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Shipping – Who Bears Loss of $7.7 Million Ransom Paid to Somali Pirates?

Piracy on the high seas is always a risk in some parts of the world and ransoms paid in order to recover ships and cargos can be very substantial. A Court of Appeal case arising from a hijacking in the Gulf of Aden provided important guidance on the question of where such losses should fall.

A merchant vessel loaded with almost 70,000 metric tonnes of fuel oil was voyaging from St Petersburg to Singapore when she was seized by Somali pirates. She was held captive for 10 months before being released, with her cargo largely intact, on payment of a $7.7 million ransom.

Citing the principle of general average, the vessel’s owner sought to recover about $4.8 million of that sum from cargo owners. An arbitration panel subsequently found that the cargo owners were not contractually liable to make any such contribution and that the shipowner was obliged to look solely to its insurance cover. That conclusion was, however, later reversed by a judge.

Dismissing the cargo owners’ appeal against that outcome, the Court found that the judge’s ruling accorded with both legal principle and commercial sense. On a true interpretation of contractual documents under which the voyage was undertaken, there was no proper basis for concluding that the shipowner had agreed not to look to the cargo owners for a contribution in the event of a ransom having to be paid.

14 December 2021
Last Updated
26 January 2023