Does 'capture and seizure' clause apply to piracy?

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The Commercial Court recently considered an appeal against a maritime arbitration award in a dispute which arose when the vessel, “Eleni P”, was hijacked in the Arabian Sea in 2010 (Eleni Shipping v Transgrain Shipping).

The vessel was detained for over 6 months and the time charterers, Transgrain Shipping, claimed that hire was suspended during that period, amounting to losses of about US$4.5 million. They relied on two clauses in the charterparty: clause 49, ‘Capture, seizure and arrest’, and clause 101, ‘Piracy clause’. The arbitration tribunal agreed with Transgrain and found that hire was suspended under both clauses.

The shipowners’ appeal

The shipowners, Eleni Shipping, appealed to the court, claiming that the award was based on an incorrect interpretation of the clauses. The judge agreed with Eleni Shipping and concluded that clause 49 didn’t apply when the vessel was captured by pirates. The wording of the clause referred to the vessel being ‘captured or seized or detained or arrested by any authority or by any legal process’ and the arbitrators were wrong to read the word ‘captured’ in isolation. In the judge's view, a vessel could be ‘captured’ by a legal authority and the clause wasn’t intended to apply to a capture or seizure by pirates.

The piracy clause

On the other hand, clause 101 expressly provided for hire to be suspended if the vessel was threatened or kidnapped by piracy, but the clause referred to transit through the Gulf of Aden. Eleni Shipping argued that it therefore applied only to seizure within the Gulf of Aden itself. In this case, the vessel had sailed through the Gulf of Aden without incident and was captured in the Arabian Sea. On this point, the arbitrators found that there was no clear geographical definition of the Gulf of Aden (a finding of fact which could not be appealed). The judge agreed with the arbitrators that the clause covered the risk of detention as a consequence of the transit through the Gulf of Aden, even if that transit had been completed before the detention occurred.

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