On 17 January 2024 the Supreme Court handed down judgment in Herculito Maritime Ltd v. Gunvor International BV (the "Polar") [2024] UKSC 2, which considered the ramifications of a piratical seizure in the Gulf of Aden on insurers, owners, charterers and cargo interests holding the bills of lading. The court considered whether the charter contained an implied insurance code, incorporation from the charter into bills of lading and manipulation of wording.
Guy Blackwood KC led Oliver Caplin, Twenty Essex for the successful shipowners, their H&M and their K&R underwriters instructed by Richard Neylon and Jenny Salmon of HFW (London).
Implications and contemporary relevance
For the first time, the Court identified the juridical basis on which an implied insurance code arises as a matter of construction in a contract, by which parties agree to look solely to insurers as the avenue of recourse and not to their contractual counterparty. An insurance code was "akin to a necessarily implied term and involves a similarly high threshold". That high threshold was not met. This has implications for contracts which provide that one contractual party is obliged to pay insurance premium, including charterparties, construction/ finance contracts and commercial leases.
The Supreme Court approved the decision of the Court of Appeal in The Product Star and dicta contained in The Paiwan Wisdom. As a consequence, in charterparties containing an agreement to proceed via Suez and necessarily the Gulf of Aden/ Red Sea, the shipowner cannot exercise general liberties to deviate and proceed around the Cape of Good Hope in order to avoid war risks unless there has been "a change in the nature of the piracy risk, or a change in its degree sufficient to make it qualitatively different".
This is of immediate contemporary relevance in the context of attacks by the Houthi movement on commercial vessels in the Gulf of Aden/Red Sea and the present deterioration of geopolitical circumstances in the Middle East more widely.
For the first time, the Court gave detailed consideration to whether a clause other than an arbitration or jurisdiction clause was incorporated from a charterparty into a bill of lading by general words of incorporation. The question to be addressed was whether the clause "directly relate[s] to shipment, carriage and delivery". Whilst not changing the law on incorporation or manipulation, the judgment contains a concise but wide-ranging analysis of the principles, which ought to limit the need to refer to older authority.
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