Bergen

After an extraordinary meeting and in the light of the growing uncertainty in the region the Joint War Committee has moved quickly to amend the Listed Areas so the waters of the Persian Gulf and Gulf of Oman west of 58 degrees East are now seen as an area of perceived enhanced risk.

That amendment will take effect on 24th May 2019 and whilst it will mean that all vessels must notify underwriters if they enter the area, it will not necessarily mean an automatic increase in premium which will be determined on a ship by ship basis.

Speculation continues to swirl as to what and who caused the damage. In terms of the former, the considered view is some kind of charge (with anything from 5 – 50 kg of explosive) below the waterline delivered by divers or underwater drone. Very little information is coming out of the area itself and the UAE have strict rules on information leaking from their own enquiries. The question as to who may have done this has seen fingers pointed at some of the key actors in the area accompanied by the usual myriad of conspiracy theories. It is reported that DNK have suggested that the Iranian National Guard is behind this and their aim is to send a strong signal to the US (and presumably to the world) that it is easy to disrupt trade in the area without a formal blockade of the Straits of Hormuz. It may not have been known to the attackers whether the Norwegian tanker pictured above was laden but placing or triggering the device at the stern may have been part of a conscious decision to avoid pollution which would undoubtedly have had an impact on both sides of the Gulf.

The damage in these cases does not seem to have been significant although the financial losses may well be. Further, there does not seem to have been any loss of life or substantial cargo losses giving rise to third party liability claims. If similar attacks take place in the future then the outcome maybe different.

In terms of liability for pollution both UAE and Iran are parties to the 1992 Civil Liability Convention and no liability attaches to the owner from liability for pollution damage “…wholly caused by an act or omission done with intent to cause damage by a third party”. That exemption covers terrorism, sabotage or malicious acts against the ship. The emphasis is on “wholly caused” . Colin de la Rue is his book[1]argues that any failure to take appropriate security measures could give rise to a contributory cause which would see the shipowner lose his right to rely on the exemption. Now that we are seeing a move to Best Management Practice Guidelines applying world-wide, risk assessments will become a critical reference point in any pollution incident resulting from third party attacks.

No doubt for various intelligence agencies finding out who carried out the attacks is of huge importance as Iran and the US escalate a war of words and exchange bellicose rhetoric (on twitter!). For ship owners and their insurers it may not matter. The ITC War and Strikes Clauses (1/10/83) provide for cover for loss or damage caused by: “any terrorist or any person acting maliciously or from a political motive” and “war….or any hostile act by or against a belligerent power”. 

Putting aside the issue as to whether a state can commit an act of terrorism, in terms of cover it doesn’t seem that it will affect the ability to make a recovery whether those that carried out the act were motivated by politics or not. Under English law an attack like this will be terrorism if it was motivated by religion, ideology or politics. In other words a person who was acting for a political motive is likely to have committed an act of terrorism in any event. However, an assured only need show that a person acted with ill will or spite (the constituent parts of “malicious“) with view to committing damage to the ship. The recent SC decision in the B Atlantic looked at what constituted “malicious damage” in some detail. In that case the claim arose out of drugs being placed on the side of the hull and the Court concluded that those placing drugs on the side of the hull cannot have had as their aim a wish to damage or cause loss to the ship even if that was foreseeable. Even if the recent attacks were by members of the Iranian National Guard it is difficult to see why they wouldn’t be regarded as “any person” for the purposes of cover. That avoids a detailed analysis of whether this was a hostile act by a belligerent power.

For P & I Clubs the starting point is likely to be an exclusion for any liabilities incurred as a result of:  “war, civil war, revolution, rebellion, insurrection, or civil strife, or any hostile act by or against a belligerent power, or any act of terrorism; … mines, torpedoes, bombs, rockets, shells, explosives, or other similar weapons of war”. However, that may then be written back into the cover on an excess of loss basis (subject to deductibles) over and above the value of the ship which in many cases will be the limit of cover under any war P & I cover. It should certainly have insurance managers and brokers checking the insured values of the war risk cover they have in place.

[1]Shipping and the Environment Second Edition page 100