6 The UK clauses on arrest or detainment of vessels
A principal consideration during the 2019 revision of the NP was that the cover for state intervention in the NP should be similar to or better than the UK conditions. In the Team Tango case, the insurers also argued that it was important for the UK and Nordic solutions to be similar because the insurers competed in the same market, but the UK regulation was not actually addressed in that case.(1)The arbitration award (n 1) 7.It is therefore interesting to see how the Team Tango case would have been solved according to these UK conditions.
Marine risk insurance for ocean-going ships is regulated by several UK sets of clauses.(2)Institute Times Clauses (Hulls) (ITCH) of 1983 and 1995; International Hull Clauses (IHC) of 2002 and 2003.A common feature of these clauses is that they are based on the named perils principle, whereby the perils insured against are specifically listed.(3)Bull (n 46) 210; Wilhelmsen and Bull (n 4) 79ff.None of the clauses used provides cover for detainment by state power, which means that this peril is not covered under the UK clauses covering marine perils. The clauses even contain the following paramount war risk exclusion:
In no case shall this insurance cover loss damage liability or expense caused by
….
capture seizure arrest restraint detainment (barratry and piracy excepted), and the consequences thereof or any attempt thereat(4)ITCH (n 64) 1995 clause 24; IHC (n 64) 2001/2003 clause 29.2.
However, the Institute War and Strike Clauses (Hulls-Time) 1/10/83 as amended 1/11/95 (IWSCH) (Clause 281) covers:(5)‘Institute War and Strikes Clauses Hulls-Time’ 1/10/83 amended 1/11/95 <Marine Insurance Clauses 329-548.indd (seamanship.eu))> (accessed 27 October 2021).
capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat
The clauses exclude:
capture seizure arrest restraint detainment confiscation or expropriation by or under the order of the government or any public or local authority of the country in which the Vessel is owned or registered
arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations
The UK regulation is thus simpler than the Nordic regulation, since interventions are either covered by the war risk clauses or else not covered at all. There is no question of there being different levels of cover.
The interventions listed in clause 1.2 overlap,(6)Michael Miller, Miller’s Marine War Risks (Michael Davey, James Davey and Oliver Caplin eds, 4thedn, Informa Law from Routledge 2020) 105. See also N. Geoffrey Hudson, Tim Madge and Keith Sturges, Marine Insurance Clauses (5thedn, Informa Law 2012) 342 and 360; Wilhelmsen (2019) (n 3) 165; Joseph Arnould, Arnould: Law of Marine Insurance and Average (Jonathan Gilman and others eds, 20thedn, Sweet & Maxwell 2021) 1296.but the relevant concept with regard to the Team Tango case is “detainment”. It is clear that the vessel was detained in a commercial sense, as it was “unable to leave without infringing regulations and would have been stopped by force if it tried to do so.”(7)Miller (n 68) 107.According to the wording of clause 1.2, the cover applies regardless of any war or war-like situation, of who is performing the actions and the legal basis for the actions. The cover thus also applies in times of peace,(8)Keith Michel, War, terror and carriage by sea (LLP 2004) 204-205; Hudson, Madge and Sturges (n 68) 359.and there is no explicit requirement for state involvement or legal justification for such intervention. As a starting point therefore, the detainment of Team Tango would be covered unless the exclusion applies. The terms originally referred, however, to political or executive acts and did not include ordinary judicial process.(9)Miller (n 68) 105. See also Hudson, Madge and Sturges (n 68) 342; Wilhelmsen (2019) (n 3) 166; Arnould (n 68) 1293-1294.The same effect is achieved today by the express exclusions in clause 4.1.5,(10)Miller (n 68) 105.cf. below.
Clause 4.1.5 excludes detainment “by reason of infringement of any customs or trading regulations”. In order to apply the exclusion, there must therefore have been an infringement.(11)Hudson, Madge and Sturges (n 68) 365-366; Arnould (n 68) 1317.This was clearly the situation in the Team Tango case. The term “customs regulation” refers to laws in force in the country concerned, whatever their form, which deal with smuggling or other offences in the field of customs.(12)Panamanian Oriental SS Corp v Wright (The Anita) (1971) 1 Lloyd’s Rep 487; Arnould (n 68) 1317-1318.The concept of “trading regulations” refers to regulations forbidding, controlling or otherwise regulating the sale or importation of goods into a country and the carriage of goods for that purpose.(13)Arnould (n 68) 1320.Elephant breached the rules of the Nigerian Customs and Excise Management Act, which appear to be included in both concepts.
