Alert

Walking the Plank

Editor’s Note: This article was originally prepared as a speech given by Mr. Kimball¹ at the Connecticut Maritime Association’s (“CMA”) Shipping 2010 Conference on March 24, 2010.

In the pirate tradition, walking the plank was a preferred method for disposing of unwanted prisoners when a ship was seized. Usually, the prisoner’s descent to death was hastened by tying a heavy weight to his body. Some historians suggest that pirates of old thought eliminating prisoners by this means was not actually murder since no one laid a hand on them to cause their death. More realistically, it most likely was the quickest way of discarding seamen who were not useful to the pirates as hostages.

This small piece of pirate history may serve as a backdrop to the narrow question to be discussed in my short talk today of whether our government and the United Nations should prohibit the payment of ransom to pirates to secure the release of a vessel and her crew. Unlike pirates of old whose goal was to capture a ship and its cargo, the pirates of Somalia have worked on the basis that their greatest reward will come from holding the crew hostage and demanding a large ransom payment. This is a question which has been the subject of much discussion and has gained currency recently from a headline article on the front page of Lloyd’s List.²

It is a point that warrants discussion. The scourge of piracy in the Gulf of Aden has claimed many victims in the last two years and, despite a significant and very costly military effort, the problem remains and certainly has not lessened. The pirates show no signs of giving up. While this CMA Shipping 2010 Conference has been proceeding, at least four ships have been captured by Somali pirates. There is historical precedent for banning ransom payments to pirates, and a compelling argument can be made in favor of the idea. My own conclusion, however, is that making ransom payments illegal is not likely to deter Somali pirates. Instead, it could take us back to the age old problem of pirates forcing their hostages to walk the plank, if necessary, to up the ante and increase the pressure on a ship owner to pay up. Except in the modern era, scenes of this happening would likely fill the internet.

The Pirate Problem

This audience needs no introduction to the pirate problem. I daresay some in the audience may have had direct experience with pirates prowling around the Gulf of Aden.

Piracy and ransom payments are not a new problem. Julius Caesar himself was seized by pirates in 75 B.C., and released after ransom was paid. Piracy on the high seas was a major preoccupation during the early years of the American republic; by 1800, the United States was paying about 20% of total federal revenues to the Barbary States as ransom and tribute.³ This only ended when the U.S. navy built up a fleet of warships able to take on the pirates.

The International Maritime Bureau’s Piracy Reporting Centre (“IMB PRC”) has reported a total of 406 incidents of piracy and armed robbery in 2009, with attacks by Somali pirates accounting for 217 of the total.⁴ In addition, in 2009, 49 vessels were hijacked, of which 47 were captured by Somali pirates. 120 vessels were fired upon, 1,052 crewmembers were taken hostage, and 76 crewmembers were either injured or killed. All of this took place despite the presence of the world’s navies around the Gulf of Aden, which increased significantly beginning in the spring of 2009.

According to experts on the subject, “[i]n 2008, ransoms would have averaged between $500,000 to $1 million. In 2009, ransoms were between $1 million and $7 million and…a rough estimate [indicates] that the average is now $2 million.”⁵

The largest reported ransom to date was paid in January 2010 to secure the release of the tanker MARAN CENTAURUS, which was laden with two million barrels of oil when it was hijacked by Somali pirates in November 2009 near the Seychelles in the Indian Ocean. The vessel was released only after an aircraft delivered a ransom payment believed to be between $5.5 million and $7 million.

There can be little doubt that the payment of ransom has contributed to the problem. For otherwise unemployed young men in Somalia, the prospect of getting a share of a multi-million dollar ransom payment far outweighs the comparatively low risk of being shot, caught, or otherwise confronted by the world’s navies. Each ransom paid only encourages pirates to demand more, thus, further perpetuating the problem. This is a principal reason behind suggestions that ransom payments should be illegal.

In addition to paying increased insurance premiums to cover ransom payments, ship owners are also negatively impacted by rising operational costs due to higher wages paid to crews to transit the higher risk areas, and delays caused by longer transit times or diversions to avoid the area altogether.

