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Article: Piracy in Southeast Asia
News & Insights 14 January 2019
Piracy is an ongoing issue in Southeast Asia. In this article we present a hypothetical case study from Thailand to illustrate how P&I cover would respond to the different claims arising from a piracy attack.
Current situation in Southeast Asia
The 2017 Annual Report of the International Maritime Bureau (IMB) reported a reduction in piracy incidents worldwide with 180 reported incidents in 2017, down from 191 in 2016 and 246 in 2015.
Despite global trends, the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP) reported that, in Asia, there was a 19% increase in the number of piracy incidents in 2017 compared to 2016 .
In its 3rd Quarter 2018 Report, ReCAAP reported a 3% increase in the total number of piracy incidents in Asia from January to September 2018 compared to same period in 2017. Notable hotspots include anchorages in Bangladesh and off Samarinda, Indonesia as well in respect of ships underway in the Straits of Malacca and Singapore .
In the Philippines, the number of incidents more than doubled from 2016 to 2017, with 22 incidents reported in 2017. As at the third quarter of 2018, the number had decreased again, particularly at ports and anchorages, but the threat of vessel hijacks and crew abductions in the Eastern Sabah waters and Sulu and Celebes Seas by the ISIS-affiliated Islamist terrorist group, Abu Sayyaf remains real, if not heightened . Not only are small fishing boats and slow-moving tug and barges under threat, large bulk carriers and tankers with high freeboards are also potential targets .
The recent increase of pirates operating in the region can likely be attributed to the increase in palm oil prices and the high value of the stolen commodities.
With the scope and nature of attacks ever changing, it is opportune to consider a hypothetical case study involving a piracy incident set in Thailand and how the club’s P&I cover might respond to the claims.
A hypothetical case study
A handysize tanker was transiting from Thailand to Singapore in 2018. Whilst sailing close to the Straits of Malacca, five pirates armed with machetes and pistols came alongside at 2300 hours and boarded her. An initial confrontation with the crew on deck left three crewmembers injured and one dead from multiple gunshot wounds. The pirates proceeded to round up and lock all the crew in the engine room, except one whom they instructed to operate the pump. They proceeded to siphon the cargo of palm oil to their ship. An estimated 10,000mt of cargo was siphoned from the handysize.
Before leaving the ship, the pirates destroyed the ship’s navigation and communication equipment and stole the crew’s personal effects as well as some of the ship stores.
The crewmember who was spared from being locked in the engine room subsequently freed his mates and after two days, the ship arrived at a port in Thailand, sought assistance from the Thai authorities at port and completed the discharge of the remaining cargo on board. The bill of lading terms provided for Thai law and jurisdiction.
Scope of cover
The member /shipowner potentially faces the following claims:
- loss of life / personal injury / illness to crew
- loss of crew’s personal effects
- loss of / damage to the ship
- loss of / shortage of cargo
In general, the member’s P&I cover will respond to P&I liabilities arising from acts of piracy so long as the attack in question does not constitute an excluded risk such as ‘terrorism’, ‘a hostile act by or against a belligerent power’, or by the use of certain ‘weapons of war’ that are specified under rule 4.3 (3) of the club’s rules .
Cover for crew risks
The club’s usual crew cover in respect of claims a) and b) will respond in this scenario. This includes medical expenses, substitution/repatriation expenses and contractual sick wages and benefits. In the event the crew suffers trauma/stress as a result of the incident, be it due to the endangerment of his own safety or by the injury or death of another member of the crew, relevant psychiatric treatment and counseling is also covered. Loss of crew effects are covered, but not ‘valuables’ such as money, gold, jewellery or works of art .
Loss of / damage to the ship
The repair and/or cost of replacement in respect of the ship’s damaged navigation and communication equipment does not fall within the P&I cover. The shipowner’s H&M insurance or war risk insurer will normally respond to these claims.
Loss of / shortage of cargo
Club cover would respond to a potential claim in respect of loss or shortage of cargo in this scenario if the shipowner is found to be legally liable.
