The UK Supreme Court gives an interpretation of contractual terms related to war risks and additional insurance premiums

Summary

The United Kingdom (UK) Supreme Court considered the case of Herculito Maritime Limited v Gunvor International BV (The “Polar”), and in doing so providing an analysis involving maritime law and the interpretation of contractual terms related to war risks and additional insurance premiums. The decision discusses the application of legal principles from previous cases, such as The Evia (No 2) and The Product Star, to the specific terms of the charter involved in the case.

Background

The Claimant, Herculito Maritime Limited (“Herculito”), was the owner of the vessel “POLAR”. POLAR was engaged on a voyage from St Petersburg in Russia to Singapore with a cargo of fuel oil owned by the Defendant, Gunvor International BV (“Gunvor”), for which multiple bills of lading were issued. POLAR was then unfortunately seized by Somali pirates while transiting the Gulf of Aden which was known to be exposed to piracy risks. POLAR was only released after part of the cargo was extracted by the pirates, and payment of a ransom to the same.

Herculito made a claim against Gunvor for the ransom paid to the pirates as general average expenditure under the relevant bills of lading, on the grounds that these bills of lading had successfully incorporated certain terms in relation to additional War Risks premiums under the voyage charter. Of particular relevance, the charterparty and the bills of lading contained the following terms:

(i) Clause 39 of the charterparty provided (among other things) Herculito with the right to change the route or not continue with the voyage if POLAR were exposed to war risks.

(ii) Another clause in the charterparty, known as the “Gulf of Aden clause” – see footnote 1 – provided (among other things) that all additional insurance premiums payable by Herculito for War Risks and Kidnap & Ransom risks would be for the charterer’s account.

(iii) The bills of lading provided that the holders were to pay freight as per the charterparty, and they were also subject to “all terms and conditions, liberties and exceptions” of the charterparty.

The arbitration tribunal held that the proper construction of the aforementioned terms as a whole was such that the charterparty contained a “code” for the losses resulting from piracy risks in the Gulf of Aden area under which Herculito agreed to look only to their insurance provider to cover these losses and not claim any contributions from anyone else. The tribunal further held that Clause 39 and the Gulf of Aden clause were both successfully incorporated into the bills of lading, and therefore the aforementioned incorporated “code” prevented Herculito from making the present claim against Gunvor.

Herculito obtained leave to appeal to the High Court under s69 of the Arbitration Act 1996.

The High Court allowed the appeal against the tribunal’s decision and held that the contract of carriage contained in or evidenced by the bills of lading did not contain an agreement that Herculito was not to seek a contribution in general average from the holders of the bills in respect of the losses covered by the additional insurance taken out by Herculito.

An appeal was proffered to the UK Court of Appeal against the decision of the High Court and the Court of Appeal upheld the decision of the UK High Court. An appeal was filed to the UK Supreme Court from the decision of the UK Court of Appeal and the brief analysis of the decision of the UK Supreme Court is as follows:

Analysis

The Supreme Court focuses on several key points:

  1. Agreement to Pass Through Gulf of Aden: The Court discussed Herculito’s agreement to transit the Gulf of Aden, a known high-risk area for piracy, as specified in the contractual terms. It considered the implications of this agreement on Herculito’s rights under the charter, emphasizing that Herculito’s stipulated agreement to transit the Gulf of Aden may limit their ability to refuse to do so based on piracy risks.
  2. Obligation to Pay Additional War Risk Premiums: The Court also considered the specific obligation of the charterers to pay additional war risk premiums, noting the contractual arrangement for sharing costs and risks related to war risks. It highlights the importance of the charterers’ financial contribution to the insurance arrangements but emphasizes that this factor alone may not necessarily determine the existence of an insurance code or fund.
  3. Precedent from Previous Cases: The Court referenced previous legal precedent, such as The Evia (No 2) and The Product Star, to support its interpretation of the contractual terms in the current case. It draws parallels with similar cases and considers the reasoning and decision-making in those cases as supportive of its conclusions.

Conclusion

The decision provides a detailed examination of the legal and contractual principles at play in the specific case, effectively applying legal reasoning and precedent to the interpretation of the contractual terms involved. The decision is useful to, not only the UK, but to those countries that have adopted UK law for determining admiralty and maritime disputes and to those who prefer, as in this case, to use UK law as the law to determine their disputes.

The decision is available here.

