[290420.EN.SEA] Maersk Embroiled in Legal Battle to Move From New York to Port Elizabeth

GLOBAL Container Terminals (GCT), the operator of the facility on Staten Island in New York, is seeking an emergency restraining order through the law courts to stop Maersk Line and Hamburg Sud from leaving and switching over to the nearby port Elizabeth in New Jersey, a site operated by AP Moller-Maersk subsidiary, APM Terminals (APMT).

Maersk said in a letter on April 10 that Maersk Line and Hamburg Sud vessels would stop calling at GCT New York by May 1. It said it was willing to pay a settlement of US$5.5 million, including an early termination fee of $2.1 million and additional consideration of $3.4 million.

GCT USA president John Atkins claimed in a court filing that its agreement with Maersk lasted until December 31, 2022, and could be terminated at the earliest on December 31, 2021, and provided if six months' notice is given, reported New York's FreightWaves.

Mr Atkins said the termination notice was sent without cause 20 months before it was allowed on "the Good Friday public holiday... in the midst of the ongoing Covid-19 emergency in the metropolitan area... [with] a mere 20 days' prior notice in the middle of an unprecedented and crippling global pandemic."

He said: "The timing could not be worse with social distancing and stay-at-home directives in place and attendant concerns about the spread of infections making an emergency management response... extremely difficult."

He alleged that Maersk and Hamburg Sud are attempting to move to port Elizabeth "for the financial benefit of their sister company, APMT, which is a direct competitor of GCT," and that Maersk's "reprehensible conduct [its early contract termination] is magnified by the fact that Maersk is essentially stealing business from GCT to give to its own corporate affiliate, APMT".

He said the services operated by Maersk and Hamburg Sud through GCT's Staten Island site account for 60 per cent of the terminal's ocean container business and 46 per cent of all box throughput including local barge business. Maersk's departure "will have immediate and catastrophic effects on the business and financial well-being of GCT and its employees".

Mr Atkins maintained that GCT is one of the top employees on Staten Island and the early loss of Maersk's business would put all of Staten Island longshoreman jobs "at risk as it jeopardizes the viability of GCT's business".

GCT alleged in its complaint that the Maersk action could cause the Staten Island terminal to "cease to be a going concern" and would "reverberate through the Staten Island economy and have adverse tax-revenue effects for the city and state of New York".

Asked by FreightWaves for a response to the allegations in the court filing, a Maersk spokesman sent a written statement. "Maersk can confirm that it is currently involved in an ongoing contract dispute with Global Container Terminals," the statement said. "We can also confirm that Global Container Terminals alleged in its lawsuit that if Maersk ceases to call [at] Global Container Terminals that Global Container Terminals will cease to be a going concern.

"We believe claims that Global Container Terminals, which is owned by multi-billion-dollar investment funds, will go out of business as a result of this contract dispute to be intentionally inflated to create unnecessary fear during this time of uncertainty and the product of a litigation strategy to distract from the contractual rights and remedies that Global Container Terminals previously negotiated and now regrets," said Maersk.

Vancouver-based GCT operates four terminals, two in British Columbia and two in the US (in Staten Island and Bayonne, New Jersey). It is owned by three very large institutional investors: the Ontario Teachers' Pension Fund owns 37.5 per cent, IMF Investors owns 37.5 per cent and British Columbia Investment Management 25 per cent. These three entities have aggregate funds under management totalling $534 billion.

In its termination letter, Maersk said its $2.1 million termination fee was "a generous estimate given the uncertainty related to Covid-19", on top of which it was offering the "additional consideration" of $3.4 million to "satisfy all obligations".

The termination fee calculation relates to volume credits that would have been issued. Mr Atkins countered that "this termination fee is not intended as a proxy for damages that GCT may suffer as a result of any breach by Maersk resulting in premature termination; instead, it is to refund the volume discounts which were solely provided to Maersk in exchange for extending the term of the agreement to December 31, 2022.

"If not for these promises and commitments from Maersk, GCT would not have reciprocally agreed to the volume discount programme and favourable contract rates set forth in the [2018] amendment."

Source : HKSG.