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W.E. Cox Claims Group present a PIRACY UPDATE
As the situation in the Gulf of Aden continues with new piracy cases being reported on a regular basis, despite the efforts of Navies to protect commercial shipping, a recent case heard in the English High Court has provided clarification for Insurers of Cargo and Hull, when considering the legality of ransom payments and the effect this may have on policy coverage.
The case in question, one with which W.E. Cox Claims Group was involved, is that of the BUNGA MELATI DUA, a chemical tanker that was hijacked in the Gulf of Aden on 19th August 2008. The vessel was held by Somali pirates, until such time as a ransom was paid some 41 days later. Following release of the vessel she sailed to Rotterdam, her original destination, arriving on 26th October 2008.
The case was brought by owners of two cargo interests against their insurer, under a policy covering piracy, claiming that the cargo became an actual total loss once the vessel was seized by the pirates and taken to Somali waters. The argument they made was that they were irretrievably deprived of the cargo under section 57(1) of the Marine Insurance Act 1906. The alternative argument was that the cargo had become a constructive total loss by virtue of section 60(1) of the Act, in that the cargo had been reasonably abandoned on account of its actual total loss appearing to be unavoidable.
Mr Justice Steel found in favour of the insurers, on the grounds that the cargo could not be deemed an actual or constructive total loss. Previous experience with similar cases had given clear indication that the motivation of the pirates was financial gain. There was nothing to suggest that upon payment of ransom the Ship, Crew and Cargo would not be released. This being borne out by the subsequent events.
However, whilst the High Court decision is of interest in itself, it was the argument put forward by the Claimant and the ruling of Mr Justice Steel that offer insurers an insight for the future consideration of piracy cases.
The argument was that the payment of ransom was contrary to public policy and should not be considered when assessing whether a vessel and cargo were irretrievable. The Claimant accepted that the payment of ransom was not illegal under English law. Mr Justice Steel was “wholly unpersuaded” by this argument. He noted that the payment of a ransom is not illegal under current English law and whilst accepting that ransom payments may encourage future hijackings, there appears little alternative in order to protect the safety of crew who fall victim to hijackings.
Furthermore, Mr Justice Steel confirmed that ransom payments are recoverable as sue and labour expenses and that to have decided the case otherwise, would have rendered kidnap and ransom policies unenforceable. The judgement also provides clarification concerning the classification of a ransom payment as a legitimate General Average Act, albeit the assessment of the extent GA expenditure will still be the subject of intense investigation and enquiries into the circumstances surrounding the hijacking may still offer insurers possible defences to the payment of GA contributions.
We have experienced instances where insurers have questioned whether the payment of a ransom can be classed as a GA act under Rule A of the York-Antwerp Rules. Specifically, some insurers have questioned whether hijacking represents no more than a delay to the completion of the joint adventure, challenging whether payment of a ransom constitutes an act preserving the property from peril.
Mr Justice Steel examined the alternatives to a ransom when deliberating whether such a payment is contrary to public policy. Foremost in the deliberations was the inescapable fact that other available options which could be employed to end the hijacking posed significantly greater risks to life and property.
A Diplomatic resolution is not anticipated. The pirates do not appear to have any agenda, apart from financial gain and the political consensus between governments is that there can be no dialogue with a view to making concessions with criminals.
Military presence/intervention cannot be relied upon to adequately protect the safety of vessels and crew. Modern pirates are armed with sophisticated weaponry and satellite tracking/navigation equipment (in all likelihood paid for courtesy of ransom payments). Nevertheless, any attempt to recapture a vessel by force would result in the devastating escalation of an already precarious situation.
The ever-present threat of the employment of violence is, therefore, reasonably averted by the payment of a ransom. It is not surprising that Mr Justice Steel was “wholly unpersuaded” by the argument that the payment of a ransom was contrary to public policy to the extent of being “substantially incontestable”.
Considering the economic and humanitarian realities when engaged upon a cost-benefit analysis of potential solutions in a crisis, it can be conceded that the options available are far from satisfactory. Notwithstanding this, the danger to human life which pirates pose cannot be ignored. Piracy is a big, profit-yielding business with a similar distorting effect to the local economy as the poppy fields in Afghanistan – not a trite comparison when considering the steps being contemplated by NATO Joint operations in paying tribal leaders previously loyal to the Taliban in exchange for the safety and security of troops on the ground.
The English courts have upheld the rights of the interested parties involved to act pragmatically in order to secure the safety of life and property. It will take legislation to move the matter in the opposite direction.
If we may offer further guidance in respect of the case in question or with regard to any aspect relating to the piracy issue, please do not hesitate to contact Anthony Carter or Paul Friett.
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Mon, 11 Jan 2010 11:14:49 GMT Costa bullish over Dubai prospects Cruise operator continues to view emirate as key strategic base for its international operation.
Mon, 11 Jan 2010 00:00:00 GMT Finnish maritime reforms completed FINLAND has completed the reform of its maritime administration, writes Craig Eason .
