English High Court considers relevance of charterparty war risks insurance provisions to B/L holders' liability in GA

Herculito Maritime Ltd and Others v Gunvor International BV and Others (the "POLAR") [2020] EWHC 3318 (Comm)

The English High Court recently confirmed that bill of lading (B/L) holders were liable in general average (GA) despite terms in the charterparty allocating responsibility to the charterer to pay additional premiums for war risks and kidnap and ransom insurance. Cargo interests had argued that these terms were incorporated into the B/Ls and amounted to an agreement that owners would not claim from B/L holders if losses covered by those additional insurances arose.

The MT POLAR was hijacked by Somali pirates in 2010 and released some ten months later upon payment of a ransom. The shipowners declared GA, but cargo interests refused to pay their contribution. Cargo interests argued that the charterparty provisions requiring charterers to pay additional premiums for war risks and kidnap and ransom insurance for Gulf of Aden transits amounted to an agreement that owners would not claim against charterers for losses covered by those insurances. Cargo interests maintained that this agreement was incorporated into the B/Ls and that, as B/L holders, they could rely on it, thereby avoiding liability for GA contributions.

The High Court rejected that argument. Although the judge found that such an agreement did exist between owners and charterers and was incorporated into the B/L, he held that it was not appropriate to manipulate the word "charterers" to read "B/L holders" for the purposes of the bills. The judge noted that B/L holders were not responsible for paying the additional premiums in question, so they would not be paying the premiums on the one hand while also facing liability to owners in respect of the additional insured risks on the other. Therefore, there was no agreement by owners not to claim from B/L holders and the owners' claim could proceed. 

The judgment is consistent with market practice and how claims are administered in a war risks context. Cargo interests routinely insure their own liability in GA in any event. Of course, in any particular case, the rights and obligations of the parties to the B/Ls will depend on their terms.

HFW represented the successful appellant owners and their insurers. Cargo interests are appealing this judgment. Read more HERE.