PIRACY - Questions & Answers

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PIRACY Questions & Answers

Like all Clubs and other insurance providers, Gard has received and continues to
receive many and different questions concerning piracy, principally off the coast
of Somalia and in the Indian Ocean and the Gulf of Aden, but increasingly in
relation to piracy in the Gulf of Guinea, from clients and members. While no
two cases are identical and each case must be assessed on its own facts, we set
out below some of most frequently asked questions and the answers we have
given.

Q1: What is being done to reduce the risk of piracy in the Gulf of Aden
and off the coast of Somalia?

A1 Two resolutions passed by the UN Security Council (Resolutions 1816 and


1838) have empowered foreign naval and other military forces to suppress
piracy in the Gulf of Aden, including within Somali territorial waters. Multi-
national navy forces have been allocated to this task. An Internationally
Recognised Transit Corridor (IRTC) has been established in the Gulf of
Aden. This area is patrolled by warships from the Coalition of various
countries and from other countries, all of whom have sent naval assets to
the region. In addition, a number of states have offered the services on
board merchant vessels of armed Navy personnel. It should be noted
that the contractual terms on which such offers have been made are often
heavily weighted in favor of the state and against the shipowner. Such
terms, principally those offered by the French Navy, have been found not
to meet the International Groups minimum contractual requirements (see
also Q & A 4).

In March 2012, the European Union agreed to expand its mission against
Somali pirates by allowing military forces to attack land targets as well as
those at sea. In a two-year extension of its mission, EU defence ministers
agreed warships could target boats and fuel dumps. At that time, up to
10 EU naval ships were currently on patrol off the Horn of Africa. The
extension means they will stay until at least December 2014.

Numerous private security companies have also offered their services to


owners and operators. Gard will, upon request, review draft contracts
with PCASP (Privately Contracted Armed Security Personnel) to ensure
they comply with any cover(s) afforded by Gard to a client or member.

However, in spite of these measures, the risk of pirate attacks and


hijackings remains high, especially in the Indian Ocean. The pirates have
shown themselves to be capable of adapting their operations in response
to steps taken by naval forces and merchant vessels. Additionally, the
level and method of response to piracy incidents/attacks varies among the
international forces.

The Norwegian Shipowners Association recommends owners to notify the


Norwegian Maritime Directorate and the UK Maritime Trade operations
before passing through the Gulf of Aden.

Their contact details are:

Gard AS Piracy Q&A 1


Norwegian Maritime Directorate
Telephone: +47 52 74 5000
E-mail: security@sjofartsdir.no

UK Maritime Trade Operations (Dubai)


Telephone: +971 50 552 3125
E-mail (preferred): ukmtodubai@eim.ae

The Maritime Security Centre, Horn of Africa (MSCHOA) provides valuable


information and assistance, as well as being the appropriate
registration/reporting location under the BMPs. Their website is

http://www.mschoa.org/Pages/default.aspx

In early October 2011, NATO issued an updated Pirate Attack Group


(PAG) map. This can be found at:

http://www.shipping.nato.int/operations/OS/Pages/PAGmap.aspx

The NATO Shipping Centre (based at Northwood, UK) is able to provide


clients and members with wide-ranging operational information. This
information is updated regularly, in some cases, several times a day.
Members and clients may contact the Shipping Centre directly for such
information at:

Web: www.shipping.nato.int
E-mail: info@shipping.nato.int
Phone: +44 (0)1923 956574
Fax: +44 (0)1923 956575

Incidents of piracy should be reported to the International Maritime


Bureau, Kuala Lumpur:
Telephone: +603 2031 0014
E-mail: imbkl@icc-ccs.org

Q2: Where can I find guidelines for Owners, Operators and Masters for
protection against piracy and armed robbery in the Gulf of Guinea
region?

A2: The Round Table of International Shipping Associations (BIMCO, ICS,


INTERCARGO, INTERTANKO) have developed a set of Interim Guidelines
for Owners, Operators and Masters for protection against piracy and
armed robbery in the Gulf of Guinea region. These Interim Guidelines
have been supported and endorsed by the NATO Shipping Centre.

