Herculito Maritime Ltd and Others v Gunvor International BV and Others

Heard on 4 and 5 October 2023

Lord Hamblen ( with whom Lord Hodge, Lord Leggatt, Lady Rose and Lord Richards agree):

On 30 October 2010 MT POLAR (“the vessel”) was seized by Somali pirates while she was transiting the designated ‘High Risk Area’ in the Gulf of Aden off the East Coast of Africa during a voyage from St Petersburg to Singapore laden with a cargo of fuel oil. The vessel was held captive for ten months before being released on 26 August 2011 following the payment of a ransom of US$7,700,000 by or on behalf of the vessel owner (“the shipowner”) – the respondent to this appeal.

General average was declared by the shipowner and in due course a general average adjustment was issued of which the ransom payment formed a major component. The adjustment concluded that US$5,914,560.75 was due to the shipowner from the respective cargo interests (“the cargo interests”) – the appellants on this appeal.

The cargo interests contend that they have no liability in general average in respect of the ransom payment. They submit that, on the true construction of the bills of lading, the shipowner's only remedy was to recover the ransom payment under the terms of additional insurance cover which had been taken out in relation to such risks pursuant to the terms of the governing voyage charterparty, the premium for which was payable by the charterer.

The principal issues which arise on the appeal are (1) whether on the proper interpretation of the voyage charter, and in particular the war risk clauses and the additional Gulf of Aden clause, and/or by implication, the shipowner was precluded from claiming against the charterer in respect of losses arising out of risks for which additional insurance had been obtained pursuant to those clauses; (2) whether all material parts of those clauses were incorporated into the bills of lading; (3) whether on the proper interpretation of those clauses in the bills of lading and/or by implication the shipowner was similarly precluded from claiming for such losses against the bill of lading holders; (4) if necessary, whether the wording of those clauses should be manipulated so as to substitute the words “the Charterers” with “the holders of the bill of lading” in the parts of those clauses allocating responsibility for the payment of the additional insurance premia.

The dispute was referred to arbitration and in an award on preliminary issues dated 8 January 2020 (“the Award”) the arbitrators (Timothy Young QC, Dominic Kendrick QC and Simon Gault) upheld the cargo interests' case on issues (1) to (4). They held therefore that the cargo interests did not have to contribute to general average. On appeal Sir Nigel Teare agreed with the arbitrators on issues (1) and (2) but disagreed with them on issues (3) and (4) and so allowed the appeal – [2020] EWHC 3318 (Comm), [2021] 1 Lloyd's Rep 150. The Court of Appeal (Peter Jackson LJ, Males LJ and Sir Patrick Elias) dismissed the appeal – [2021] EWCA Civ 1828, [2022] 1 Lloyd's Rep 375. They reached the same conclusion as the judge on each of the issues, save that they expressed no concluded view on issue (1). They therefore held that the cargo interests did have to contribute to general average.

By a fixture recap dated 20 September 2010 (“the charter”) the vessel was chartered to Clearlake Shipping Ltd (“the charterer”) for a voyage from Tallin/St Petersburg to 1 safe port Fujairah or, in charterer's option, 1/2 safe port / ship to ship locations in the Singapore area. The charter incorporated the BPVOY 4 form, including clause 39 “War Risks” as amended in the fixture recap (“clause 39”), and various additional clauses, including the “War Risk” clause (“the War Risk clause”) and the ‘Gulf of Aden’ clause (“the Gulf of Aden clause”). Immediately below the applicable freight rates agreed for Fujairah and Singapore it was stated: “All above via Suez with the Suez costs to be for Owners account”. The freight rates were therefore agreed on the basis that the voyage would be via Suez.

Six bills of lading, numbered respectively 1–5 and 084VI (“the bills of lading”) were issued by the vessel's master, dated variously 29 and 30 September 2010 and 2 October 2010, recording shipment at St Petersburg of a total cargo of 69,493.28 mts of fuel oil (“the cargo”) for carriage to Singapore “for orders”. The shippers under the bills of lading were Warley International Ltd, part of the Rosneft group. The consignees were stated to be to the order of BNP Paribas (Suisse) SA. It is common ground that Gunvor International BV (“Gunvor”) were the lawful holders of all six bills of lading at all material times and were the owners and eventual receivers of the entire cargo in Singapore.

