crew shortages. Even now, in April 2025, the effects linger, creating a web of legal risks for shipowners, charterers, and cargo owners. Why do these risks matter? Because they affect contracts, costs, and compliance in ways that can lead to disputes or financial losses. This paper explores the key legal issues that have emerged post-pandemic and offers practical strategies to manage them, drawing on recent research and real-world examples.

Force Majeure and Contract Disputes

Contracts in maritime trade often include force majeure clauses, which excuse parties from fulfilling obligations during extraordinary events like pandemics. During COVID-19, many relied on these clauses to justify delays caused by lockdowns or port restrictions. However, proving force majeure is not straightforward. Courts require evidence that the event directly prevented performance and that reasonable steps were taken to reduce its impact (Lexology, 2020).

For instance, a ship delayed by a port closure might claim force majeure, but if the delay stemmed from poor planning rather than the closure itself, the claim could fail. As Brill (2022) points out, the pandemic’s foreseeability has shifted over time. Early in 2020, courts were lenient, but by 2025, with pandemics less unexpected, legal standards have tightened. Contracts lacking specific pandemic provisions now face greater scrutiny, increasing the risk of disputes.

Moreover, standard clauses like BIMCO’s Infectious Disease Clause offer some protection by allowing termination if a port becomes unsafe due to disease. Yet, disagreements over what counts as “unsafe” can still spark legal battles. Clear contract terms are essential to avoid such uncertainty.

Supply Chain Disruptions and Breach of Contract

Disruptions in supply chains—think port congestion or export bans—have led to missed deadlines and broken contracts. The OECD (2020) reported that COVID-19 introduced new trade costs, with border controls and health protocols slowing maritime operations. A supplier unable to deliver goods due to a factory shutdown might face a breach of contract claim unless force majeure applies.

Consider the 2021 Suez Canal blockage, which, while not pandemic-related, mirrors the kind of disruption seen during COVID-19. Ships stuck for days led to claims against operators and charterers, showing how delays can escalate into legal issues (CSIS, 2024). Post-pandemic, similar risks persist, especially with geopolitical tensions like Houthi attacks in the Red Sea adding further delays. These incidents highlight the need for contracts to define responsibilities clearly, reducing the chance of costly litigation.

Statistics reinforce this point: global shipping delays peaked at 11.6% of vessels in 2021, a figure that has only partially eased by 2025 (CSIS, 2024). Legal risks grow when parties cannot agree on who bears the cost of such delays.

Regulatory Compliance Challenges

Maritime operations must follow strict rules on safety, emissions, and crew welfare. The pandemic disrupted this compliance. Certificates proving a ship meets standards often expired as inspections were postponed. Brill (2022) notes that classification societies allowed temporary extensions, but failure to renew on time now risks penalties or detention.

Take environmental regulations as an example. The International Maritime Organization requires ships to reduce carbon emissions, tracked through certificates. If a vessel’s paperwork lapses due to pandemic-related delays, it could face fines or be barred from ports. Likewise, health regulations under the International Health Regulations (2005) demand updated protocols, adding pressure to stay compliant.

Failure to meet these standards can also void insurance or breach charter agreements, amplifying legal exposure. Keeping up with these rules, even years after the pandemic’s peak, remains a challenge for operators.

Insurance Gaps and Risk Management

Insurance is meant to protect against losses, but many policies fell short during COVID-19. Standard coverage often excludes pandemic-related claims, leaving gaps when ships faced delays or crew illnesses. Lexology (2020) explains that expired safety certificates could breach insurance terms, rendering claims invalid.

A real case illustrates this: in 2020, a shipowner lost hire coverage after a delay caused by crew quarantine, as the policy did not cover “disease-related perils” (Lexology, 2020). By 2025, insurers have adapted, offering new options, but gaps persist for those with older policies. Reviewing coverage is critical to avoid unexpected legal and financial hits.

Additionally, rising premiums reflect these risks. Data from CSIS (2024) shows maritime insurance costs rose 15% between 2020 and 2023, a trend continuing into 2025 as insurers adjust to ongoing uncertainties.

