Millers Marine War Risks

Michael Davey; James Davey and Oliver Caplin

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CHAPTER 20 Piracy

Piracy as an insured peril: Hull & Machinery cover

20.1 In recent decades, piracy has alternated between being treated as an insured peril under the standard marine policies (alongside perils of the sea and other maritime risks) and under war risks policies (with political risks).1 Whether it is treated as a marine or a war risks peril is a matter for the parties and the market, but it would normally be insured under one form of cover and specifically excluded under the other.2 20.2 At present, piracy is by default located within maritime risks (under the Institute Times Clauses Hulls (1982) and other standard Hull & Machinery policies)3 but is commonly excluded by contract variation and insured within war risks cover. This places piracy alongside other deliberate acts by third parties, such as “malicious acts” and terrorism. The specific variations to cover which remove violent theft, piracy and barratry from marine perils and extend cover to include them in the war risks clauses were drafted in 2005 as a response to increased levels of modern piracy.4 Despite this change in approach, many leading texts still consider piracy as a part of the standard marine risks.5

Piracy as an insured peril: cargo cover

20.3 Piracy is an insured peril under Institute Cargo Clauses A (as all risks cover), but not Institute Cargo Clauses B or C. In the 1983 and 2009 variants of the Institute Cargo Clauses (A-C), certain named war and strikes risks are specifically excluded by Clauses 6 and 7, but the exclusion of “capture or seizure” in Clause 6.2 explicitly does not apply to piratical seizures. Cargo Clauses B and C do not, in any event, insure piracy (whether by

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seizure or otherwise) as a named peril.6 The Institute War & Strikes Clauses do not (by default) cover piracy, that being treated as marine peril rather than a war risk.7

Piracy: the limits of the peril

20.4 Piracy as a peril has been the subject of careful judicial scrutiny, as its precise limits differ from those in other legal contexts. Moreover, its relationship to other perils, such as violent theft, barratry, terrorism, seizure, and capture will be important in policies which do not treat each of these risks equally. The need to carefully identify the limits of piratical losses is added to by the changing nature of modern day piracy. The last two decades has seen the rise (and fall) of Somali piracy-for-ransom and the rise of violent theft of cargo in the Gulf of Guinea. As ever, changing circumstances raises fresh questions on the limits of insured perils and exclusions.8 20.5 As noted in previous editions, the words “piracy” and “pirates” are elastic terms whose meanings can vary depending on the circumstances. The precise limits of the peril in a marine insurance policy is fundamentally a matter for the parties but in the absence of express words the courts have often made reference to other legal and non-legal definitions. These include:

(1) Piracy jure gentium by hostes humani generis, or piracy against the Law of Nations by the enemies of all mankind. It is a criminal offence, and any state which captures a pirate may try and punish him regardless of where his crimes were committed.
(2) Piracy which is a crime against the domestic laws of a state. These will vary from state to state.
(3) Piracy as defined by treaty in Public International Law. For example, Articles 100–107 of the United Nations Convention on the Law of the Sea empower (and sometimes, oblige) contracting states to act against pirates on the High Seas.
(4) Piracy as defined by statute entitling officers and men of the Royal Navy to a bounty for dealing with pirates.
(5) Piracy for the purposes of commercial documents such as charterparties, bills of lading, and insurance policies.

20.6 This work is particularly concerned with the last aspect, but there are some common threads which run through them all, and in considering “piracy” as applied to commercial documents, the courts and NGOs have drawn on sources from across the range.

Piracy: incidences

20.7 The International Chamber of Commerce hosts the International Maritime Bureau’s Piracy Reporting Centre, which logs the location, nature, and outcome of suspected

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piratical attacks globally.9 The real-time global piracy map that it maintains shows hot spots in the Gulf of Guinea, the Gulf of Aden and in the waters surrounding Indonesia. Other regions are identified as being of high risk when at berth. Many of the incidences during 2017 were relatively minor in terms of loss of or damage to hull or cargo, but some were potentially more serious with the use of weapons against crew members. The centre has created a “Community of Reporting” intended to counter the under-reporting attacks on vessels, particularly in the Gulf of Guinea, but the figures produced should be treated as indicative rather than the complete picture. 20.8 The reported data from 2010–18 show a considerable shift in the distribution of attacks since the high water mark in the Gulf of Aden in the mid-2000s. The 2017 reports show 180 incidents across the globe, broadly in line with the 2016 figures. However, this does not mean that the position is entirely static. Attacks in some regions have been significantly reduced by the intervention of littoral States in hot spots, but some of this activity is displaced to neighbouring locations. Moreover, the nature of the attacks varies considerably, with pirates variously engaged in the capture of the vessel, cargo and crew for ransom in some areas; the kidnapping of crew in others; and smaller scale operations involving the forcible theft of cargo and parts. Focusing on the frequency of attacks and attempted attacks, there is a notable shift in the past decade. The 2010 figures show three-quarters of the 445 attacks linked to six key locations (Somalia and Gulf of Aden, South China Sea, Bangladesh, Indonesia, Nigeria, Red Sea), with Somalia and the Gulf of Aden accounting for 43% of the overall total. By 2017, the year-end figure had reduced to 180 incidents, with notable hotspots in Indonesia (24%), Nigeria (18%), the Philippines (12%), Venezuela (7%) and Bangladesh (6%).

Piracy: definitional issues

20.9 Cases concerned with the definition of piracy in marine insurance policies and other commercial contracts have often considered, but not found themselves constrained by, definitions from criminal and public international law. The orthodox approach is to treat it as a question of contractual interpretation, albeit one informed by the norms of both criminal and public international law. 20.10 The leading decisions on the meaning on piracy for the purposes of marine insurance are Republic of Bolivia v. Indemnity Mutual Marine Assurance Co, Ltd 10 and The Andreas Lemos.11 In the Republic of Bolivia case, Pickford J. was concerned with goods seized whilst in transit on a voyage on the Amazon, in a region on the Brazilian/Bolivian border. The insured cargo was seized by armed men hostile to the establishment of Bolivian control over the region, as the vessel carrying the goods was also shipping supplies intended for the Bolivian authorities. In determining the meaning of the word piracy within the “warranted fc&s” Clause, and having reviewed competing definitions in criminal and public international law texts, he stated:

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… I am not at all sure that what might be piracy in international law is necessarily piracy within the meaning of the term in a policy of insurance. 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; and I think that, looking at it in that way, one must attach to it a more popular meaning, the meaning that would be given to it by ordinary persons, rather than the meaning to which it may be extended by writers on international law.12

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