Dry Log Bulk Carriers v Phaethon International Co SA

Under the BIMCO Piracy Clause 2009, “additional insurance costs” means the premiums payable for insurance cover actually purchased. In a subcharter, the expression does not extend to sums which a disponent owner has agreed to pay a head owner unless those sums correspond to insurance costs incurred by the head owner. The claimant must also prove that the contractual trigger occurred: either the owners’ underwriters required additional premiums or additional piracy cover was necessary. Debit notes evidencing only payments between owners are insufficient.

The claimant, a disponent owner, appealed under section 69 of the Arbitration Act 1996 from an award of maritime arbitrators. The vessel had been ordered through the Gulf of Aden under a time charter incorporating the BIMCO Piracy Clause 2009.

The claimant sought reimbursement of US$60,000 said to represent additional kidnap and ransom insurance costs. It relied on debit notes issued by the head owners, but produced no evidence of the sums charged or paid to underwriters. The arbitrators rejected the claim. The central issue was what documentation and proof the clause required for reimbursement.

1. Appeal dismissed. The arbitrators’ conclusion that the claim failed for want of proof was upheld.
2. The phrase “additional insurance costs” had to be construed in the context of the Piracy Clause as a whole. It referred to the costs of purchasing additional insurance cover, namely premiums payable to the underwriters, whether under existing insurance or newly arranged insurance. It did not include sums payable by a disponent owner to a head owner which did not correspond to costs incurred by the head owner in obtaining piracy cover.
3. The fact that the charter was a subcharter, and that this was known to the charterers, did not justify a broader construction. The comparison with the War Risks Clause did not assist because that clause dealt only with additional premiums under insurance already effected, whereas the Piracy Clause also addressed cases where additional cover was necessary.
4. The fixture recap’s provisional estimates for piracy costs did not create a binding obligation. The references to approximate amounts, a reference-only provision and “without guarantee” prevented those figures from altering the meaning of the Piracy Clause.
5. The claimant had failed on two related grounds. It could not prove that it had paid additional insurance costs within the proper meaning of the clause. It also could not prove either that the underwriters had required additional premiums or that additional insurance cover had been necessary. Payments evidenced only by debit notes between the disponent and head owners were insufficient.
6. The court exercised its jurisdiction under section 69(3)(c) of the Arbitration Act 1996 to decide the question of general public importance, recognising the importance of court decisions to the development of commercial law even where the appellant might not obtain substantive relief.

• Maritime arbitration: The arbitrators dismissed the claimant’s reimbursement claim in an award dated 9 May 2016.
• High Court (Commercial Court): Teare J granted permission to appeal on 8 August 2016. Mr Justice Leggatt dismissed the appeal.