Although standalone in nature, the Interim Guidelines should be read in


conjunction with the existing industry guidelines that address the Somalia
based piracy problem, Best Management Practices for Protection against
Somalia Based Piracy (BMP4).

Copies of the Interim Guidance are available for download from the
Members area of the Intercargo website under Piracy. Alternatively,
copies can be obtained from Gard.

Gard AS Piracy Q&A 2


Q3: What is the scope of P&I cover for loss, damage or injury caused
by pirates?

A3: Piracy may be considered a marine risk or a war risk depending on the
terms and conditions of the war risk insurances for the ship. For
example, under English conditions (ITC), piracy has traditionally been
treated as a marine risk, although more and more insurers now seek to
exclude piracy from the standard hull and machinery cover and treat it as
a war risk. Under Norwegian conditions, however (Norwegian Marine
Insurance Plan (NMIP)), piracy is treated as a war risk. If it is a war
risk, the P&I cover will be subsidiary to the war risk cover. See Gard Rule
71. If it is a marine risk, the standard scope of cover is available under the
P&I insurance. For example, cover is available for the shipowners liability
for injury or death to crew members as a consequence of a pirate attack
on the ship, as well as for the shipowners legal liability to cargo owners
for loss or damage to cargo. See also comments in the Gard Guidance to
the Statutes and Rules, page 334 and Gard News Issue 192, pages 30
32.

It should be kept in mind that the facts of each case are likely to be
different. Therefore, Gard will assess the existence and availability of
cover on a case by case basis.

Reference should also be made to the International Groups FAQs. These


were last revised in August 2013 and can be found at:

http://www.igpandi.org/downloadables/piracy/news/Piracy_FAQs_28%20A
ugust%202013.pdf

Q4: Can a shipowner refuse to comply with an order from the time
charterer to transit the Gulf of Aden or the Indian Ocean on
account of protecting his ship, crew and/or cargo from pirate
attacks?

A4: There is no one answer to this question. The rights and duties of the
parties to relevant contracts of carriage or period employment, which will
commonly involve time charterparties, voyage charterparties and bills of
lading, will depend on the terms and conditions of those contracts, and
how they operate together, as well as the level of risk of pirate attacks
that is prevalent at the relevant time,which could be when the
employment order is given, the fixture date or the time the vessel decides
to avoid the Gulf of Aden or the Indian Ocean. Gard will help Members
with Defence cover to consider rights and remedies in this regard after
having reviewed the relevant contractual terms. A ship owner may also
have a (different) contractual relationship under a bill of lading with
cargo owners. This will also have to be taken into account when
considering choice of route.

Gard is aware of major ship owners who have taken the decision that,
unless contractually obliged to sail through the Gulf of Aden, all their
vessels will, for the foreseeable future, sail around South Africa. Other

Gard AS Piracy Q&A 3


major owners are, reportedly, considering taking a similar approach. Gard
is also aware of Owners, upon advice from Leading Counsel, have decided
to go via the Cape of Good Hope.

Charter party clauses specifically dealing with the rights and


responsibilities of owners and charterers in such a situation have been
developed by e.g. BIMCO.

Q5: What is Gards position if shipowners wish to place armed guards


on board their ships as a deterrent against pirate attacks during
transits in the Gulf of Aden or the Indian Ocean?

A5: Current public information suggests that, so far, no vessel with armed
private security guards on board has been hijacked (although many
vessels have been attacked). Insofar as this is correct, it would seem that
the use of armed private security guards may, up to now, have prevented
pirates getting on board and hijacking such vessels, although whether the
continued use of such armed guards will serve to escalate the level of
violence and thereby risks to personnel and property, remains to be seen
and continues to be debated in the industry. Gard has noted that many
shipping industry organizations, such as ICS and a number of Flag States
have changed their position from recommending against the use of armed
private security guards to being neutral. Gards position has also been
changed to neutral. A relatively small number of States have enacted
legislation which expressly permits the employment on board of armed
guards.