The Court of Appeal overturns the High Court order blocking the 2.75% health levy and other provisions

The Court of Appeal delivered its ruling in the Cabinet Secretary for Health vs Joseph Enock Aura and ors., which was an application for a stay of execution and/or implementation of the orders of the High Court barring the implementation of the Social Insurance Health Fund Act, 2023, the Primary Health Care Act, 2023 (discussed on the following link, i.e., https://www.okadvocates.com/blog-details.php?title=10-the-primary-health-care-act) and the Digital Health Act, 2023 (discussed on the following link, i.e., https://www.okadvocates.com/blog-details.php?title=3-the-digital-health-act-2023). The court carefully considered the arguments presented by both the petitioner and the respondents and made several key findings.

First, the court acknowledged the serious and contentious nature of the constitutional and statutory issues raised in the original petition before the High Court. It recognized the potential impact on the public interest, particularly in relation to the implementation of healthcare-related statutes and the potential harm to citizens if the regulatory framework was suspended.

Second, the court addressed the jurisdictional issue raised by the respondent’s counsel, establishing that the court did indeed have jurisdiction to consider the application for a stay based on the notice of appeal filed against the orders of the High Court.
Third, the court assessed whether the petitioner had an arguable appeal and whether the appeal was likely to be rendered nugatory without the orders being granted. The court found that the appeal raised bona fide points of law and fact and that there was a real and present danger to the health rights of countless citizens, satisfying this requirement.

Finally, the court granted the motion for a stay of execution, suspending the orders of the High Court restraining the implementation and enforcement of certain statutes. The court also set out specific provisions of the Social Health Insurance Act that would remain suspended pending the hearing and determination of the appeal.

Overall, the decision demonstrates a careful consideration of the legal and public interest factors at play, and the court’s detailed analysis and reasoning provide a clear and reasoned basis for the ruling. Additionally, the decision, though it did not state so, was a victory for the doctrine of separation of powers. This is because these three legislations came from Parliament, the legislative arm of Government and as such, a High Court should ideally presume that a legislation is constitutional, until it is proved beyond a reasonable doubt to be unconstitutional. The presumption of the constitutionality of legislation by Parliament is a long-standing principle upheld by countries with a written Constitution, including Kenya.

The decision is available on the following link, i.e., http://www.okadvocates.com/blog/wp-content/uploads/2024/01/Cabinet-Secretary-for-Health-vs-Aura-and-ors..pdf.

The Primary Health Care Act, 2023

The Primary Health Care Act, 2023 (the Act) was enacted by the Parliament of Kenya on the 19th of October, 2023 and commenced on the 2nd of November, 2023. The Act aims to provide a framework for the delivery of, access to, and management of primary health care services and related purposes. It is organized into several parts, including preliminary, primary health care services, primary health care workforce, role of the national government in primary health care policy, management of primary health care services, and miscellaneous provisions.

The Act outlines the objects, interpretation, and definitions related to the Act, as well as the roles and responsibilities of various stakeholders involved in the delivery of primary health care services. It also establishes provisions for the recruitment and retention of community health promoters and the role of the Ministry responsible for health in providing policy direction and support for primary health care services. Additionally, the Act includes provisions for the establishment and management of primary health care networks, community health units, and community health committees.

Furthermore, the Act includes transitional provisions, offenses and penalties, adherence to data protection, and regulations to ensure the effective implementation and enforcement of the Act.

Overall, the Act aims to promote and fulfill the rights of all persons in Kenya towards the progressive realization of their right to the highest attainable standards of health care, and to establish a comprehensive framework for the delivery of primary health care services in the country.

The Act is available on the following link, i.e., http://kenyalaw.org:8181/exist/kenyalex/actview.xql?actid=No.%2013%20of%202023.

Proposed amendments to article V of Protocol I of the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto

It is proposed to the Marine Environment and Protection Committee (MEPC) of the International Maritime Organization (IMO) to amend article V of Protocol I of the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto (MARPOL) in the following manner:

The following new paragraph 3 is inserted after existing paragraph 2:

“In case of the loss of freight container(s), the report required by article II (1)(b) shall be made in accordance with the requirements on danger messages as provided for in regulations V/31 and V/32 of the International Convention for the Safety of Life at Sea, 1974 (SOLAS).”

