6th Annual International Conference "Practice of Maritime Business & NOVO2010" - Piracy in the Gulf of Aden a Legal And Practical Update

Julian Clark

Partner

Holman Fenwick Willan

There's Nothing New About Piracy

AD 75 Julius Caesar captured by Cilician pirates while crossing the Aegean Sea.

Malacca Straights 18th Century – onwards(noted reduction year on year since 2004)

GoA – unprecedented in maritime history(range/level of activity/targets)

How Big A Problem Is It?

2008 – 111 attacks resulting in 42 hijacks

2009 – 246 attacks resulting in 54 hijacks

2010 (Jan) – 35 incidents resulting in 9 hijacks

Since March 2010 – 13 more attacks/hijacks

HFW instructed on 53 matters from incident date

5 post incident Currently acting on 5 of the

hijacked vessels since 13 March

Detention and Ransom

Longest detention – 10 months ("Win Far 116") Shortest detention – 15 days ("Bow Asir") Average – 2-3 months Increasing level of demand – current average approximately

US$3 million plus(Julius Caesar 20 talents)

Assessment of Risk

Approximately 22,000 transits per year 90% of world trade by volume carried by sea with 50% of the

world's container fleet passing through the Indian Ocean Percentage risk of capture 0.1%. Risk of attack 1% BUT: how does the law react to this?

Routing – Charterer v. Owner – Who Wins?

No recent definitive decision in arbitration or litigation – each case turns on its own facts

Start point – bespoke clauses Printed terms – compare Conwartime and Shell forms Key issue – what is reasonable "HILL HARMONY" [2001] 1 LLR 147 The "PRODUCT STAR" issue

"PRODUCT STAR" (NO. 2) [1993] 1 Lloyds Rep 397

Cargo/Owners/Charterers – The Current Battlefield

No recent decisions save for those on GA and legality of ransom payment (the "SALDANHA" – decision still awaited)

General Average – topic on its own Off-hire – clause 15 NYPE – on hire

"WHATSOEVER" – the "LACONIAN CONFIDENCE" [1997] 1 Lloyds Rep 139

Unsafe port – unlikely Routing (as above) Payment of AP's – follow the clauses Clause 8 Indemnity – mixed views Armed Guards

General Average

Payment of a ransom in a piracy situation is a clear common sacrifice falling within GA

Barnard v. Adams 51 US 270 [1850] "The ransom to pirates is to be contributed for; the loss is inevitable and indeed actual"

Hicks v. Palington 1590 Moores QB R297 "Cargo given to a pirate by way of a ransom is a sacrifice which properly falls within General Average"

General Average Cont'd

Recent approval from the High Court – Masefield AG v. Amlin Corporate Member Limited (2010) EWHC (Comm)

German position – German commercial code section 706.6 – ransom forms part of GA

Not illegal – repeal of the Ransom Act 1782

How Effective Are The Convoys?

2009-2010 – 15-20 successful naval interceptions

10-15 incidents of active support

20 plus vessels own evasive manoeuvres to avoid capture

Citadel – best management practice clause 4(k) "It is recommended that a piracy attack muster point or "Citadel" is designated and lock down procedures rehearsed in order to delay access to control of the ship and buy time. Ideally this

How Effective Are The Convoys? Cont'd

should be away from external bulk heads and port holes. Due to the ongoing debate on the use of Citadels and their method of employment, Masters are recommended to check regularly with MSCHOA

Successful deployment in the Moscow University – Russian navy (May 2010) and the "TAI PAN" – Dutch navy (April 2010)

But It Still Happens

Questions

Lawyers for international commerce

hfw.com