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Dangerous waters

Using the latest tools, today's pirates have more in common with organised criminals than story tales.
ANALYSIS, Ports & Free Zones

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Is enough being done to tackle the threat of piracy to the maritime industry?

For modern-day pirates, the booming sea freight industry is an attractive lure. Using the latest tools, including guns, satellite navigation devices, mobile phones and speedboats, today's pirates have more in common with organised criminals than the opportunists of story tales.

Tight timetables and predictable shipping routes, coupled with steadily decreasing crew sizes due to the automation of ship tasks and the congestion currently slowing the flow of traffic, make sailing the seas a risky business for freight vessels.

 

The whole purpose of such insurance coverage is to limit risk should a piracy attack occur. - Meenakshi Srinath.

Last year's piracy 'hotspots' were reported to include the Far East - in particular the South China Sea and the Malacca Strait - East Africa, West Africa, the Indian Ocean, South America and, for the first time, the Arabian Sea.

However, it is the inherently international nature of commercial shipping that leads to Middle Eastern controlled and operated ships becoming vulnerable to attacks. The waters off Somalia, for instance, have become a focus of concern for the region's industry following a spate of attacks in the past year.

According to the International Maritime Organization (IMO), the number of reported acts of piracy and armed robbery increased by 17% last year, with 282 attacks in total. Seven of those were reported in the Arabian Sea.

"Most of the attacks occurred or were attempted in the coastal states' concerned territorial waters while the ships were at anchor or berthed," explains Natasha Brown, external relations officer at the IMO. "In many of the reports received, the crews were violently attacked by groups of five to 10 people carrying knives or guns."

The IMO itself has responded by fostering regional agreements on counter-piracy measures, including the 2004 Regional Cooperation Agreement on Combating Piracy and Armed Robbery against ships in Asia (RECAAP), which Brown believes have contributed to the decline of piracy in certain locations like the Malacca Strait and the South China Sea.

Following a meeting in April this year, a draft memorandum of understanding on the repression of piracy and armed robbery against ships in the Western Indian Ocean, the Gulf of Aden and the Red Sea has been developed and is being considered by 20 countries from the region.

These long-term solutions have met with both positive and critical responses from the shipping industry, with the sector's own focus remaining on how to protect its vessels and cargo in the immediate future, particularly when charting through dangerous waters.

Ensuring adequate insurance against losses incurred due to piracy is one recommendation. "The whole purpose of such insurance coverage is to limit risk should a piracy attack occur," says Meenakshi Srinath, marine manager, Gulf region, AXA Insurance. In this case, Standard Hull clauses offer cover for loss or damage to the vessel's hull and machinery due to 'piracy', with separate cargo insurance needed to protect the ship's load.

"The coverage would be separate for the hull and the cargo carried, with each interest subject to the relevant clause," Srinath says. Considering that figures for worldwide losses due to piracy cases are estimated in the region of US$13-16 million each year, failing to take out adequate insurance could be a big mistake.

The issue of insurance can become a much more complex affair for vessels sailing through identified piracy 'hotspots'. For example, the latest edition of the Joint War Committee's Listed Areas warns against entering Somalian waters within 200 nautical miles off the country's eastern coast and advises vessels to stay at least 40 nautical miles to the north of Somalia whilst transiting through the Gulf of Aden.

"This area around the Horn of Africa and the Gulf of Aden particularly affects Middle Eastern trade and, unless the threat is identified and dealt with, piracy could affect commercial activity in the region," Srinath forewarns.

However, according to the International Maritime Bureau (IMB), a significant number of attacks remain unreported due to the reluctance of shipping companies to publicise the event in case it leads to a loss of trust from customers or insurance premiums being raised, which may well be the case.

"An increase in claims due to piracy will not only lead to an increase in hull premiums worldwide, it might also prompt underwriters to restrict the movements of the vessels insured by them to ‘safe' areas, with a resultant effect on the vessel's commercial activities," Srinath admits.

As well as adequate insurance, Srinath believes that shipowners would be wise to invest in technological solutions to reduce the risk of an attack. She points to some of the gadgets available on the market today such as Shiploc, where a vessel's position can be monitored 24 hours a day through a PC hidden on board the vessel.

The Shiploc system also involves stretching a fibre-optic network around the vessel's perimeter, which, if breached, is capable of sending an automatic signal to the ship's crew and authorities ashore.

"The key to foiling any potential attack is to have a ship security plan and increased vigilance whilst navigating pirate-infested waters. This coupled with the optimum use of fire hoses, flare guns, ship's horn, and lighting can deter pirate attacks to some extent," she adds.

Shipowners are presented with an increasingly diverse range of technological solutions to choose from. These range from the popular 'SecureShip', a 9000-volt electric fence surrounding the vessel to give a jolt to unwanted boarders, unmanned mobile surveillance systems such as SmarterSentry, and underwater sonar to detect opportunist intruders attempting to gain access from below the vessel.

However, such measures do come at a price and for some shipowners this may be an unwelcome additional cost. "The shipping industry has shown a general reluctance to increase fixed operating overhead costs by introducing more concerted security measures for safeguarding their vessels," agrees Peter Chalk, senior analyst at the non-profit RAND Corporation research organisation in Santa Monica, California.

He believes that monitoring and protecting initiatives such as ShipLoc and SecureShip should be sponsored through private-public sector partnerships instead.
 

