Maritime Fraud and Piracy

Paul Todd

• Publisher: Informa Law from Routledge
• Year: 2013
• ISBN:
  9781135116330
• Edition: 2
• Topic: Law
• Subtopic: Maritime Law
• Index: Law

The main focus of this book is the impact of maritime fraud on contracts for sale and carriage, documentary credits and marine insurance. It covers all varieties of maritime fraud, from the most serious downwards, describing the methods employed and the risks to traders and carriers. At the serious end of the spectrum, pirates capture an entire ship, often murdering the entire crew, in order to sell the cargo (to which of course they have no title), later to use the "innocent" ship to pose as innocent traders. Less serious (but perhaps of greater interest to lawyers) are misdescriptions of cargo in, or backdating of, bills of lading, and other deceptions, usually practised on purchasers and banks.

Chapter One
Piracy Today

1.001 This chapter is about piracy in the wide sense in which that term is used in English domestic law, and is not confined to the much narrower international law meaning of the term. Coverage is in line with the IMB definition of piracy, set out below. In general terms, we are describing robbery at sea.¹

1.002 Until fairly recently, piracy was often a prelude to phantom ship frauds, and hence intimately related with maritime fraud. In recent years piracy to steal vessels and cargoes has declined, whereas there has been a great increase in kidnap hijackings, particularly in the vicinity of Somalia. Kidnap hijackings have no relationship with fraud. In this edition (contrasting with the last) piracy is treated as a separate crime and, except for the discussion of insured risks,² this chapter has little relationship with the remainder of the book.

1.003 Many people continue to associate piracy with attacks on the Spanish Main and elsewhere from the sixteenth to nineteenth centuries, and (writing in 2010) only very recently has it again impinged on public consciousness. For a period of almost 200 years, from the early nineteenth until almost the end of the twentieth century, it was regarded as obsolete.³ Over the last 20 or so years there has been a resurgence, however,⁴ and with hijacked ships recently in the English Channel, this resurgence is at last reaching the general public consciousness.⁵

1.004 Ten years ago, the paradigmatic piracy situation was a case such as The Petro Ranger.⁶ An oil tanker was seized (in 1998), and sailed into Chinese waters. Had events gone as the pirates planned, both ship and cargo would probably have been stolen, the ship later to appear as a phantom trader, to load and steal further cargoes. She had been renamed Wilby, presumably to disguise her true identity, possibly only to avoid detection, but more likely for resale and trading; false registration papers had been obtained and crew lists drawn up.⁷ It is also likely that the crew would have been killed.⁸ For example, on MV Tenyu (which had been renamed Sanei 1, the name of another existing vessel, and which was trading as such) and MV Cheung Son in 1998, the entire crews of both ships were killed.⁹ The Petro Ranger was unusual in that the crew escaped and the Chinese authorities intervened, leading to the recovery of the ship. Some of the cargo was also recovered, but ended up under the control of the Chinese authorities, the ship herself being released back to the owners. The Petro Ranger was also unusual in the extent to which it was documented, both by the captain in a book about the events,¹⁰ and in subsequent litigation regarding loss of that part of the cargo which ended up in Chinese hands (allegedly with the connivance of the shipowners).¹¹

1.005 Since the Petro Ranger, hijackings leading to the theft of ship and cargo have declined. At the time of writing (August 2010), the past two years have seen the hijacking of the Sirius Star and the Maersk Alabama. The Sirius Star attack was notable for the size of the vessel, and the distance from shore; no doubt the owners thought she was safe.¹² The aim was not to take ship and cargo, but instead to hold ship, cargo and crew to ransom. A similar aim can be seen in the Maersk Alabama, but there the ship was retaken by her crew. The pirates captured the captain, however, and a ransom was eventually paid for his release.¹³

1.006 With more effective counter-measures being taken around Somalia itself, the pirates have continued to move their operations still further out into the Indian Ocean. Recently:¹⁴

"The IMB in cooperation with MSCHOA suggest that vessels not making scheduled calls to ports in Somalia should keep as far away as possible from the Somali coast, preferably more than 600 nautical miles from the coastline and when routing north/south consider keeping east of 60°E longitude."