Ultimately, though, the type and scope of safety precautions is an


operational issue that each shipowner must consider and decide, given the
type of ship, cargo and trade. Gard remains of the view that having
armed private security guards on board does not, by itself, prejudice the
owners insurance cover with Gard, whether P&I, H&M, LOH or War H&M.
Members and clients are reminded that they should contact their Flag
State to ensure that the employment of private armed guards and/or the
use of armed force by such guards against pirates is not prohibited under
the Flag State regulations and would not otherwise represent a breach of
any statutory provisions of the Flag State. Gards Rule 8.1.f. may be
relevant here. Gard reserves the right to change its view if it is at odds
with that of co-insurers, reinsurers or other parties. It should also be
noted that the terms of the contracts offered to shipowners by a number
of States with naval assets in the region in exchange for them providing
armed service personnel to serve as guards on board ships have
previously been found to fall outside standard International Group cover
and thus were also outside Club cover. A special cover in relation to this
0contract has been arranged by Miller Insurance Brokers. Gards
underwriting department can assist in arranging such special cover.

On a practical level, members and clients should refer to the Industry


Guidance on the Selection of Privately Contracted Armed Security
Personnel (PCASP), approved by the IMO and updated in May 2012. The
revised MSC.1-Circ.1405-Rev.2 dated 25/5/12 and Guidance can be found
at:

http://www.imo.org/OurWork/Security/SecDocs/Documents/Piracy/MSC.1
-Circ.1405-Rev2.pdf

Gard AS Piracy Q&A 4


In addition, all clients and members are strongly recommended to follow
the Best Management Practices to deter Piracy in the Gulf of Aden and off
the Coast of Somalia. The current version is version 4 (August 2011).
This can be found at:

http://www.marisec.org/piracybmp.htm

Members should note that the International Group has advised that .a
causative failure to comply with the BMPs could prejudice a shipowners
right of recovery particularly in cases where cover is provided on a
discretionary basis. See paragraph 10 of the Groups FAQs.

Q6: What is Gard's attitude to the employment and presence on board


of unarmed security personnel?

A6: In principle, Gard has no objection to the employment and presence on


board of unarmed security personnel. Their employment and presence on
board will not, by itself, affect the P & I Cover and normally, they will be
treated as "other persons on board" in accordance with Rule 29 of the
Statutes & Rules. Ideally, such persons should sign an Indemnity
Agreement, the wording of which is available on request, or from the Gard
website in the Claims/Instructions/Forms section. More often, they will
be employed under a contract. Gard will evaluate all such contracts to
ensure they do not impose liabilities on the member which are considered
to be unacceptable and/or outside the scope of the cover.

Again, clients and members are strongly recommended to follow the Best
Management Practices to deter Piracy in the Gulf of Aden and off the Coast
of Somalia. The current version is version 4 (August 2011). This can be
found at:

http://www.marisec.org/piracybmp.htm

Q7: Does Gard recommend or endorse any particular form of contract


with private security companies?

A7: In March 2012, BIMCO released the GUARDCON contract. This has
become the industry standard contract for the employment of PMSCs in
the Gulf of Aden/Indian Ocean. However, an unamended GUARDCON is
not a suitable contract to use in West Africa/Gulf of Guinea. Therefore,
the International Group has developed an amended version of GUARDCON
for use in West Africa/Gulf of Guinea, called GUARDCON West Africa. This
was published in April 2014. Clients and members employing (armed)
security personnel in this area are recommended to do so only under this
contract.

Members and clients are reminded that GUARDCON does not represent a
recommendation by BIMCO or Gard for, or endorsement of, the use of
security guards on board vessels. Nor are security guards a substitute for
strict compliance with Best Management Practices. Placing security guards
on board a vessel should also only be considered after a risk assessment

Gard AS Piracy Q&A 5


has been carried out and the Master should be involved in the decision-
making process. However, the provisions of GUARDCON have been
reviewed by the International Groups Maritime Security subcommittee
and conform with Club cover and Pooling requirements. The use of the
unamended GUARDCON contract, or the GUARDCON West Africa, as
applicable, is, therefore, recommended. Further, provided that the
provisions of the GUARDCON contract relevant to P&I cover are materially
unchanged, it is not necessary for clients and members to seek prior
approval of such a contract from Gard. Clients and members are
reminded that all other draft contracts should be submitted to Gard to
ensure they do not prejudice the P&I cover.

