Reed Smith Client Alerts

Key takeaways

  • The UK Supreme Court recently gave judgment in The Polar, ruling that the cargo interests were liable for their share of a ransom payment claimed in general average.
  • Shipowners may need to consider the specific wording of their charters, including any war risks clauses, when assessing their rights and liabilities in war-affected areas.
  • The judgment has a limited impact on shipowners’ right to deviate in the face of potential Houthi attacks in the Red Sea, as the decision is largely based on the construction of terms.

Authors: Lianjun Li Nick Austin Keith H. Rowbory Alex Ngai Julie Wong Zicong Zeng, Leah Lei

On 17 January 2024, the UK Supreme Court handed down judgment in The Polar [2024] UKSC 2. The judgment addresses an issue of current relevance given the ongoing war risks issues in the Red Sea area.

Key facts

The vessel MT Polar was chartered for a voyage from St Petersburg to Singapore laden with a cargo of fuel oil.

The voyage charter contained a specific agreement that the voyage would take place via the Suez Canal, with the wording “All above via Suez with the Suez costs to be for Owners account”.

This necessarily required that the vessel would transit the Gulf of Aden, a known piracy risk area at the time. The charter incorporated the amended BPVOY 4 form, including a revised clause 39, “War Risks” (Clause 39) and various additional provisions, including a “Gulf of Aden” clause. Clause 39 gave the Owners considerable liberties to cancel or vary the performance of the charter if performance would expose the vessel to war risks.

On 30 October 2010, while transiting the Gulf of Aden, the vessel was seized by Somali pirates and held captive for 10 months until a ransom of US$7.7 million was paid. General average was declared by the Owners, including the ransom payment. Eventually the adjustment found that over US$5.9 million was due from cargo interests. Cargo interests disputed liability for their share of the ransom payment. The present appeal is an appeal brought by the cargo interests against the Owners.