London High Court Rules That Seizure by Pirates Does Not Place Vessel Off-Hire

In Cosco Bulk Carrier v. Team-Up Owning, [2010] EWHC 1340 (Comm) (June 11, 2010), the High Court of Justice Queen's Bench Division Commercial Court considered the issue of "whether detention by pirates, piracy or perhaps the effects of piracy entitled Charterers to put the vessel off-hire" under the charter party agreement with the owner of the vessel, the M/V SALDANHA. The arbitration tribunal first considering the issue unanimously held that hijacking by pirates did not fall within the relevant clause of the charterparty, and the Charterers appealed.

By charterparty dated June 25, 2008, the Owners of the M/V SALDANHA agreed to charter the vessel to the Charterers for a period of forty-seven (47) to fifty (50) months. On February 22, 2009, the vessel was seized by Somali pirates while sailing through the transit corrider in the Gulf of Aden. The vessel was held by the pirates in waters off the Somali town of Eyl until April 25, 2009, when the pirates released the ship. The Charterers refused to pay hire for the period between February 22 and May 2 (i.e. – the date where the vessel reached an equivalent position to the location at which she had been seized by the pirates). Owners commenced arbitration to recover the hire, plus the cost of bunkers, additional war risk premium and crew war risk bonuses.

The relevant clause in the charterparty provided that the vessel could be placed off-hire by the Charterers "in the event of loss of time from default and/or deficiency of men, stores, fire, breakdown or damages to hull, machinery, or equipment, detention by average accidents to ship or cargo, dry-docking for the purpose of examination or painting bottom, or by any other cause preventing the full working of the vessel . . ." The sole issue on appeal was whether the hijacking incident brought the Charterers within one or more of three clauses contained in the relevant provision of the charterer party:, i.e., whether the hijacking could properly be considered (1) detention by average accidents to ship or cargo; (2) default and/or deficiency of men; and/or (3) any other cause."

Mr. Justice Gross, writing the Approved Judgment for the Court, first found that the hijacking was not an "average accident", as the incident did not result in any damage to the vessel. The Court further agreed with the Tribunal's conclusion that the term 'accident' "requires lack of intent by all protagonists."  The Court next considered the Charterers' argument that a "default and/or deficiency of men" was present. Noting that this issue relied on assumed facts (i.e. – that the Officers and crew had failed to take recognized anti-piracy precautions before and during the attack), the Court found that a "default of men" nonetheless was not present. The Court noted that this phrase was intended to cover a situation where the Officers and/or crew refused to perform duties, not an act of negligence by a crew member or officer. Finally, the Court concluded that the phrase "any other cause" contained in the relevant charterparty provision should be distinguished from the phrase "any other cause whatsoever", which would have a more expansive meaning beyond the general context of the charter and clause. The Court then found that seizure by pirates is a "classic example" of a totally extraneous cause, not to be contained in the limited wording of "any other cause." 

Finally, the Court looked to a separate provision in the charterparty which ceased the Charterers' liability to pay hire in the event of a seizure, arrest, requisition, or detention "by any authority or at the suit of any person having or purporting to have a claim against or any interest in the Vessel."  The Court found that the plain language of this clause was not intended to cover seizure by pirates, and that if parties want to treat seizures by pirates as an off-hire event under a time charterparty, they can do so straightforwardly and expressly.

The appeal was dismissed.

Read a copy of the Court's decision

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