Whilst technology and insurance can both provide short-term solutions, adopting a practical and proactive approach is even more crucial.

"Most of the recommendations from the IMO do not rely on new technology; they rely on communication, avoidance of the problem and common sense," emphasises Brown.

"Ultimately, it is up to a ship operator and crew to decide the best way to implement their security plan with respect to piracy and armed robbery against ships."

However, a longer-term solution to stamping out piracy altogether relies heavily on international government backing.

"An effective deterrent is probably the only way to counter piracy - for example, a co-ordinated international policy, plus the willingness of international forces to engage pirates in territorial or international waters, put them on trial and confiscate their ill-gotten gains - all of which is easier said than done," agrees Ann Mazzucco, a senior lawyer with first-hand experience of dealing with piracy and hijacking incidents at law firm Holman Fenwick Willan.

"A concerted effort on the part of the international shipping community is urgently required and there are signs that this is starting to be addressed."

According to international maritime law, any naval vessel can, and should, come to the aid of ships under attack by pirates. However, not only does this depend on the availability of such patrols in any one given location, it is, in reality, rarely pirate-proof.

"To date, the pirates menacing the region do not appear to have been deterred by the presence of coalition warships - when patrols are stepped up in one area, the pirates simply target another area where the risk of getting caught is lower," explains Mazzucco.

Carrying weapons on the vessel itself is strongly discouraged by international regulations, with many nations prohibiting ships from entering their territorial waters or ports if the crews of the ships are armed.

If a vessel is captured by pirates, its owner may be faced with a ransom demand to secure its release. "There is little doubt that ransom payments fund piracy operations so, for example, any UK-based owners making payment from a UK account should be very wary of falling foul of far-reaching anti-terrorism legislation," warns Mazzucco.

"With large ransom payments allowing the pirates to buy faster boats, and more sophisticated GPS systems, they can strike several hundred miles out to sea."

Post 9/11, the shipping industry further had to contend with the possibility of its vessels being used as part of a terrorist attack being launched from the sea. However, a report published last month by the RAND Corporation has found little evidence of a link between terrorism and piracy itself.

"Pirates depend on a thriving maritime industry to support their ‘business' while terrorists seek to destroy or undermine the maritime industry through an asymmetric campaign of economic warfare," explains Chalk, the author of the report.

Nonetheless, Chalk warns of the emergence of new zones of opportunity, such as off the west and east coasts of Africa as further increasing the piracy threat. "Many littoral states in the developing world have difficulties in effectively safeguarding their ports, coastlines and territorial waters due to the lack of resources, corruption or a combination of both," he adds.

"Working with like-minded littoral states to help develop regional and sub-regional regimes of maritime security is one way of overcoming this problem."

Furthermore, having a better awareness of the patterns of pirate attacks can help to reduce the likelihood of an attack, if alternative routes for the vessels are available.

The Piracy Reporting Centre, set up by IMB, issues daily status reports on piracy and armed robbery to ships via broadcasts on the INMARSAT-C SafetyNET service. Other initiatives from the coastal states have shown promising results.

"Somalia has recently established a ‘Maritime Security Force' comprising a number of trained private operatives," says Srinath. Furthermore, the United Nations has been asked to create an international force to tackle piracy following the recapture of a French vessel from Somali pirates.

It appears that the shipping industry can be relatively assured that, whilst it adopts the short-term measures to repel and avoid a piracy threat, other forces are at work to stamp it out altogether.

"Until the statistics on piracy and armed robbery against ships are reduced to a bare minimum then more still needs to be done," says Brown.

"The IMO is actively working to support the fight to reduce and suppress piracy and armed robbery against ships and to encourage cooperation on a regional basis to address the issue."

 

Chartering the hot spots

Ann Mazzucco from Holman Fenwick Willan discusses the human and legal issues arising out of piracy situations.

"Every prudent shipowner should make sure that he is fully insured, particularly if he intends to sail to/through a known piracy troublespot - for example the Gulf of Aden.

However, with the increase in piracy incidents, some underwriters have refused to write war risk insurance cover for the Gulf of Aden - effectively meaning that there is no insurance cover for piracy, at least in terms of hull and machinery cover for damage to the vessel.

The known risks of pirate attacks have knock-on implications for charterparties and bills of lading. Whether under a time or voyage charter, a charterer's primary obligation is to order a ship only to ports that are safe.

However, the risk (and there must be a real risk) of hostile seizure or attack en route to a nominated port, say Mogadishu, may make that port unsafe and may entitle an owner to reasonably refuse to sail there.

Similarly, a shipowner has responsibilities to cargo interests to properly and carefully carry their cargo under bills of lading which incorporate the Hague/Hague-Visby Rules.

If an owner complies with his charterers' orders to sail to, say, Mogadishu and the ship is captured by pirates, cargo interests will have a claim if the cargo is lost or damaged as a result.

In these circumstances, it is arguable that the owner may not be entitled to rely on defences otherwise available because of the known risk of pirate attacks. Having said this, if an owner follows his charterers' orders to sail to an unsafe port, he may be able to recover losses from his charterer for breach of charterparty.

What can an owner do to minimise the risk of one of his ships being hijacked? The simplest solution is to avoid known troublespots. This is easier said than done, particularly if a ship owner's general trading pattern takes him past the Somali coast."

Ann Mazzucco is a senior lawyer with Holman Fenwick Willan, and can be contacted at company's Dubai office (http://www.hfw.com)
 

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