War Risks and Kidnap & Ransom in charter do not exclude GA claim for piracy under bills of lading.

The Polar [2020] EWHC 3318 (Comm) – HERCULITO MARITIME LIMITED v. GUNVOR INTERNATIONAL BV – involved an appeal pursuant to section 69 of the Arbitration Act 1996, in respect of a claim by shipowners against cargo owners under six bills of lading for general average  in respect of ransom payments made by owners to pirates. under the relevant bills of lading. The general average expenditure was the payment of a ransom to pirates to enable the release of the vessel so that she could complete her voyage.  Cargo owners contended that the GA claim was barred because the bills of lading incorporated the terms of the relevant charterparty under which the shipowners’ only remedy in the event of having to pay a ransom to pirates was to recover the same under the terms of a Kidnap and Ransom insurance policy and a War Risks policy taken out by the shipowners, the premium for which was, pursuant to the charterparty, payable by the charterers. Previous cases on incorporation had involved demurrage clauses and jurisdiction and arbitration clause. Incorporation of insurance terms and their possible constitution of a complete code excluding other remedies, such as claiming in GA, was a novelty.

The clauses were incorporated as directly germane to the loading, carriage and discharge of the cargo, but they provided  for payment of the premiums

by charterers and this language would not be manipulated so as to include bills of lading holders. Sir Nigel Teare, acting as a Judge of the High Court, held that “to substitute “bill of lading holders” for “Charterers” when reading clause 39 into the bills would be inconsistent with the obligation of the bill of lading holders to pay freight as per the charterparty as the price for the performance by the Owners of the contract of carriage. It would mean that the holders of the bills of lading, in the event that certain liberties were exercised by the Owners, had to pay may more than the agreed freight for the performance of the contract of carriage. Moreover, such additional sums would be unknown and unlimited.”  Similar provisions applied as regards kidnap and ransom insurance premiums payable under the Gulf of Aden clause.

As regards, the argument that the charter provisions on payment of the premiums constituted a ‘complete code’ excluding owners’ remedies in the event of piracy, this was certainly the position as regards the charterers. On the true construction of the charter the parties had agreed to look to the additional policies for the recovery of relevant losses and so the Owners were precluded by that agreement from seeking to recover that loss by way of a contribution in general average. However, as regards the position under the bill of lading, the only parts of the clauses in question which have been incorporated into the bills so as to bind the holders of the bills were the liberties conferred on the Owners not to complete the voyage or to depart from the usual or expected route. There was an important difference between the position under the Charter and the position under the bills of lading –  it could not be said of the bill of lading holders, as Lord Roskill said of the charterers in the Evia No.2, that theyhad paid the premiums not only for no benefit for themselves but without shedding any of their liability to contribute in general average in respect of losses caused by the additional insured perils. The point was not that the Owners had agreed to transit the Gulf of Aden at no cost to themselves, but that the charterers had agreed to pay for the insurance.

For these reasons the contract of carriage contained in or evidenced by the bills of lading did not contain an agreement by the Owners not to seek a contribution in general average from the holders of the bills from liability in respect of losses covered by the additional insurance taken out by the Owners.

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