The shipowner paid the ransom. The bill still went to the cargo owner

Dark Stories — Episode #15

Somali pirates held a tanker for ten months. The shipowner paid a $7.7 million ransom, and in 2024, the UK Supreme Court ruled that the cargo owner must still cover a portion of that sum, even though they had paid their own piracy risk premiums.

A shipper pays an insurer for piracy risks on the route through the Gulf of Aden. Three court instances later, they learn that a premium is not the same as an exemption from liability. What does this mean for a Polish importer currently insuring cargo traveling through the Red Sea?

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St. Petersburg, September 2010. The tanker MT Polar, owned by Herculito Maritime, is chartered to Clearlake Shipping to transport 69,493.28 metric tons of fuel oil to Fujairah or Singapore. Six bills of lading are ultimately held by Gunvor International BV, a Dutch trader that becomes the receiver of the entire cargo in Singapore. The charter party (BPVOY4 form) includes a war risk clause covering piracy and a "Gulf of Aden clause": the charterer covers additional insurance premiums for kidnapping and ransom risks, up to a limit of $40,000.

On October 30, 2010, the Polar is seized by Somali pirates. The ship is returned to its owner only after ten months, on August 26, 2011, following the payment of a $7.7 million ransom. The shipowner declares general average and demands a proportional share of the costs from the cargo owners; the statement of adjustment (the settlement of losses resulting from the ship's casualty) shows that the shippers' share exceeds $4.3 million.

Gunvor refuses to pay. Their argument: since the charterer had paid war risk and kidnapping premiums in advance, the charter clauses created a closed "insurance fund" from which the shipowner could satisfy their claims solely from insurers, not from the cargo owner.

The core of the dispute

The question is twofold. First: did the charter party itself create a "complete code" for settling piracy losses, excluding claims for general average? Second: even if such a code existed between the shipowner and the charterer, did the general clauses incorporating charter terms into the bills of lading automatically transfer it to Gunvor, who was never a party to the charter?

This distinction has practical significance: the charter binds the shipowner and the charterer, but the bill of lading governs the relationship with the cargo owner, and English case law treats the incorporation of charter clauses into bills of lading strictly.

The verdict

The case went through three instances. In 2020, Sir Nigel Teare (High Court, Admiralty) ruled in favor of the shipowner, finding no implied insurance fund in the charter. The Court of Appeal ([2021] EWCA Civ 1828, December 1, 2021, composed of Males LJ, Peter Jackson LJ, and Sir Patrick Elias) upheld this judgment. On January 17, 2024, the UK Supreme Court ([2024] UKSC 2, composed of Lord Hodge, Lord Hamblen—author of the judgment, Lord Leggatt, Lady Rose, and Lord Richards) dismissed Gunvor's appeal.

The court stated that there was no implied fund in the charter that would release the shipowner from the right to a general average contribution, and even if there were, it would only protect the charterer, not every subsequent holder of a bill of lading. Gunvor had to pay.

The case has additional significance today: since the Houthi attacks in the Red Sea, industry commentators have cited it as a precedent limiting the freedom of shipowners to invoke war risk clauses when changing routes—the right to deviate from a course is limited by other contract provisions indicating the intent to sail the shortest route.

A note for the Polish importer

This is not a matter of CMR, Hague-Visby, or COGSA. It is governed by English law and the York-Antwerp Rules—a privately developed set of principles for general average adjustment dating back to 1864, which are incorporated into contracts by the parties rather than being a binding convention. The Polish Maritime Code (Act of September 18, 2001) has its own section on general average, but in practice, like the legislation of other maritime nations, it refers to these same Rules, as almost every standard charter party and bill of lading (e.g., BPVOY4, Congenbill) includes them by default. Therefore, how much a Polish importer pays is determined by the content of the specific transport document, not the national code.

The conclusion is simple: paying a premium for war or kidnapping risks by the shipowner or charterer does not automatically exempt the cargo owner from the obligation to contribute to general average. These are two separate protections. A company importing goods through high-risk areas should verify whether its own cargo policy explicitly covers general average and piracy—rather than assuming that someone else in the chain has already paid for it.

The Moral

Just like in episode #12 of our series, where the liability limit under COGSA proved to be an illusory protection because the evidence went down with the ship, here the insurance coverage that seemed complete had a hole where no one had carefully checked the wording of the clause. A paid premium is not the same as a release from liability.

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Our previous publications from the "Dark Stories" series

• Why do we need FOB? - Dark Stories #1
• Really CIF? - Dark Stories #2
• Is EXW my shield? - Dark Stories #3
• A ticking time bomb in hold number 4 - Dark Stories #4
• To have or not to have copper? - Dark Stories #5
• Your container is intact. You'll pay anyway - Dark Stories #6
• Really DDP? — Dark Stories #7
• "Fake carrier fraud" - Dark Stories #8
• Not my wagon, not my fault? — Dark Stories #9
• How a loose cable sank a bridge and cost the shipowner $2.25 billion - Dark Stories #10
• Your cargo. Not your carrier - Dark Stories #11
• The evidence that went to the bottom - Dark Stories #12
• Concrete blocks at the price of copper - Dark Stories #13
• Pallet or parcel? - Dark Stories #14

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Sources

• Herculito Maritime Ltd and others v Gunvor International BV and others (The "Polar"), UK Supreme Court, [2024] UKSC 2, judgment of 17 January 2024 — supremecourt.uk
• Herculito Maritime Ltd and others v Gunvor International BV and others (The "Polar"), Court of Appeal, [2021] EWCA Civ 1828, judgment of 1 December 2021 — bailii.org
• Steamship Mutual, "MT Polar - UK Supreme Court guidance on application of war risks clauses" — steamshipmutual.com
• Mondaq / E. G. Arghyrakis & Co., "The Polar, Piracy In The Gulf Of Aden" — mondaq.com
• DMC (onlinedmc.co.uk), "Herculito Maritime v Gunvor International - Supreme Court Decision" — onlinedmc.co.uk
• Hill Dickinson, "Herculito Maritime Limited & others -v- Gunvor International BV & others [2021] EWCA Civ 1828" — hilldickinson.com
• HFW, "Shipowner's right to a GA ransom recovery confirmed by the court of appeal" — hfw.com

Factual and legal status as of August 2026. This article presents the findings and reasoning of the English courts in the case described and does not contain an assessment of the conduct of any party to the dispute. If you have any doubts regarding the scope of your insurance coverage or liability in a specific shipping transaction, we recommend consulting a lawyer specializing in maritime law.

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