Mon, 11 Jan 2010 00:00:00 GMT Russian master drunk in charge of grain ship A RUSSIAN master was fined £2,000 ($3,200) with £100 costs at Southampton magistrates’ court on Friday, within hours of being found drunk in charge of a ship that berthed erratically at the port the night before, writes David Osler .
Mon, 11 Jan 2010 00:00:00 GMT Sharp rise in fleet expected to curb gains in earnings DESPITE an expected increase in oil demand this year, a sharp rise of tonnage in the suezmax fleet over the next three months is likely to cap any substantial gains in freight rates, writes Liz McCarthy .
Mon, 11 Jan 2010 00:00:00 GMT CMA CGM’s oil hedging losses in 2008 put at close to $1bn LOSSES incurred while hedging against higher oil prices that CMA CGM revealed nine months ago are suddenly back in the headlines in France, writes Janet Porter.
Mon, 11 Jan 2010 00:00:00 GMT UK ports to benefit from new era of windfarms PORTS around the UK stand to gain from a massive expansion in offshore windfarms, with licences awarded on Friday to develop nine new sites, writes Janet Porter.
Mon, 11 Jan 2010 00:00:00 GMT Shippers still putting lives at risk with misdeclared containers SHIPPERS continue to put lives at risk by providing the wrong information about the weight of cargo, despite intensive efforts by lines to spell out the dangers of overloading containers.
Mon, 11 Jan 2010 00:00:00 GMT Baltic freeze begins earlier than expected THE Nordic region’s ice-breaking fleet is bracing itself for a busy spring as the Baltic Sea begins to freeze earlier than normal.
Mon, 11 Jan 2010 00:00:00 GMT Galileo Date set for European satellite navigation to go live GALILEO, the European Union’s satellite navigation system, will go live in 2014, the European Commission announced last week, writes Justin Stares in Brussels.
Mon, 11 Jan 2010 00:00:00 GMT Top exporter China heads list CHINA has overtaken Germany as the world’s top exporter, writes Richard Meade.
Mon, 11 Jan 2010 00:00:00 GMT Blowing bubbles THINKING about Dubai the other day, it occurred to us that the most salient point about the sudden Dubai shock late last year is that it seemed a surprise. Everyone knew the scale of Dubai’s real estate bubble. Everyone knew that the only reason for Dubai’s investment standing was that its benefactor, the Abu Dhabi government, had bailed it out and was expected to do so again. Then Abu Dhabi decided, temporarily, that the game was not worth the candle, and the world reeled.
Mon, 11 Jan 2010 00:00:00 GMT Fantastic five Norwegian owners win charters NORWEGIAN shipowners Solstad Offshore and Farstad Shipping have clinched new charter contracts for five of their offshore support vessels, writes Martyn Wingrove.
Mon, 11 Jan 2010 00:00:00 GMT Hansa Stavanger master appeals against dismissal THE former master of containership Hansa Stavanger , who was made redundant by owner Leonhardt & Blumberg at the end of last year, has taken legal action against his dismissal, writes Patrick Hagen in Cologne.
Mon, 11 Jan 2010 00:00:00 GMT Owners to benefit from ‘serious’ China coal shortages WITH coal shortages starting to squeeze power supply in China and the country’s steel mills keen to secure iron ore stockpiles ahead of a new price agreement in April, capesize owners may have a bumper start to 2010, writes Keith Wallis in Hong Kong.
Mon, 11 Jan 2010 00:00:00 GMT Suezmax owners poised for lift in Black Sea activity SUEZMAX owners are anticipating increased activity in the Black Sea market this week as Russian oil traders return to work following the country’s week-long New Year holiday.
Mon, 11 Jan 2010 00:00:00 GMT News in brief Frontline ends charter deal
Mon, 11 Jan 2010 00:00:00 GMT Volume of FFA trades to double THE volume of dry bulk forward freight agreements traded this year is set to double compared with 2009 levels, according to Freight Investor Services.
Mon, 11 Jan 2010 00:00:00 GMT Hamburg’s valuable delivery SELDOM has a ship from Morocco been so desperately awaited in the port of Hamburg as the general cargoship Tiwala . Even Germany’s yellow press incumbent Bild-Zeitung reported about the planned arrival, which — according to Automatic Identification System data — finally took place on Wednesday morning.
Mon, 11 Jan 2010 00:00:00 GMT Farstad hit by Australian strike action FARSTAD’S Australian operation faces significant disruption, as members of the Maritime Union of Australia were due to kick off a three-day strike on Saturday in support of its demand for a huge pay increase.
Mon, 11 Jan 2010 00:00:00 GMT Qinhuangdao port unveils plan to raise $732m with Shanghai flotation QINHUANGDAO Port, China’s largest coal port, is reportedly planning an initial public offering on the Shanghai stock exchange later this year, in a bid to raise up to Yuan5bn ($732m), according to local financial magazine Caijing, writes Hui Ching-hoo in Hong Kong.
Mon, 11 Jan 2010 00:00:00 GMT Falling demand takes toll on Nantes traffic FOURTH-ranking French cargo port Nantes-Saint Nazaire posted a 11% drop in traffic to 29.8m tonnes last year, as traffic in virtually all categories was hit by falling demand, writes Andrew Spurrier in Paris.
