The Court of Appeal in London has ruled that a group of cargo owners owe money to a Greek shipowner for a ransom payment made to free a tanker from pirates in 2011.

The shippers — led by trader Gunvor — were contesting a ruling last year that they were liable for part of the $7.7m handed to Somali gunmen.

The cash was claimed back by owner Herculito Maritime as part of a general average settlement under the bills of lading, even thought the company had war risk and kidnap and ransom insurance policies.

The case arose from the seizure of the Paradise Navigation-managed, 73,000-dwt (built 2005), which was heading from St Petersburg in Russia to Singapore with a cargo of 69,500 tonnes of fuel oil.

The ship was hijacked on 30 October 2010 in the Gulf of Aden.

It was released on 26 August 2011, following payment of the ransom. One of the 24 crew members on board died of a stroke during captivity.

A London arbitration tribunal had found the cargo owners not liable, but this was overturned on appeal at the Commercial Court in December 2020.

Lord Justice Stephen Males said in the Court of Appeal judgment: “The risk of piracy and the potential need to pay a ransom were not only foreseeable but were foreseen by the parties to the bill of lading contract and dealt with expressly by them.”

‘Straightforward’

It would have been “straightforward” for the cargo owners to state that they were not to contribute in general average to a ransom, but they did not do so”.

Males said: “In realitym this is a case where both parties were insured against the risk of piracy and where allowing the shipowner to claim will mean that each set of insurers will bear its proper share of the risk which it has agreed to cover.”

He concluded that if an owner were not to be allowed a claim through the bills of lading, the loss would be borne entirely by that company’s insurers.

The cargo owners’ insurers would thereby “escape liability for a risk which they agreed to cover”.

He found the Commercial Court judgment accorded with legal principle and commercial sense.

Cargo owners now have to pay court costs of £95,000 ($126,500). Males also refused leave to appeal to the Supreme Court.

Specific

Some cargo was extracted by the pirates during the seizure, but ultimately the balance of the fuel was delivered in Singapore.

The shipowner later claimed $4.83m from the cargo interests, which refused to pay.

Herculito Maritime’s case hinged on the wording of the bills of lading and the charter contract with vessel operator Clearlake Shipping, part of Gunvor Group.

The decision is a rare instance of a successful appeal from a tribunal on a point of law.

Ince Group global head of admiralty Christian Dwyer and managing associate Rachel Bernie have previously said the decision is a reminder that owners should ensure their contractual arrangements accurately reflect the way in which the parties intend risk to be allocated for piracy losses.