Carriage of Goods by Sea, Land and Air

Uni-modal and Multi-modal Transport in the 21st Century

Baris Soyer, Andrew Tettenborn, Baris Soyer, Andrew Tettenborn

• Publisher: Informa Law from Routledge
• Year: 2013
• ISBN:
  9781135124199
• Edition: 1
• Topic: Law
• Subtopic: Maritime Law
• Index: Law

Written by a combination of top academics, industry experts and leading practitioners, this book offers a detailed insight into both unimodal and multimodal carriage of goods. It provides a comprehensive and thoroughly practical guide to the issues that matter today on what is a very complex area of law. From the papers delivered at the 8th International Colloquium organised by Swansea Law School's prestigious Institute of International Shipping and Trade Law, this original work considers current opinions, trends and issues arising from contracts of carriage of goods by sea, land, air, and multi-modal combinations of these, not to mention the legal position of vital participants such as freight forwarders, terminal operators and cargo insurers. The topics under discussion range through issues such as paperwork, piracy, liability for defective containers, damage in transit, the CMR Convention, and the possible effects of the Rotterdam Rules.An indispensable resource for transport lawyers, industry professionals, academics and post-graduate students of maritime law.

Carriage of Goods by Sea

DOI: 10.4324/9780203798065-1

Piracy and Contracts of Carriage by Sea

Simon Rainey QC*

* Barrister at and former joint head of Quadrant Chambers, London. The author thanks Ms Emily McCrae-Theaker, barrister at Quadrant Chambers, for her assistance in the preparation of this paper.

DOI: 10.4324/9780203798065-2

Introduction

The number of reported incidents of piracy worldwide has been declining since 2010¹ and this trend continued in the first half of 2012 with a further sharp drop in the number of attacks recorded.² Despite this positive progress, largely attributable to a concerted international effort (as well as to, perhaps, the more recent introduction of armed guards or response teams on board vessels transiting affected waters), the threat posed by piracy remains significant and continues to create serious issues in the shipping industry.

1 Piracy Attacks in East and West Africa Dominate World Report, ICC, 19 January 2012. Available at http://www.icc-ccs.org/news/711-piracy-attacks-in-east-and-west-africa-dominate-world-report (last tested on 1 January 2013). 2 177 incidents were reported to the International Maritime Bureau (IMB) Piracy Reporting Centre in the first six months of 2012, compared to 266 incidents during the corresponding period in 2011. Source: Six Month Drop in World Piracy, IMB Report Shows, ICC, 16 July 2012. Available at http://www.icc-ccs.org/news/747-six-month-drop-in-world-piracy-imb-report-shows (last tested on 1 January 2013).

The current decline comes after four consecutive years of increase in the number of incidents reported³; in the course of 2011 there were still 439 incidents. This consisted of 45 hijacked vessels, 176 boarded vessels, 113 vessels fired upon and 105 attempted attacks. Last year alone, eight crew members were killed.⁴

3 Piracy Attacks in East and West Africa Dominate World Report, ICC, 19 January 2012. 4 Ibid.

The overall decrease is largely due to a decline in Somali piracy activity, with the number of incidents dropping from 163 in the first six months of 2011 to 69 in 2012.⁵ There has, however, been a significant increase in the number of attacks in other areas, such as the Gulf of Guinea. In Nigeria alone, 17 incidents have been reported in the first half of this year, compared to just six in 2011.⁶ Even more worryingly, the IMB⁷ has emphasised that high levels of violence are being used against crew members in this area; guns were used in at least 20 of the 32 incidents last year.⁸

5 Ibid. 6 Ibid. 7 The IMB was formed in 1981 as a division of the International Chamber of Commerce to combat maritime crime and malpractices and is at the forefront of efforts to reduce the risk of piracy at sea. It opened a Piracy Reporting Centre in Kuala Lumpur in 1992, from where it maintains a 24-hour global piracy watch on worldwide shipping lanes. 8 Piracy Attacks in East and West Africa Dominate World Report, ICC, 19 January 2012.

The human cost of piracy therefore remains high. In 2011, 3,863 seafarers were fired upon by Somali pirates armed with assault rifles and rocket propelled grenades and Somali pirates held at least 1,206 people hostage during the same year, with the average length of captivity increasing by 50 per cent, up to an average of over eight months.⁹

9 Human Cost of Somali Piracy Updated Report Released, ICC, 22 June 2012. Available at http://www.icc-ccs.org/news/745-human-cost-of-somali-piracy-updated-report-released (last tested on 1 January 2013).

Piracy also has a significant financial cost. Freight rates and insurance premiums have both risen as a result of piracy risk surcharges,¹⁰ and ransom payments have increased dramatically from a total of $177 million in 2009 to $238 million in 2010, amounting to an average of $5.2 million per vessel in 2010, compared to $1.5 million in 2007.¹¹ The total cost to the global shipping industry was estimated to be between $8 and $10 billion in 2010.¹²

10 In 2010, war risk surcharge amounted to $4 billion globally. L. Booth, A Year of Uncertainty, Maritime Risk International, 14 October 2011. 11 Ibid. 12 Ibid.

Despite some positive progress, piracy therefore remains very much a live issue for the shipping industry. As a result, it is important that there is clarity in relation to the legal consequences of piracy for contracts of carriage.

