[EN-SEA] Cargo Owner Loses Court Claim For Total Loss After Pirates Seize Ship

A BRITISH judge has rejected a cargo owner's claim that he was entitled to total loss insurance payment after the ship carrying his goods was seized by pirates, reported London's International Freighting Weekly.

"The case provides welcome clarification of legal issues. . . [and] useful guidance on issues concerning shipowners, cargo owners and their insurers arising from piracy off Somalia," said a review of the judgment by London international law firm Clyde & Co.

Clyde & Co lawyers Andrew Preston, Simon Culhane and Mike Roderick wrote of the US-based trading company Masefield Group's suit against Amlin plc, a UK-based insurer, claiming $7 million payment for a total loss of the ship's cargo under the Marine Insurance Act 1906.

The cargo, since recovered after ransom was paid, was aboard the tanker Bunga Melati Dua together with its crew and cargo, when captured by Somali pirates on August 19, 2008, in the Gulf of Aden while bound for Rotterdam from Malaysia.

The "Dean versus Hornby" case of 1854, said Masefield lawyers, established that if cargo is captured by pirates, it is deemed to be an immediate total loss "even if it is later recovered".

Masefield lawyers argued that because ransom payments to pirates were contrary to British public policy, they should not be taken into account in considering the prospects of cargo recovery for which the company sought the US$7 million, that being the alleged loss suffered after the sale of the recovered cargo in Rotterdam.

Said the Clyde & Co lawyers: "The judge accepted that, when read in isolation, "Dean versus Hornby" might be viewed as determining that a capture by pirates as such would constitute a total loss. However, following an extensive review of the authorities he concluded that this was not in fact the case." .

Pirates of the 1850s would be expected to sell stolen cargo and use captured ships for their own purposes, but Somali pirates almost always seize ships and crews to exact ransoms and their return is expected, said the judge.

"Given the history of previous cases of capture by Somali pirates, there was ample evidence before the court that, in reality, there was a reasonable hope - and perhaps even a likelihood - that the ship and cargo would be recovered by payment of a ransom." said the Clyde & Co team.

"The judge noted that while it might be said that payments of ransom encouraged further seizures, in practice there was little option but to pay a ransom where that is the only effective means (absent diplomatic or military intervention) to remove vessel crews and property from harm," they said.

Source : HKSG.