The World Trade Organization has projected that “world trade is expected to fall by between 13% and 32% in 2020” due to the COVID-19 pandemic, as it has increased globally causing massive disruptions on the economic activity of international markets, including individuals’ lifestyles. One of the major industries shaken by this calamity is the global shipping industry, from reduction in freight rates to a decline in cargo demand. Though the industry faces uncertainty in the impending future with global supply chains being curbed, there is some optimism, that in the long run, the future brings alight opportunities. This FAQ will consider some of the difficulties confronting the future of the industry and what to expect.

1. What is the impact of the crisis due to the Coronavirus pandemic on shipbuilding industry in extension?

The crisis has caused a decrease in general trading operations which has subsided the viability of the shipping industry, and with lockdowns executed, only once the situation improves, can the global supply chain be evaluated appropriately. From a short-term perspective, there will be difficulties, especially since the first quarter was the slowest, with diminished trade, however, for the long term, we predict there will be more prospects presented for the industry.

2. What is the impact of the virus in shipping trade in the UAE and Middle East as a whole?

The brunt of Coronavirus on the Middle East economies has been probably greater than anticipated, with consequences obviously impacting on the economy. For the future, we do predict that trade will cultivate again once this all resides, however, we anticipate there will be different specialties for vessels, such as the design and operating speed, new fuels costs and important prospects for the industry. The UAE continues as a crucial hub for trade, so though the short-term challenges are prevalent at the moment, in the long term, we believe the negative repercussions will fade.

3. How can the shipping industry speed up the recovery process in the future?

The industry has always been very resourceful with room for legal updates, rules and alterations to be flexible towards globalization, therefore, the industry should seize this opportunity to take prompt action to position their business for better resiliency and efficiency. Specific considerations the maritime industry will need to look into would be, renovating digitalization, persistent adaption of transportation models, physical automation, and cost structure in order to acclimatize to post Covid-19. Thus, it is essential from now to assess future objectives and challenges that lie ahead, in order to tackle them and stay ahead of the plan.

4. Will the current crisis speed up the industries move into the digital era?

Yes, the pandemic has quickened the application of remote technologies within the industry, as many ports worldwide have been compelled to re-analyze their operations by utilizing more computerized approaches to increase in connectivity and communication in order to sustain an effective workflow. Nevertheless, capitalizing on these technologies necessitate regulatory frameworks requiring amendments prior to implementation. The UAE in particular is at the forefront of the smart technology evolution, however, though this is yet to be exhibited, there is a positive outlook for the regional shipping industry on capitalizing these new technologies in order to transmute the way goods are being shipped globally.

5. What it the best and worst-case scenario for the global shipping industry, where 90% of global trade is facilitated?

It is evident that this virus will cause certain repercussions in the upcoming future following this pandemic, but the severity would be challenging to comment on. On the worst case scenario, it may take some time for businesses to operate at its usual capacity as before, but on the positive side, due to automation, smart shipping, accelerated investment in new technology, these influencing factors will present an encouraging outlook for global trade.

6. Does the force majeure clause have to be specific? (Covid-19 clause may not cover any other future pandemic unless its covid-19 again)

This exclusively depends of the drafting of the clauses of whether or not it will trigger a Force Majeure event. A general force majeure clause may have been sufficient to cover Covid-19 in the beginning, however while it may cover a further, different pandemic, it may not cover a seasonal return of Covid-19 which could have been anticipated. Hence, it is advisable that the parties draft their clauses to cover any events they may consider as Force Majeure within the contract.

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Assistant Author/Researcher: Ifrah George

Alessandro Tricoli

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