According to Lloyd’s List, vessels electing to transit around the Cape of Good Hope to avoid piracy in the Horn of Africa incur hundreds of thousands of dollars in increased fuel costs per trip and an additional seven to ten days of transit time. When this occurs, “both the shipper and the consumer are ultimately impacted due to higher operating costs and the delays in the supply chain.”⁶

As the piracy problem has escalated, so has the development of specialized insurance policies created to respond to this increased risk. It is reported that the cost of kidnap and ransom insurance in 2009 was 10 times more expensive than it was in October 2008 for ships transiting the Gulf of Aden.⁷ These numbers may not be precisely up to the minute, but it has been reported that a ship owner can obtain up to $3 million of cover for the ship and the crew for a maximum of five or six days for a premium of $4,000 to $5,000.⁸ The shipping and insurance industries have adapted very quickly to the reality of having to pay ransom, regrettably as a virtually normal cost of doing business. It is accepted that ransom may be treated as a general average expense and the cost will be spread among all parties to the venture.

The insurance industry’s readiness to insure against ransom undoubtedly has contributed to the piracy problem and no doubt has led to a spike in ransom demands. In turn, this has led to an increase in attacks, since payments enable the pirates to recruit more pirates and buy more sophisticated weapons and equipment.⁹

By virtually all accounts, the Somali pirates appear to be motivated by money, not ideology, and the continued payment of ransom fuels this affront to maritime navigation. The question is, will the attacks end if governments make the payment of ransom to pirates illegal?

Ransom Payments

At a Security Council Debate on Piracy and Somalia held on November 18, 2009, Ambassador Rosemary A. DiCarlo, Alternate U.S. Representative for Special Political Affairs, remarked “[the United States is] concern[ed] that ransom payments have contributed to the recent increases in piracy and [the United States] encourage[s] all states to adopt a firm ‘no concessions policy’ when dealing with hostage-takers, including pirates.”

While many countries, including the U.S., do not make or facilitate substantive concessions to hijackers—including the payment of ransoms to terrorists and pirates—very few countries, if any, actually have laws making it illegal for private parties, such as ship owners and insurance companies, to pay ransoms. It is legal in the U.S. and England to pay ransom to a pirate. Countries that do have laws prohibiting ransom payments, such as Italy and Colombia, have not had much success in deterring the attacks or the subsequent ransom payments.

Historical Precedent

There is historical precedent for establishing legal prohibitions against ransom payments. England, France, and other European countries formerly had laws that banned ransom. These laws, however, were repealed long ago.

The easiest solution for outlawing ransom payments to pirates would be to redefine “piracy” as an act of “terrorism.” One vehicle for doing so would be to modify existing Security Council resolutions and U.S. laws that prohibit payments to terrorist groups. Making ransom payments illegal would be enormously difficult and, to be effective, require approval by the U.N. Security Council. By doing so, ransom payments to pirates will be deemed illegal under the prohibition against furthering terrorism. For instance, payment of ransom to pirates is not illegal as a matter of English law.¹⁰ However, payments that are known, or reasonably suspected, to be used for “terrorist purposes” are illegal and punishable by fourteen years in prison. “Terrorism,” under the United Kingdom’s Terrorism Act of 2000, is defined as the use or threat of action designed to intimidate the government or the public for the purpose of advancing a political, religious, or ideological cause.¹¹

As a matter of international law, however, piracy is not terrorism. Indeed, the two are quite distinct and the difference is important. Under Article 101 of the United Nations Convention on the Law of the Sea, piracy is defined as “illegal acts … committed for private ends ….” The aim of pirates is simply to make money, whereas terrorists have the wholly different goal of destroying governments and the world economy. Therefore, laws aimed at those who make payments to terrorists, as currently defined, do not apply to ransom payments paid to Somali pirates. Governments should be reluctant to change their laws in order to redefine piracy as an act of terrorism unless—and until—evidence is provided that proves that pirate ransom payments are, in fact, funding terrorist organizations.

One key problem with making pirate ransom payments illegal is the need for international cooperation to make the measure effective. In the absence of wide international acceptance of a ban, the problem will continue to persist.

While it is more realistic to tackle the problem at a national level, governments may find that they do not have the support from shipowners and the insurance industry who are pragmatic and prefer paying ransoms to bloodshed. As the English Commercial Court held in a recent opinion dated February 18, 2010, “[n]o one favors the payment of ransom, but the alternative of leaving the vessel, its cargo, and especially its crew in the hands of pirates is significantly worse.” Moreover, attempting to restrict ransom payments may be problematic for a number of reasons.