Q8: Is a ransom payment covered by Gard?

A8: Under English law, the position is that a ransom payment to pirates (but
not to fund or support terrorism) appears to be regarded as not being
illegal and to be generally accepted as being a General Average expense,
which will be apportioned between the interested parties in accordance
with the values at stake. In such circumstances, P&I cover would not
respond in respect of the ransom payment itself, but may be involved,
pursuant to Rule 41 (a), if cargo interests proportion of GA is
irrecoverable solely by reason of a breach of the contract of carriage.
Under certain insurance conditions, notably English conditions, H&M cover
would respond, subject to deductible, in respect of the Ships proportion of
GA. Under certain other conditions, notably the NMIP, piracy is treated as
a war risk, not a marine peril, so unless the H&M cover includes war risks,
it would not respond. See also Q2 and A2.

Q9: As from 1/4/11, the existing High Risk Area surrounding the coast
of Somalia has been extended into the Arabian Sea and the North
Indian Ocean. This is now called the Extended Risk Zone.
Under previously amended CBAs IBF/POEA/Model Agreement,
certain crew were entitled to extra benefits (extra wages/bonus,
double disability/death compensation) when in transit through the
High Risk Area. These crews are now entitled to a bonus
equivalent to 100% of basic pay if the vessel on which they are
serving is attacked, on a day by day basis. Compensation for
death or disability is also doubled while passing through the
Extended Risk Zone. To what extent, if any, are such additional
costs/exposure covered by Gard?

A9: Extra wages/bonuses are considered to be an operational cost and thus


are not coverable. However, P & I cover is available under Gard Rule 27
for double compensation referring particularly to disability/death
compensation, provided the incident occurred during the passage through
the Extended Risk Zone. Some comments have been made with respect
to whether the incident giving rise to the disability/death must be caused
by a terrorist action. Whether or not a seafarer is entitled to double
compensation for an incident occurring in the Extended Risk Zone,
irrespective of the cause of any injury or death, will have to be evaluated
on the basis on the wording of the relevant Agreement(s).

Q10: To what extent is cover available under Gards Comprehensive


Charterers Liability Cover (SCC) in respect of a charterers liability

Gard AS Piracy Q&A 6


to pay compensation to the owner for liabilities, losses, costs and
expenses incurred as a result of the hijacking, capture or other
attack by pirates? Does it impact on the scope of cover whether or
not piracy is consider a war risk?

A10: Gards SCC is one of the widest available.

As far as charterers are concerned, piracy is not excluded from Gards


Comprehensive Charterers Liability Cover and liability that a charterer
member could incur as a result of piracy would be covered as per Rules
and terms of entry.

Cover for liability for damage to ships in areas declared as war risks
restricted zones by the war risk insurance market would be conditional
upon use of approved charter party terms as set out in the Certificate of
Entry. Information as to acceptable charter party terms can be obtained
from Gards underwriting department.

If a ransom payment is recoverable in GA, Gards Comprehensive


Charterers Cover would respond to a charterers liability to contribute to
GA on basis of bunkers and/or freight at risk, if not covered by other
insurances.

Q11: Will Gard assist or take the lead in any negotiations with the
pirates/hijackers?

A11: No. Gard does not have the experience or the expertise to do so. However,
there are a number of crisis consultants and/or London law firms who offer
such a service. Gard has no direct experience of such a service and
members and clients considering using such an organization may wish to
seek the views of ship owners/operators who have previously employed
such an organization.

10.4.14

DISCLAIMER

This note is intended to assist and clarify issues relating to the issue of
piracy in/around the Gulf of Aden and in the Indian Ocean and/or the
Gulf of Guinea. It is not intended to and should not be taken to provide
definitive answers in all situations. Readers should seek specific
guidance in specific situations. Everything stated in this note is stated
in good faith and to the best of the knowledge and understanding of the
contributors to it, but should not be treated as legal advice or as legally
binding on Gard in relation to any particular case or matter.

Gard AS Piracy Q&A 7

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