Page 38 - The Insurance Times August 2024

Westminster NV v Mountain, that the payment of a ransom Thus, the “Bunga Melati Dua” is an example of a marine
can be recovered as a sue and labour expense pursuant to insurance contract that did not clearly define when losses
section 78(4) of the MIA. It logically followed that the due to piracy could be claimed. Following this decision, it is
payment of a ransom could not be against public policy. important for contracts of insurance to deal with all
eventualities in the event of pirate attack in order to avoid
The Claimant also submitted that it could not or should not any uncertainty in their interpretation.
be under a duty of sue and labour to make a ransom
payment meaning that capture, which could only be In the absence of express agreement, where the recovery
resolved by way of a ransom payment, fulfilled the test of of a ship’s cargo remains a possibility, no claims for the total
an ATL. This argument was dismissed by the Court. The loss of the cargo can be made against the cargo insurer. It
Court's decision as to whether seizure by pirates amounted is up to the parties in insurance contracts to clearly define
to an actual total loss was based on a factual analysis of the the point at which a claim for the full insured value of the
likelihood that the vessel and her cargo would be recovered. cargo will be possible. In a case of refusing the ransom may
jeopardize the crew’s lives that such a risk cannot be taken.
The Court observed that the motive of pirates in seizing Although these payments would seem as an incentive for
vessels is generally to obtain the ransom payment, upon pirates, yet the solution is not refusing the payment and
receipt of which a vessel, its crew and cargo are released. jeopardize the lives and goods.
In light of this, in similar circumstances, it appears unlikely
that seizure by pirates could ever amount to an actual total With the scourge of piracy expanding deeper into the Indian
loss. However, the position may differ if the ransom demand Ocean, the Court of Appeal’s confirmation that a ransom
is a much greater proportion of the value of the ship and paid to a pirate is a timely decision and leaves in place one
cargo, or if there is any other reason to believe that a of the few options an owner has to secure the release of his
ransom will not be paid or, if paid, would not secure the vessel, cargo, and most importantly, his crew, in a safe and
release of the vessel. timely manner. To this extent the Court’s decision can only
be welcomed in these morally opaque times.
It is also interesting to note that an analogy was drawn by
the claimant between the payment of a ransom and the
payment of a bribe, in the context of its argument that the
payment of a ransom is an "illegitimate and unreasonable
means of recovery". Although the Court did not consider this
to be a sound analogy, the potential comparison could give
rise to a question of whether, once the Bribery Act 2010
(the "Act") comes into force, ransom payments are illegal
under this Act.

The Court was not directly concerned with the application
of the Act. However, the Court observed that there is no
legislation expressly precluding the payment of a ransom
and to do so is, therefore, not illegal, although "bribery or *I am thankful to Dr.S.Mukherjee, a Maritime Legal Expert
constructive bribery may well be". It commented that the and International Investigator for Maritime Fraud for his
payment of a ransom in these circumstances is prima facie advice
not a bribe, "done for the purpose of obtaining an improper
advantage". This draws a direct comparison with the Act, Dr.Soumi Mukherjee completed her Graduation in Mass
which defines as an offence a situation where financial Media and Masters in Mass Media from University of
advantage is offered or given to induce or reward the Mumbai, later completed her Ph.d. She is interested in
improper performance of a function or activity, or where Investigative Journalism related with History, Geography,
the acceptance of the advantage itself constitutes improper Zoology etc. She is currently serving in Media Officer
performance. with International Police Organization.

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