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Incorporation – Gulf of Aden clause in charterparty requiring charterers to pay for P & I Kidnap Risks and Ransoms cover up to a maximum of 40 000 USD – even if such obligation implied that owners would not seek general average contribution for ransom paid to pirates from charterers – and even if the Gulf of Aden clause was incorporated in bills of lading, no implication in bills of lading that owners would not seek general average contribution from holders

The facts

In 2010 the mv POLAR was engaged on a voyage from St. Petersburg to Singapore with a cargo of 69,493.28 mt of fuel oil. In the Gulf of Aden the vessel was seized on 30 October 2010 by Somali pirates and held for ransom. She was released on 26 August 2011 following payment of a ransom of US$7,700,000. Some cargo was extracted during the period of seizure but ultimately the balance of the cargo was delivered in Singapore. General average was declared, the cargo underwriters provided a general average guarantee and the cargo owners provided a general average bond. A general average adjustment was issued pursuant to which US$4,829,393.22 was due from the cargo owners to the shipowners.

The voyage charterparty gave charterers the option of the Suez canal, Gulf of Aden route. The Gulf of Aden clause provided that time awaiting an escort or protection team shall count (half time) against used laytime or demurrage if on demurrage. It also provided that additional costs incurred by reason of entering a convoy or picking up a protection team were to be shared 50/50 between Owners and Charterers. Finally, any additional insurance for matters such as P&I Kidnap Risks and Ransoms were to be for Charterers’ account subject to a maximum of $40,000.

Six bills of lading were issued, dated variously 29 and 30 September 2010 and 2 October 2010. The shippers were Warly International Ltd and the consignees BNF Paribas (Suisse) SA. The bills were signed by the master.

Bills 1-5 provided on their face as follows:

“pursuant and subject to all terms and conditions, liberties and exceptions as per TANKER VOYAGE CHARTERPARTY indicated hereunder, including provisions overleaf.”

The sixth bill of lading was in a different form and provided on its reverse as follows:

“All terms and conditions, liberties and exceptions of the Charterparty, dated as overleaf, including the Law and Arbitration Clause are herein incorporated.”

All 6 bills were held by the claimant, a corporation linked to the charterers, Clearlake – this link was not mentioned in the judgments and had no effect on the outcome.


Timothy Young QC, Dominic Kendrick and Simon Gault held that the Gulf of Aden clause was incorporated in the bills of lading; in the charterparty this clause had the effect that the owners could not look to the charterers for a general average contribution for the ransom; incorporated in the bills of lading, the clause had the same effect.

The arbitrators reasoned that, analogous to the situation in the Evia 2, a safe port case, an obligation imposed on the charterers to insure or pay for insurance meant the owners impliedly gave up their right to be indemnified by the charterers for the occurrence of an insured peril.

In an appeal under section 69, leave to appeal having been given by Andrew Baker J, Sir Nigel Teare agreed that owners could not look to charterers for a general average contribution. He differed from the arbitrators that incorporation imposed on the bill of lading holders liability for the Kidnap Risks and Ransoms cover. This meant that the Evia 2 implication could not be made and the owners could look to the holders for a contribution.

Males, Peter Jackson and Sir Patrick Elias LJJ doubted whether charterers were exempted from a general average contribution, but even if they were, this did not apply to the holders.


Both courts referred to the useful summary on the law of incorporation in Scrutton 24th edition.

Despite the incorporation clause being wide enough and the target provision being germane, thus satisfying the requirements for incorporation, the essential difference between a charterparty between immediate parties and bills of lading between remote parties had to be borne in mind. The bills had to be interpreted on their own and certain aspects of incorporated clauses might be not be applicable to bill of lading holders.

Lucid judgments in both courts. Result seems correct.



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