Reasons for Not Making Ransom Illegal

1. Enforcement would be very difficult.
2. It would criminalize what may be the only action available to ship owners and their insurers to free captured crew members.
3. It would escalate the problem by forcing pirates to take even more drastic action than we have seen to force their demands. Seeing even one seaman who is forced to walk the plank because of a refusal to pay ransom would be one too many.
4. It is not likely to solve the problem.
5. There are better solutions. Our governments have done a commendable job on many different fronts to prevent pirate attacks. These efforts should continue to be the main focal point for dealing with the problem. Our governments also should be making a concerted effort to prosecute pirates who are captured. The Maersk Alabama prosecution in the U.S. is notable. The U.S. government also has been working with Kenya and helping to fund its efforts to prosecute and convict pirates and this is likely to have a greater impact than trying to shut-off ransom payments. There was a positive development recently with the successful prosecution and conviction of 8 Somali pirates in Kenya, all of whom received 20 year prison sentences. According to Lloyd’s List, this was only the first of 12 major piracy cases working their way through the Kenyan judicial system. These prosecutions should be helpful in deterring piracy.

For all of these reasons mentioned above, I urge government leaders to keep the focus on prevention and prosecution, and not on criminalizing the only means that may be available to a ship owner to secure the release of the vessel and crew if captured by pirates.¹²

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1. Partner, Blank Rome LLP. The author wishes to thank Lauren Wilgus and Marija Pecar for their assistance in the preparation of this presentation. The views stated in this paper are solely the opinion of the author and should not be considered the opinion of Blank Rome LLP or our clients.
2. “High Court clarifies legality of ransom payments-Move comes amid rumors that U.S. is planning to outlaw ransom payments to Somali pirates,” Lloyds List, February 22, 2010. See also “UN should ban ransom payments,” by Fred C. Ikle, The Washington Post, April 15, 2009; and “U.S. Condemns Ransom Payments to Pirates,” The Somaliland Times (Issue 408), November 2009. As a result of the conflict with the Barbary pirates, Thomas Jefferson advocated an international treaty banning ransom, see “America and the Barbary Pirates: An International Battle Against an Unconventional Foe,” by Gawalt, The Thomas Jefferson Papers.
3. Statement of Under Secretary of Defense, Michèle Flournoy, in her opening statement before the Senate Armed Services and Commerce Subcommittee on May 5, 2009.
4. See “2009 Worldwide piracy figures surpass 400” dated January 14, 2010 at http://www.icc-ccs.org/index.php?option=com_content&view=article&id= 385:2009-worldwide-piracy-figures-surpass-400 &catid=60:news&Itemid=51.
5. As reported by Simon Goodley in an article entitled “Piracy A Growing Threat to Shipping Trade on the High Seas” published in The London Evening Standard on February 11, 2010.
6. Acting Deputy Administrator James Caponiti’s February 4, 2009 statement before the U.S. Coast Guard Sub-Committee on Transportation and Infrastructure of the U.S. House of Representatives on International Piracy.
7. See “Piracy driving up kidnap and ransom rates: Aon” dated April 9, 2009 at http://www.businessinsurance.com/article/20090409/NEWS/200015933.
8. Id.
9. See Masefield AG v. Amlin Corporate Member Ltd., [2010] EWHC 280 (Comm)(February 18, 2010)(the payment of ransom was formerly illegal in England under the (now repealed) Ransom Act of 1782).
10. See United Kingdom Terrorism Act 2000 at www.legislation.gov.uk.
11. Subsequent to the presentation of this paper at the CMA Shipping 2010 Conference on March 24, 2010, on April 13, 2010, President Obama issued an executive order imposing economic sanctions against persons contributing to the deteriorating situation in Somalia, including acts of piracy in the waters off of Somalia. The executive order freezes the assets of certain persons who are identified as “specially designated nationals” and prohibits U.S. persons from doing business with these individuals. Two persons on the list of specially designated nationals are known pirates. The executive order does not contain a general ban on the making of ransom payments to Somalia pirates. However, the order could affect ransom payments to the extent they involve the two identified pirates or their associates. Please see Blank Rome’s April 2010 Maritime Developments Advisory “New U.S. Sanctions Against Somalia Terrorists and Piracy and Terrorism” at www.blankrome.com/index.cfm?contentID=37&itemID=2225.

Notice: The purpose of this newsletter is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. The Advisory should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel. Additional information on Blank Rome may be found on our website www.blankrome.com.