If the proposed amendment is adopted by the MEPC in its 81st session to be held in March, 2024, the proposed amendment shall, in accordance with article 16(2)(d) of MARPOL, be deemed to have been accepted on [1 February 2025], unless the required number of States are opposed to the proposed amendment. Accordingly, in terms with article 16(2)(g)(ii) of MARPOL, the proposed amendment should enter into force on the [1 August, 2025] provided the requirements under article 16(2)(d) of MARPOL have been met.

Protocol I of MARPOL contains provisions concerning reports on incidents involving harmful substances (in accordance with article 8 of the MARPOL). Article II (1)(b) of Protocol I of MARPOL provides that:

“The report shall be made when an incident involves a discharge or possible discharge of harmful substances in packaged form, including those in freight containers, portable tanks, roads and rail vehicles and shipborne barges.”

Comment The proposed amendment appears to be a recognition that the loss of freight containers presents with it the likelihood of, in the words of article II (1)(b) of Protocol I to MARPOL, “a possible discharge of harmful substances in packaged form” and thus, in addition to the reporting procedures already contained in article V of Protocol I of MARPOL, the proposed amendment seeks to ensure that the report shall be made in accordance with the requirements on danger messages as provided for in regulations V/31 and V/32 of SOLAS. Regulations V/31 and V/32 of SOLAS contain detailed provisions on what constitutes “danger messages” and the “information required in danger messages” and, as such, the master of a vessel where loss of freight container(s) has been experienced is bound, inter-alia, to communicate the information, by all means at his disposal, to ships in the vicinity and to the competent authorities.

The progress of this proposed amendment shall be followed with interest.

The Digital Health Act, 2023

On the 19th of October, 2023, the President assented to the Digital Health Act, 2023 (the Act). The date of commencement of the Act was 2nd November, 2023.

The Act establishes the Digital Health Agency (the Agency), a comprehensive integrated health information system (the system), and a framework for the governance of health data. The document covers various aspects such as the establishment of the Agency, the technical aspects of the system, health data governance, confidentiality, privacy and security of data, and other related provisions.

In creating the Agency, the Act, as is usual with such enactments, makes the Agency a body corporate, capable of suing and being sued, dealing with property and dealing with money and gives the Agency a Board that is an interesting mix of National government officials, private industry representatives and persons representing counties.

The system shall be used in managing digital systems that are required during health information exchange. The system’s scope of work extends to, but is not limited to, collection, analysis, reporting, storage and sharing of health or anything relating to health, whether mental or physical, of an individual for the specific purpose of providing healthcare services. In addition, the Act has employed health and health-related data for operational management and provides essential support for healthcare policy decisions.

The Act aims to promote innovation, safeguard the privacy and security of health data, and facilitate the use of digital technology to improve healthcare and, in a sense, picks up from where the Data Protection Act, 2019, left off and there has been a deliberate and laudable effort to create consistency between the Act and the Data Protection Act, 2019.
The Act is available on http://kenyalaw.org/kl/fileadmin/pdfdownloads/Acts/2023/TheDigitalHealthAct_2023.pdf

Monthly wage for seafarers set to increase with effect from 1st January, 2024

By virtue of a past resolution by a subcommittee of the Joint Maritime Commission (JMC) of the International Labour Organization (ILO), the minimum monthly basic wage for able seafarers is to be raised, to USD.666 with effect from the 1st of January, 2024, up from USD.658.

The report by the subcommittee can be found on the following link, i.e., http://www.okadvocates.com/blog/wp-content/uploads/2023/12/wcms_856877.pdf

United Nations Convention on the International Effects of Judicial Sales of Ships

The United Nations General Assembly adopted the United Nations Convention on the International Effects of Judicial Sales of Ships (the Ship Sales Convention) on 7 December 2022. The General Assembly authorized a signing ceremony for the Ship Sales Convention to be held as soon as practicable in 2023 in Beijing and recommended the Ship Sales Convention be known as the “Beijing Convention on the Judicial Sale of Ships”. The signing ceremony will be held on the 5th of September, 2023 in Beijing, China.

The Ship Sales Convention is a legal framework established by the United Nations to address the international sale of ships through judicial processes. The Ship Sales Convention aims to provide clear rules and procedures for such sales and ensure that the rights and interests of all parties involved are protected.

Under the Ship Sales Convention, when a ship is sold through a judicial process, the sale is recognized and given effect in other countries that are party to the Ship Sales Convention. This means that the buyer of the ship can acquire clear and marketable title to the vessel, free from any claims or encumbrances.

