The Polar: charterparty liable for both, insurance premium and ransom
Herculito Maritime Ltd and others v Gunvor International BV and others [2024] UKSC 2 (also known as “The Polar”) 17 January 2024
In its judgement in Herculito Maritime Ltd and others v Gunvor International BV and others [2024] UKSC 2 (also known as “The Polar”) handed down on 17 January 2024, the UK Supreme Court determined that shipowners were able to recover from the respective cargo interests a general average adjustment of US$5,914,560 in respect of a ransom payment to pirates, despite the fact that a Kidnap and Ransom insurance was taken out by the shipowner and the premium in respect of that insurance was paid by the charterer.
On 30 October 2010, MT Polar (the vessel) was transiting through the Gulf of Aden laden with a cargo of fuel oil, on its way from St Petersburg to Singapore, when it was seized by Somali pirates. The vessel was held captive for ten months, before the payment of a US$7.7m ransom by or on behalf of the vessel owner secured the vessel’s release.
The shipowner declared general average but the cargo interests who held the bills of lading denied any liability to contribute to the ransom on the basis that it was the charterer who had the obligation to pay additional war risk premium for transit through the Gulf of Aden. In these circumstances, the parties agreed to look to insurers rather than to each other in the event of loss or damage covered by the insurance. An attempt was made to rely on Kodros Shipping Corp of Monrovia v Empresa Cubana de Fletes (The Evia (No 2)) [1983] 1 AC 736, the only non-joint names insurance shipping matter and a time charter case in which there was held to be an insurance code or fund.
Contrary to the contentions of the cargo interests, Lord Hamblen (with whom Lord Hodge, Lord Leggatt, Lady Rose and Lord Richards agreed) decided that there was no insurance code or fund agreed in the charter, taking into account the criteria in The Evia (No 2).
The result of the decision is that the charterparty who had been paying contributions to insurance premiums in respect of the Kidnap and Ransom insurance held by the shipowner remained liable for the ransom payment in accordance with the provisions of the charter.
In delineating the rights of shipowners and obligations of charterers where a vessel had been held to ransom, this decision acts as a timely reminder to parties in charterparty contracts and/or contracts for the carriage of goods by sea to clearly state any agreed rights of recovery or subrogation between the parties in respect of loss or damage covered by insurance. This is particularly important amidst continuous piracy activities in the Gulf of Aden and the ongoing war in Ukraine now nearing the conclusion of its second year.
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