The direct geographical route for the contractual voyage from St Petersburg to both Fujairah and Singapore was via Suez and the Gulf of Aden. The Gulf of Aden was designated a “High Risk Area” for the purposes of marine insurance. The arbitrators found that it was an “area well known for the risk of piratical attack and seizure for ransom” (para 88 of their award).

Before the vessel entered the Gulf of Aden ‘High Risk Area’ the shipowner took out Kidnap and Ransom (“K&R”) insurance with Griffin Underwriting Ltd for a single voyage not exceeding 14 days from 25 October 2010. The geographical limits of the K&R insurance were “one voyage from Suez to Singapore including one Gulf of Aden transit …”. The K&R insurance provided cover of up to US$5m in respect of (among other things): “Ransom which has been surrendered under duress”. It also contained the following statement by the underwriters: “We waive all rights of subrogation against other marine and/or marine war risks policies”. (This was a provision upon which the arbitrators placed significance but it has not been relied upon on the appeal, it being recognised that it does not affect the parties' rights under the charter.)

The shipowner also paid an additional premium to extend their annual Hull & Machinery and War Risk insurance to cover the vessel's proposed transit through “current Joint War Committee Listed Areas” (including the Gulf of Aden) for a period not exceeding 14 days in total. The shipowner had standard annual Hull & Machinery and War Risk insurance on (inter alia) Institute War and Strikes Clauses Hulls – Time (1 October 1983). As with all such insurances, various geographical areas were excluded unless an additional premium was paid.

On 30 October 2010, during the voyage from St Petersburg to Singapore, the vessel was seized by Somali pirates “while she was transiting the designated ‘High Risk Area’ in the Gulf of Aden off the east coast of Africa” (para 1 of the Award and para 6 of the agreed Statement of Facts). The vessel was eventually released on 26 August 2011 following the payment of a ransom of US$7,700,000 by or on behalf of the shipowner.

Most of the cargo was intact. After diverting for repairs, supplies and re-crewing, the vessel continued her voyage and finally delivered the balance of the cargo at Singapore in October 2011.

General average was declared by the shipowner and before discharge of the cargo at Singapore a general average guarantee, dated 16 September 2011 (“the GA Guarantee”), was provided by cargo underwriters, and a general average bond, dated 28 September 2011 (“the GA Bond”), was provided by Gunvor. Both the GA Guarantee and the GA Bond are governed by English law, and provided expressly that any disputes should be referred to arbitration in London in accordance with the Arbitration Act 1996 and the London Maritime Arbitrators Association (LMAA) Terms.

In due course, a general average adjustment was issued which concluded that US$4,829,393.22 was due to the shipowner from the respective cargo interests.

Cargo interests denied that they were under any liability in general average in respect of the ransom payment and the shipowner commenced arbitrations in London under the GA Bond and the GA Guarantee. The same tribunal was appointed in both arbitrations.

The fixture recap provided “GA Arb London. English law” and set out various “Additional Clauses”. These included the Gulf of Aden clause (said to be “for this CP only”) and the War Risk clause.

The first paragraph of the Gulf of Aden clause provided that half of any time awaiting an escort or protection team or other protective measures would count against used laytime or (if applicable) as time on demurrage. The second paragraph provided that any additional costs of such measures, including time and bunkers, would be shared 50/50 between the shipowner and the charterer. The third paragraph addressed additional insurance premia and crew bonuses and provided:

“Any additional insurance premia (including, but not limited to, those in respect of H&M, crew, P&I kidnap risks and ransoms), crew bonuses (which to be in accordance with the international standard) shall be for chrtrs account. Max USD40,000 for charterer's account for any additional insurance premium except for crew bonus which to be max USD20,000 for charterers account.”

The War Risks clause provided that any additional premia payable in respect of war risks incurred by reason of the vessel trading to excluded areas not covered by the shipowner's basic war risk insurance were to be for charterer's account (it was common ground that for the Gulf of Aden this was subject to the...