Piracy gives rise to a wide range of legal issues in this context, from the consequences of re-routing a vessel to avoid piracy hot spots, to the obligation to adopt appropriate preventative measures and the duties of the parties in the event that an attack is successful. As a result, it is increasingly common for contracts of carriage to incorporate terms which expressly deal with the consequences of piracy, and new standard form terms have been produced in an attempt to address some of these issues.¹³

13 See further below at p. 18.

In recent years disputes concerning the effect of piracy on contracts of carriage have begun to come before the courts, but prior to this, there were little or no directly relevant authorities. Several cases have now been decided by the High Court, helping to provide greater clarity to what are often difficult legal questions, but there are still many issues which remain to be determined.

The Meaning of Piracy in a Private Law Context

As yet, there is no English authority considering the meaning of piracy in the specific context of a contract of carriage. The IMB in its various publications defines piracy as

An act of boarding or attempting to board any ship with the apparent intent to commit theft or any other crime and with the apparent intent or capability to use force in furtherance of that act.

As a matter of international law, piracy is widely accepted (and is defined for English law statutory purposes) as referring to

Any illegal acts of violence or detention, or any act of depredation, committed for private ends by the crew or the passengers of a private ship or a private aircraft directed: (i) on the high seas, against another ship or aircraft, or against persons or property on board such ship or aircraft. …¹⁴

14 Article 101, United Nations Convention on the Laws of the Sea (UNCLOS). See also Article 101 of Schedule 5 to the Merchant Shipping and Maritime Security Act 1997 (entitled Provisions of United Nations Convention on the Law of the Sea to be treated as part of the Law of Nations).

Whilst this provides useful a guide, the meaning attributed to piracy in international or criminal law will not be determinative in the context of private law relationships.¹⁵

15 Republic of Bolivia v Indemnity Mutual Assurance Co Ltd [1909] 1 KB 785 at 789.

The meaning of piracy has, however, been frequently considered in the private law context in relation to contracts of insurance. In Republic of Bolivia v Indemnity Mutual Marine Assurance Company Ltd, Pickford J considered that, in determining what constitutes piracy

One has to look at what is the natural and clear meaning of the word “pirate” in a document used by business men for business purposes; … one must attach to it a more popular meaning, the meaning that would be given to it by ordinary persons.¹⁶

16 Ibid., per Pickford J at 790, approved by Vaughan Williams LJ at 792.

Similarly, in Athens Maritime Enterprises Corporation v Hellenic Mutual War Risks Association (Bermuda) Ltd (The Andreas Lemos)¹⁷ in determining whether armed men boarding a vessel within Bangladeshi territorial waters amounted to an act of piracy for the purposes of a war risk policy, Staughton J considered that the “business purposes” of the agreement had to be taken into account.¹⁸

17 [1983] QB 647. 18 Ibid. at 662.

As a result, Staughton J concluded that, in contrast to international law, for the purposes of private law contracts there is no need for a vessel to be outside territorial waters for an act of piracy to occur, the rationale being that the same issues of jurisdiction do not arise. Instead, it was held that it is sufficient if the ship was

in the ordinary meaning of the phrase, “at sea”… or if the attack upon her can be described as “a maritime offence”.¹⁹

19 Ibid. at 658.

Staughton J considered therefore that the fact that for international law piracy was restricted to the high seas was not relevant to domestic disputes involving the interpretation of insurance contracts. He held that for domestic law purposes, the concept of “the high seas” was a flexible and pragmatic one which was not be read as connoting, for example, only the areas outside territorial waters. Accordingly, if a ship was, within the ordinary English language meaning of the phrase “at sea”, or if an attack on her could be described as “a maritime offence”, then for the commercial and business purposes of a marine insurance policy the ship was in a place where piracy could be committed. A similar approach was more recently adopted in Singapore in Bayswater Carriers Pte Ltd v QBE Insurance (International) Pte Ltd.^{2 0}

20 [2006] 1 SLR 69.

It is unlikely that an English Court seised of a dispute concerning a “piracy clause” in a contract of carriage (such as the new Baltic and International Maritime Council (BIMCO) clauses considered below) would take any different approach.

However, it remains a requirement that acts of piracy are carried out for “private ends”,²¹ the popular conception of a pirate being

21 Article 101 of UNCLOS.

a man who is plundering indiscriminately for his own ends, and not a man who is simply operating against the property of a particular State for a public end, the end of establishing a government, although that act may be illegal and even criminal, and although he may not be acting on behalf of a society which is … politically organised.²²

22 Republic of Bolivia v Indemnity Mutual Assurance Co [1909] 1 KB 785 at 791.

These cases provide some guidance as to how piracy is likely to be defined in the context of a contract of carriage, but in any event, the key concept in any attempt to define piracy is relatively clear: the essential requirement is forcible robbery at sea.²³

23 P Todd, Maritime Fraud and Piracy (2nd edn) (Informa, 2010) at 1.016 (hereinafter referred to as Maritime Fraud and Piracy (2nd edn)). For a comprehensive analysis of the key elements of piracy in marine insurance context see B. Soyer, “Coverage against Unlawful Acts in Contemporary Marine Insurance Policies”, published as Chapter 7 of The Modern Law of Marine Insurance Volume 3, edited by DR Thomas (Informa, 2009), 149–176.

The Responsibilities of Contractual Carriers

There are typically two distinct situations in which piracy may affect the carrier’s responsibilities to the cargo owner:

1. Where it is intended that the vessel will pass through an area affected by piracy
2. Where a vessel and its cargo have been hijacked by pirates

Prevention of Acts of Piracy and Their Operative Effects

By no means are all pirate attacks are successful; in 2011, only 12% of all Somali piracy incidents resulted in a hijacking.²⁴ Furthermore, the tactics...