Sri Lanka warned of higher trade costs over US$ 1bn X-Press Pearl verdict

Sri Lanka could face significant economic fallout, including higher import-export costs, following the Supreme Court’s landmark US$ 1 billion verdict against the stakeholders of the X-Press Pearl container ship. 

The vessel’s operator and its global insurer have issued a stark warning that the ruling creates an “unprecedented level of risk” that shipping lines will be unwilling to bear, potentially impacting the nation’s trade viability. 

The strong reaction comes after the court in July ordered the ship’s owner, operators, and local agent to pay an initial US$ 1 billion as compensation for the 2021 maritime disaster. The first US$ 250 million installment is due by September 23.

In a formal statement, operator X-Press Feeders, a key player in Sri Lankan trade for 40 years, argued that the judgment “ignores accepted international maritime law.” The company fears this new legal precedent will deter international shipping companies from servicing Sri Lankan ports due to the high financial and legal risks.

The operator warned that this situation will “inevitably lead to a sharp rise in import-export costs, with the final burden falling on the people of Sri Lanka.” Their statement concluded with an appeal for “rational decision-making” to balance environmental compensation with the country’s economic needs.

The vessel’s insurer, The London P&I Club, echoed the operator’s concerns, calling the ruling a “deeply troubling turn of events for global shipping.” Chief Executive James Bean stated the court had “extended its reach far beyond its original scope,” noting the case began as a rights claim by Sri Lankan citizens against their own government’s handling of the disaster.

Both organisations accused the court of using the ship’s Master and local agents as “human collateral.” They highlighted that the Master has been held in Sri Lanka under a travel ban for four and a half years and that this judgment effectively convicts him and the agents without due process. 

The operator also pointed to the refusal by three ports—including Colombo—to allow the leaking container to be offloaded before the fire, a fact they claim the court’s narrative ignores.

The Supreme Court’s landmark judgment was based on its finding that the ship’s command and agents “intentionally concealed” crucial information about the hazardous situation on board from Colombo Harbour Master. 

The court concluded that this deception prevented authorities from taking necessary preventative action, making the companies fully responsible for the environmental catastrophe caused by the sinking of the ship and its cargo, which included 81 containers of toxic chemicals. While expressing regret for the incident, the operator noted it has already paid over US$ 150 million for wreck removal, cleanup, and initial compensation efforts.