1.007 The recent attacks differ in a number of respects from the paradigm of a decade ago. Though violence is used, or at least threatened, in the initial boarding, no damage need be occasioned to ship or cargo, which are usually recovered, as long as the ransom is paid, and the crew are usually unharmed. Recent attacks have been localised close to Somalia.

1.008 In terms of prevalence of piracy, IMB figures show spikes in 2000 and 2003, with respectively 469 and 445 attacks (mostly in South East Asia), then a drop to a low of 239 in 2006, but with figures rising again to 406 in 2009. Much of the post-2006 increase is explained by ransom hijackings, mostly off Somalia. In 2009 no fewer than 1,052 crew were taken hostage. Fortunately, with the change in nature of piracy, though it remains a brutal business, the number of deaths has been on the decrease,¹⁵ there being eight reported in 2009.

Legal Issues, and Definitions of Piracy

1.009 Piracy has many different legal consequences, but though there is a central concept, there is no single definition of piracy, for all purposes. There are a number of definitions of piracy, each of which makes sense in its particular context. All are considered in this chapter.

1.010 Pirates have long been considered hostis humanis generis, an enemy of mankind, so that in international law every state may seize a pirate ship, or a ship taken by piracy and under the control of pirates. However, the international community is careful not to interfere in matters which should be within the jurisdiction of a particular state. Thus, the international law definition of piracy excludes mutiny, and events that occur within the territorial waters of any state.

1.011 Once pirates have been apprehended and taken into custody, it is necessary to prosecute them, which raises issues of domestic criminal law. Piracy has long been a serious criminal offence in the UK, the definition of which differs from piracy in international law.

1.012 Piracy may be an insured risk, and it may be necessary to determine whether it falls under the general marine, or war policy. The definition of piracy in marine insurance is certainly wider that its definition in international law.

1.013 Piracy can also have consequences for the contract of carriage, though its definition is rarely crucial in this context, because events which are similar to piracy will often have the same effects. It seems likely that the definition for all contractual purposes is broadly similar.

1.014 Some of the legal issues occasioned, and in particular the ability of the international community to respond to the attacks, are similar to those of a decade ago. Recovery of the ransom, if paid, raises new issues, as would any loss occasioned to ship and cargo, were it not to be. Issues can arise on carriage contracts from re-routing to avoid piracy hotspots,¹⁶ and potentially also from the ability of shipowners to take counter-measures. These issues are discussed below.

1.015 Finally, the IMB has a wider definition of piracy:¹⁷

"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 the furtherance of that act."

This definition is appropriate for describing the work of the IMB, and for its statistical purposes, but it is wider than most or all of the legal definitions of piracy.

1.016 The central idea behind piracy, for any definition, is robbery at sea, and piracy has always involved the forcible seizure of property.¹⁸ Moreover, pirates are criminals, not idealists. Certainly, they are not acting on behalf of a state authority, it becoming necessary from earliest times to distinguish between piracy and warfare.¹⁹ For example, for hundreds of years at least, thefts of ships and cargoes by private individuals have not transferred property, whereas Prize acquisitions in wartime have. For purely commercial reasons, it is necessary to settle disputes over title. Moreover, pirates are treated as criminals, and not accorded the privileges of prisoners of war. It is therefore necessary to distinguish between private and statebased motives, piracy traditionally falling into the former category. It is not a brightline distinction, because wars are not always formally declared, and it is not always clear whether a group of people in a particular area is entitled to be considered a state.

1.017 At the time of writing (2010), most ransom attacks are criminal in this sense, but there is a fear they may in the future be used to fund terrorism.²⁰ If so, then they will no longer be piracy, for the purposes of any definition of the term.

1.018 This idea of piracy, as a violent criminal act committed at sea, is central to all the definitions, and is probably quite close to its definition for private civil law purposes, for example where the term appears in a carriage or insurance contract. In international law, piracy is defined far more narrowly, but there are reasons for this, which do not extend to defining piracy for criminal or contractual purposes.

Piracy and International Law

1.019 There would be no need for internationa...