In January 2024, the English Supreme Court confirmed in The Polar that the mere fact that charterers paid additional insurance premiums for cover taken out by shipowners to transit the Gulf of Aden did not equate to an “insurance code” covering all parties to a voyage charterparty (“Charter”). This meant that the contractual parties could seek compensation from each other rather than just look to the insurances. 

Insurance codes have been recognised in only two cases by the English courts, once when construing a demise charter (The Ocean Victory (2017)) and a time charter (The Evia (No.2) (1983)).  The Evia (No.2) is the only non-joint names insurance shipping case where a code has been acknowledged.

The Polar required the courts to assess, for the first time, whether a code was established by a voyage charter and bills of lading incorporating charterparty terms.

Shipowners had paid a ransom of USD7.7m to pirates to release the vessel and cargo.  Their subrogated insurers claimed a contribution in General Average from cargo interests, lawful holders of the bills.

Cargo interests denied liability to contribute given the supplementary insurances that shipowners had purchased.  As the additional insurance premiums had been paid for by charterers, cargo interests argued that there was an insurance code, which barred subrogated claims.

In arbitration, the tribunal agreed and held that the code extended to cargo interests given that the bills incorporated the charterparty clauses. 

On appeal, the Commercial Court and subsequently the Court of Appeal recognised the code as between shipowners and charterers but rejected the argument that cargo interests could benefit from it.

The Supreme Court dismissed cargo interests’ appeal, holding that there was no express or implied code in the charterparty, nor any clear agreement that shipowners had relinquished their right to claim GA.

The Court also rejected shipowners’ argument that they could have refused charterers’ orders to sail via Suez, holding that there was clear agreement to go via Suez, the risks of Somali piracy were not new, and nothing of substance had changed since the charter was agreed.  These comments are relevant to the wider debate currently taking place about whether shipowners are entitled to refuse charterers’ orders to sail via the Gulf of Aden and Red Sea.