Further, the detainment must be “by reason of” infringement. This suggests a causal link between the actual infringement and the detainment.(14)Miller (n 68) 191.It is more unclear to what extent it is relevant that the regulation that was infringed was motivated by overriding political security reasons typical for war or times of crisis. From a Nordic perspective this seem to be a question of combination of detainment due to a political act, which is covered according to clause1.2, and detainment by reason of infringement of customs regulation, which is excluded in clause 4.1.4. In the UK regulation, this issue is regulated through the principle of “proximate cause”.(15)Wilhelmsen and Bull (n 4) 128; Miller (n 68) ch. 28; Arnould (n 68) ch. 22.The question here is thus whether the expression “by reason of” involves a question of proximate cause. This issue was discussed in the B Atlantic case:(16)Atlasnavios Navegacao Lda v Navigators Insurance Co Ltd (The B Atlantic) (2019) A.C. 136 (2018) 2 Lloyd’s Rep 1; here referred from Miller (n 68) 154, 191.
The case concerned a substantial quantity of narcotics that was deliberately planted on board a vessel in harbour in Venezuela. On discovery of the drugs, the vessel was impounded as part of judicial proceedings.(17)Miller (n 68) 154.It was argued that the secreting of drugs constituted a malicious act that was covered by the war risk insurance clause 1.5, which provided cover for ‘any terrorist or any person acting maliciously or from a political motive’. If so, the question was whether this malicious act was the proximate cause of the loss, and not the detention by reason of infringement of customs regulations, which was excluded. The Appeal Court considered whether the phrase ‘by reason of’ the infringement involved a question of proximate cause, but argued that ‘by reason of’ then begged the question of ‘why’ the vessel was detained, and this question was not identical to the question of proximate cause.(18)Miller (n 68) 191.The Supreme Court rejected the argument that the proximate cause was the malicious act rather than the infringement, as the malicious act could not be distinguished from the infringement. The court further stated that as ‘a matter of construction, the analysis of the present Clauses falls into three stages. The first stage, if clause 1.5 is capable of applying at all, is that there was a loss caused by a “person acting maliciously”. Assuming that there was, the second stage is that the means by which loss arose was the vessel’s consequent detainment and the fact that this lasted for a continuous period of six months. Only on this basis were the owners able to treat the vessel as a constructive total loss under clause 3. The third stage involves the question whether such detainment was by reason of any infringement of customs regulations within clause 4.1.5.’(19)The B Atlantic 41. See also Miller (n 68) 191.It is ‘possible that a loss may both be caused by a person acting maliciously within clause 1.5 and at the same time arise from detainment by reason of infringement of customs regulations within clause 4.1.5.’(20)The B Atlantic 42.‘[W]hile the general aim in insurance law is to identify a single real, effective or proximate cause of any loss, the correct analysis is in some cases that there are two concurrent causes. This is particularly so where an exceptions clause takes certain perils out of the prima facie cover’.(21)ibid 43.The court concluded that even ‘if it had been possible to view the loss as caused by a person acting maliciously within clause 1.5, it would still have been excluded by clause 4.1.5 as arising, at least concurrently, from detainment by reason of infringement of customs regulations.’(22)ibid 55.
It appears from this that a loss can be proximately caused, both by a peril insured against and by a peril that is excluded, but even so, the exclusion prevails. Applied to the Team Tango case, this would mean that even if the detainment was proximately caused by a political act and was therefore covered, it would still be excluded, since the detainment was also proximately caused by infringement of customs regulation.
The exclusion is silent as to who the infringement must be committed by, but there is no implied implication that the infringement must be one committed by the ship-owner itself or by its servants or agents.(23)ibid 33; Miller (n 68) 191.The clause is not needed in order to exclude smuggling by ship owners themselves, and smuggling by the crew is generally excluded as barratry.(24)Miller (n 68) 191-192.In the B Atlantic case, the Supreme Court considered whether there could be situations where the exclusion should not be applied, and mentioned three possible scenarios: First, where there was a seizure on a knowingly false basis, where no smuggling took place, or the authority has planted the drugs on board. Second, where a malicious third party planted the drugs on board in order to blackmail the owner. Third, where a malicious third party planted the drugs to inform the authorities about this in order to get the vessel detained.(25)The B Atlantic 33-37; Miller (n 68) 192.Apart from such situations, it does not matter whether or not the owner is acting in good faith.(26)Hudson, Madge and Sturges (n 68) 366; Arnould (n 68) 1319.Based on this, the assured in the Team Tango case would not be covered when the vessel was detained due to infringement of customs regulations by the receiver of the goods.