Crew Welfare and Employment Law

Seafarers bore much of the pandemic’s burden, with over 600,000 stranded by mid-2020 due to travel bans (Brill, 2022). The Maritime Labour Convention (MLC) 2006 sets an 11-month limit on time at sea, extendable only in extreme cases. Shipowners must provide medical care and repatriation, but delays in doing so have led to legal claims.

Imagine a seafarer stuck aboard for 14 months, falling ill without prompt care. Their employer could face lawsuits for breaching MLC rules. Off-hire disputes also arise when crew shortages halt operations, with charterers and owners arguing over costs. BIMCO clauses help, but only if tailored to these scenarios.

Crew welfare ties directly to legal risk. Supporting seafarers—through health programs or timely repatriation—reduces the chance of litigation and keeps ships running.

Safe Port Doctrine and Charterparty Issues

Charterparties, agreements between shipowners and charterers, often require “safe ports” for loading and unloading. During COVID-19, ports with high infection rates or strict quarantines raised questions about safety. Lexology (2020) notes that shipowners can refuse unsafe ports, but proving the risk is significant enough is a legal grey area.

For example, a charterer nominating a port under lockdown might face a refusal, leading to a dispute over who pays for delays. Clauses like INTERTANKO’s COVID-19 Clause shift some liability to charterers, but clarity in drafting is key. Without it, legal battles over port safety can drag on, costing both sides.

Strategies to Mitigate Legal Risks

Managing these risks requires practical steps. Here are some approaches grounded in evidence:

• Update Contracts: Add specific clauses for pandemics and disruptions, learning from BIMCO and INTERTANKO models. Clear terms reduce disputes (Brill, 2022).
• Boost Communication: Regular updates between shipowners, charterers, and ports can spot issues early, avoiding legal tangles (OECD, 2020).
• Ensure Compliance: Track regulatory changes and renew certificates promptly to avoid penalties or insurance issues (Brill, 2022).
• Review Insurance: Check policies for pandemic exclusions and consider add-ons to cover crew or delay risks (Lexology, 2020).
• Support Crew: Invest in welfare programs to meet MLC standards, cutting legal exposure (Brill, 2022).
• Use Technology: Digital tools for tracking shipments can improve visibility and reduce delays, as CSIS (2024) suggests.

These steps offer a starting point. However, their success depends on tailoring them to specific contracts and regions.

Conclusion

The pandemic has left a lasting mark on maritime supply chains, amplifying legal risks from contract disputes to crew welfare challenges. Stakeholders face a complex web of issues, but proactive measures—updating contracts, ensuring compliance, and supporting crews—can limit exposure. As trade continues to recover in 2025, staying ahead of these risks is not just smart; it’s essential. How will the industry adapt next? That depends on learning from the past and acting now.

References

• Brill (2022) Risks Posed by the COVID-19 Pandemic regarding the Carriage of Goods and Passengers by Sea: Considerations on Seafarers’ Rights and Health. Available at: https://brill.com/edcollchap-oa/book/9789004518681/BP000008.xml (Accessed: 7 April 2025).
• CSIS (2024) The State of Maritime Supply-Chain Threats. Available at: https://www.csis.org/analysis/state-maritime-supply-chain-threats (Accessed: 7 April 2025).
• Lexology (2020) COVID-19: Legal Challenges for Shipping Industry. Available at: https://www.lexology.com/library/detail.aspx?g=869429ca-8061-4e64-b2d1-632a366da6c8 (Accessed: 7 April 2025).
• OECD (2020) Getting Goods Across Borders in Times of COVID-19. Available at: https://www.oecd.org/coronavirus/policy-responses/getting-goods-across-borders-in-times-of-covid-19-972ada7a/ (Accessed: 7 April 2025).
• American Journal of International Law (2020) Trade Law and Supply Chain Regulation in a Post-COVID-19 World. Available at: https://www.cambridge.org/core/journals/american-journal-of-international-law/article/abs/trade-law-and-supply-chain-regulation-in-a-postcovid19-world/A79D0162F035F415EE35EFF64895409E (Accessed: 7 April 2025).