The Ship Sales Convention sets out specific requirements and procedures for the sale of ships, including public notice requirements, the right of a mortgagee to participate in the sale, and the transfer of any outstanding liabilities associated with the ship.

By establishing a uniform framework for the international sale of ships, the Ship Sales Convention aims to promote the development of international trade and increase transparency and predictability in maritime transactions. It provides a secure legal basis for ship sales and facilitates the financing and transfer of vessels between countries.

It’s important to note that the Ship Sales Convention only applies to ships and does not cover other types of maritime assets or vessels. Additionally, its provisions are not automatically applicable in every country; a country must explicitly ratify or accede to the convention for it to have legal effect in that jurisdiction.

In case you need any clarification or specific advise on the Ship Sales Convention, don’t hesitate to call on us.

The text of the Ship Sales Convention is available on the following link, i.e., http://www.okadvocates.com/blog/wp-content/uploads/2023/09/United-Nations-Convention-on-the-International-Effects-of-Judicial-Sales-of-Ships-text.pdf

The Fisheries Management and Development Bill, 2023

The Fisheries Management and Development Bill, 2023 (the Bill) is intended to be an Act of Parliament to provide for the conservation, management and development of fisheries and
other aquatic resources to enhance the livelihood of communities dependent on fishing and to establish the Kenya Fisheries Services and for connected purposes.

The Bill is dated the 16th of June, 2023 and has not yet, as far as we know, gone through the first (1st) reading in Parliament.

The Bill appears to be a comprehensive legislation aimed at protecting, managing, and developing Kenya’s fisheries resources. The Bill outlines various provisions and principles to ensure sustainable use, conservation, and the enhancement of livelihoods for fishing communities. It focuses on promoting long-term sustainability, biodiversity conservation, and effective ecosystem management. The Bill also highlights the establishment of the Kenya Fisheries Advisory Council and the Kenya Fisheries Service to provide guidance, regulate activities, conduct research, and coordinate fisheries management efforts. Overall, the bill seems to be designed to promote responsible and sustainable fisheries practices in Kenya.

In case you need any clarification or specific advise on the Bill, don’t hesitate to call on us.

The Bill can be obtained downloaded at the following link, i.e., http://www.okadvocates.com/blog/wp-content/uploads/2023/09/TheFisheriesManagementandDevelopmentBill_2023.pdf

The Care and Protection of Child Parents Bill, 2023

The Care and Protection of Child Parents Bill, 2023 aims to provide a framework for the care and protection of expectant children and child parents in Kenya. It addresses the issue of pregnant girls dropping out of school and the challenges they face. The Bill emphasizes the importance of education for these individuals and seeks to ensure their right to basic education is upheld.

The Bill outlines the obligations of the National and county governments in terms of providing support and services to child parents, preventing school dropouts, facilitating re-entry into school after pregnancy, and establishing care centers for the children of child parents. It also sets criteria for the registration and licensing of care centers, as well as the inspection and evaluation of their safety and standards.

By addressing the needs of expectant children and child parents, this Bill aims to protect their rights and provide them with opportunities for education and a better future. It also encourages collaboration between different levels of government and relevant stakeholders to effectively implement the provisions of the Bill.

Overall, this Bill shows a commitment to ensuring the well-being and empowerment of expectant children and child parents in Kenya.

For any further on the Bill and its effect on your specific situation, please call upon us.

The Bill is available on the following link, i.e., http://www.okadvocates.com/blog/wp-content/uploads/2023/09/The-Care-Protection-of-Child-Parents-Bill-2023.pdf

The principles for review at the Employment and Labour Relations Court

The decision made by Hon. Justice Byram Ongaya of the Employment and Labour Relations Court is clear and concise. The court dismissed the application for review filed by the claimant, stating that there were no grounds for review. Additionally, the judge emphasized that the claimant did not specifically plead for damages in their original claim, and therefore, it would be unfair to award compensation at this stage. The judge also noted that the application for review was filed without undue delay. Overall, the decision shows a careful consideration of the facts and legal principles involved in the case. Okello Kinyanjui and Company LLP represented the successful party and the decision can be found on the following link, i.e., http://www.okadvocates.com/blog/wp-content/uploads/2023/08/Mubweka-v-Sameer-Africa-Limited.pdf