Mon, 11 Jan 2010 00:00:00 GMT French court overturns SNRH tug ban at Le Havre KOTUG French subsidiary SNRH has resumed operations at the port of Le Havre after an administrative court overturned a suspension imposed on it for allegedly having infringed French manning regulations.
Mon, 11 Jan 2010 00:00:00 GMT Cosco Shipping sets up Yangshan subsidiary COSCO Shipping, the specialist vessels and heavylift offshoot of China’s largest shipping company, will establish a Yuan200m ($29.4m) wholly-owned subsidiary at Shanghai’s Yangshan deepwater port to take advantage of tax breaks that were introduced last year, writes Hui Ching-hoo in Hong Kong .
Mon, 11 Jan 2010 00:00:00 GMT DSME set to secure Russian offshore deal DAEWOO Shipbuilding & Marine Engineering is set to win a $400m contract from US oil major ExxonMobil to build a new offshore platform for an east Russian oil project.
Mon, 11 Jan 2010 00:00:00 GMT Holding up Singapore clings to top spot SINGAPORE is set to retain its title as the world’s busiest box port even though container volumes last year fell for the first time since the dot.com bubble burst in 2001, writes Keith Wallis in Hong Kong.
Mon, 11 Jan 2010 00:00:00 GMT Scooped Consortium secures $268m Panama Canal excavation deal THE Panama Canal Authority has awarded the latest contract in its expansion project, a $268m excavation deal, to a consortium including Mexican construction giant ICA, Spain?s FCC and Costa Rica?s Meco, writes Richard Meade.
Mon, 11 Jan 2010 00:00:00 GMT Fingal master convicted after Scottish grounding BESTA Shipping Lines has asked the Filipino authorities to lift a requirement to recover bodies from Baleno 9, the ferry that sunk off Verde Island last month, arguing that it cannot afford to do so, writes David Osler.
Mon, 11 Jan 2010 00:00:00 GMT EU transport urged to step up fight against climate change EUROPE’s transport industries need to undergo “deep structural transformation” as part of the fight against climate change, says the incoming Brussels commissioner, writes Justin Stares in Brussels .
Mon, 11 Jan 2010 00:00:00 GMT Aegean's Verbeke grab estimated at $50m-$100m AEGEAN Marine Petroleum Network’s planned takeover of Belgian family controlled marine fuel supplier Verbeke Bunkering is likely to come with a price tag of between $50m-$100m, Dahlman Rose has estimated.
Mon, 11 Jan 2010 00:00:00 GMT TBS given more cashflow elbow room TBS International has reduced the minimum monthly cash it must maintain to prevent its long-term debt from being called due, with the figure dropping to $25m from $40m.
Mon, 11 Jan 2010 00:00:00 GMT Matterhorn prosecutor calls for $1.4m fines on owner and master A FRENCH prosecutor has called for the imposition of a €1m ($1.4m) fine for deliberate pollution on the owner and master of the Matterhorn , an Eastwind Maritime vessel, writes Andrew Spurrier in Paris.
Mon, 11 Jan 2010 00:00:00 GMT Contship meets unions over Gioia Tauro layoffs CONTSHIP Italia officials were due to hold talks with Calabrian regional politicians and port unions on Saturday over plans to lay off around one third of its workers at the Medcenter Container Terminal at Gioia Tauro.
Mon, 11 Jan 2010 00:00:00 GMT Hamburg bids to recover lost volumes with feeder venture HAMBURG terminal operators HHLA and Eurogate have provided details of their newly established joint central office for feeder logistics (FLZ), which they hope will combat sluggish handling.
Mon, 11 Jan 2010 00:00:00 GMT UNDER SUSPICION ... but seafarers have rights too SEAFARERS have a fairly unusual life in that their place of work also happens, for much of the year, to be where they live. You probably would not describe it as their home, for this implies a number of characteristics which a modern ship, with even the best of facilities, obviously does not have. A person can go into his or her home, shut the door and leave the world behind. The phrase “in the privacy of one’s own home” suggests a degree of freedom not available to a seafarer behind a closed cabin door.
Mon, 11 Jan 2010 00:00:00 GMT Realistic regulators should consult the users THREE years ago at an International Maritime Organization meeting, a very sensible idea was devised for ensuring that every regulation emerging from that body had been audited against a checklist to ensure that it took due account of the human element. It takes the form of guidance, but it is difficult to argue that this is a very necessary part of the process, if human beings are going to successfully implement the regulation. I guess it also reflects practical issues, which ought never to be ignored, but sometimes are, if regulators are remote from the action.
Mon, 11 Jan 2010 00:00:00 GMT Great Yarmouth ready to make impression on UK box market AS A buzzing east coast UK holiday resort, Great Yarmouth boasts an impressive roller coaster, offering bare knuckle rides to adventurous souls.
Mon, 11 Jan 2010 00:00:00 GMT New outer harbour ‘will never be a white elephant’, says Freeman TALK of Great Yarmouth’s new outer harbour being a white elephant gets short shrift from Eddie Freeman, maritime industry veteran and now chief executive of Great Yarmouth Port Co, writes Roger Hailey.