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I wondered how long it would be before the professional criminals got involved with this ...kinda surprised that it took this long!
Original story here :
http://www.businessi...SUE01/307269980
Ransom dispute may alter response to pirates' demands
Shipowner, cargo firm spar over sharing ransom in hijacking
LONDON—A ransom payment dispute between a U.K. shipowner and a Chinese cargo shipper could significantly affect how insurers and others pay to release ships hijacked by pirates, legal experts and other observers say.
On April 6, Somali pirates hijacked the MV Malaspina Castle, which was on its way to China from a Russian port on the Black Sea. On May 9, the pirates released the ship for $1.8 million in ransom.
Hangzhou Cogeneration Import and Export Co. Ltd., a Chinese firm that shipped 30,000 tons of iron on the Malaspina, refused to contribute to the ransom. London-based shipowner Navalmar (U.K.) Ltd. took Hangzhou Cogeneration to arbitration, according to legal documents.
The arbitration is taking place in London, where the details and results of such cases are not released publicly. But Navalmar filed a related action in U.S. District Court for the Southern District of New York, which said the hijacking cost the firm $3.6 million. In addition to the ransom, Navalmar paid $512,000 to negotiate and deliver the ransom and $75,000 to insure the ransom during delivery, according to the complaint, which also said the firm anticipates $500,000 in claims from crew members.
The case is important because it could cast doubt on the largely informal process by which many shipowners, charterers, shippers and their insurers have been paying for ransom, observers say. A shipowner without separate kidnap and ransom insurance typically pays the ransom and then seeks reimbursement contributions from the various interests involved in the ship's voyage, under a concept known as "general average."
A general-average declaration means the ship had to incur an extraordinary expense to save it from peril, and the owner, cargo owner and other interests—and their insurers—should contribute their proportionate share as beneficiaries of the ship being saved. A general-average adjuster determines how much each interest owes.
Maritime attorneys say numerous court cases have established that a pirate hijacking qualifies as a general-average act. But marine insurance experts say, in many piracy cases, those involved agree on their contributions without involving an adjuster, avoiding a potentially costly and lengthy process.
Navalmar paid $25,000 in average adjuster fees and expenses for the Malaspina, according to court records.
"There is so far relatively little consensus or established practice," Jonathan Spencer, a New York-based average adjuster with Spencer Co., said during a June panel discussion at the Marine Money conference in New York. "A number of claims have been settled with (general-average adjustments)," he said. "A lot of incidents have also been settled on the basis of a more informal pooling of the ransom between the ship and cargo interests."
Some shipowners buy separate K&R insurance, which reimburses the owner for the ransom and all related expenses. But that insurance can be expensive: between $16,000 and $20,000 for a single voyage through areas beset by Somali pirates, according to industry observers. It is impossible to know how many shipowners buy K&R cover because policyholders are not permitted to reveal that they have the insurance, but observers say many shippers rely on general-average contributions to help pay for ransom, instead of K&R insurance.
For the Malaspina hijacking, a general-average adjuster determined Hangzhou should contribute $2.3 million—64% of total costs, according to Navalmar's complaint.
It is not known on what basis the Chinese cargo shipper is disputing that charge. It's possible the shipper is disputing only part of the charges; Mr. Spencer said he thought some of the expenses were not properly included in the general-average adjustment.
John Woods, a New York-based partner with law firm Clyde & Co. U.S. L.L.P. who has handled piracy cases, said he could imagine a cargo interest arguing its general-average obligation was nullified for a ship made "unseaworthy" by traveling through pirate-infested waters without proper safeguards.
"A year ago, it would have been clear-cut that shipowners were not expected to take steps like arming their ships," Mr. Woods said. "Now the waters are a little murkier because more owners are in fact either hiring private companies or otherwise arming their ships."
Observers wonder if the Malaspina case could encourage more shipping interests to resist informal ransom agreements and, instead, push for a formal general-average adjustment or dispute a general-average adjustment in arbitration, as Hangzhou has done.
"If there start to be decisions that come from courts or arbitration panels holding that payment of ransom is not a general-average act, you can see cargo interests not stepping up and paying," said Bruce G. Paulsen, a New York-based attorney at Seward & Kissel L.L.P. "We haven't gotten to that point (yet). I don't know if this case will get us there. It could."
Even if the arbitration panel were to side with Navalmar, observers say the dispute underscores the risk of relying on general-average contributions to cover ransom costs. They say it could take a long time, and potentially a legal battle, before getting repaid.
It "could call into question those that are not buying K&R cover, but relying on recovery (through) general average sometime after the detention is over," Mr. Paulsen said. "They may want to think twice."
Original story here :
http://www.businessi...SUE01/307269980