Loss And Liability

Vessel hijackings for fuel theft are on the rise - particularly in Southeast Asia. Against this background, Tom Gorrard-Smith and Sam Sidkin of Clyde & Co review a recent UK Court of Appeal ruling which confirmed that shipowners are not liable for loss of cargo stolen by pirates

Despite the general decline in the price of oil, fuel theft is driving a rise in global ship hijackings by pirates, with it becoming increasingly prevalent in Southeast Asia, a trend evidenced in early May by the hijacking of the Ocean Energy in the Malacca Straits.

According to data from the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP), there were 183 reported piracy incidents in 2014 - a 10-year high - many of which related to fuel theft with pirates targeting small, low freeboard tankers, boarding vessels and siphoning off their fuel cargos.

Fuel theft has also been big business in West African waters for some time, in particular in the Gulf of Guinea. A legal dispute arising from an attack on the Valle di Cordoba, a tanker carrying a cargo of premium motor spirit from Abidjan to Lagos, in December 2010 has recently been determined by the Court of Appeal (CA)1 in London. Trafigura (the charterers) claimed against Navigazione (shipowners) in respect of the oil stolen in the incident.

In rejecting the charterers' appeal against the Commercial Court's earlier ruling, the CA clarified what constitutes an 'in transit-loss' for the purposes of a voyage charterparty. The in-transit loss clause (ITL clause) in question covered 'loss of a kind encountered on a normal voyage'. The CA confirmed that it did not therefore permit charterers to recover from the shipowners.

Background

The terms of the charterparty between the parties contained the following ITL clause:

'...Owners will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.5% and Charterers shall have the right to claim an amount equal to FOB port of loading value of such lost cargo plus freight and insurance due with respect thereto. In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port.'

The Hague-Visby Rules (the Rules) were incorporated into the charterparty. Article IV of the Rules provides exceptions to the carrier's liability for loss of, or damage to, the cargo. Significantly, loss resulting from piracy is excluded by these...