Where such cargo claims arise, the shipowner would seek to defend their position based on the terms and conditions of the contract of carriage and its incorporated charterparty. In cases where the contract of carriage is governed by the Hague-Visby Rules, the carrier/shipowner could defend the cargo liabilities by relying on the exception in Art IV (2) (c) of the Hague-Visby Rules, which provides:
‘Neither the carrier nor ship shall be responsible for loss or damage arising or resulting from …(c) Perils, dangers and accidents of the sea or other navigable waters’.
Under English law, it has long been established that an act of piracy is regarded as a peril of and danger at sea.
However, the shipowner might face difficulties in relying upon the perils of the sea defence in the event the claimant could establish that the said peril/danger in question could and ought to have been prevented by the exercise of reasonable care and good seamanship or if it could be proven that the vessel was somehow unseaworthy for transit through known high risk areas.
The effect of Thai law and jurisdiction
Since the Thai Carriage of Goods by Sea Act (Thai COGSA) applies in the scenario, the shipowner may need to consider some specific Thai law issues.
Whilst ‘Perils, danger and accidents of the sea or navigable waters’ is an exclusion to the carrier’s liability pursuant to the Thai COGSA, unlike in English law it has not been established by the Thai Courts that the perils and dangers at sea include an act of piracy.
The term ‘an act of piracy’ is defined by the Thai Act on Prevention and Suppression of Piracy, B.E. 2534 (1991) (the PSP Act) to include an act of robbery or gang-robbery which is committed on the high seas or within the exclusive economic zone of any state by a person on board a private ship or a private aircraft against another ship or against a person or property on board such ship and for the private ends of the offender .
‘Force majeure’ is also an exclusion under the Thai COGSA. Interestingly, there is Thai law authority that states that the act of robbery or gang-robbery is considered force majeure .
Accordingly, it is likely that this incident falls within the definition of gang-robbery for the purposes of the Thai Penal Code . It is arguable that a defence may be established on the grounds of force majeure.
Despite recent general trends indicating a global reduction in the incidents of piracy , the threat of piracy is far from being eradicated. Incidentally, the use of private maritime security contractors (PMSCs) is not common in Southeast Asia. Regardless, the member should continue to exercise vigilance when trading to areas where the threat of attack by pirates and armed robbers exists , and comply with the best practices .
In addition to the exposures discussed in the case study above, a member’s exposure following an incident of piracy or armed robbery at sea could extend to pollution, wreck removal, and General Average losses.
As illustrated by the case study, a member’s P&I cover is but one of a number of types of insurance that might be triggered in the event of an armed attack on the member’s vessel. Ideally, the member’s P&I cover should be structured so that it dovetails with its other policies which respond to an attack (eg War Risks, Hull & Machinery, Kidnap & Ransom, Marine delay and Loss of Hire) .
The Standard Club provides War Risk Insurance through Standard War Risks Class and more recently through the Singapore War Risks Mutual (SWRM) which is a class within Standard Asia. From 1 February 2019, The Strike Club is part of The Standard Club group. The Strike Club’s Marine Delay Insurance provides vessel operators with cover for daily running costs or charter hire when a ship is delayed by a wide range of unexpected perils, including hostile acts.
We remain on hand to advise members further on specific queries with regards to placement of insurance that matches members’ specific trading and requirements.
The author acknowledges with thanks the contributions by the shipping team of Pramuanchai Law Office Co., Ltd (PMC Law), Bangkok for their advice on the Thai law position in this article.
 ReCAAP Annual report 2017. ReCAAP is the first regional government -to-government agreement to promote and enhance cooperation against piracy and armed robbery in Asia.
 IMB 2017 Annual Report
 ReCAAP 3rd Quarter 2018 Report. Also see summary sheet of ReCCAP 3rd Quarter 2018 Report
 Vessels transiting Eastern Sabah in East Malaysia and the Sulu and Celebes seas urged to exercise caution following Eastern Sabah Security Command (Esscom) heightened security alert of fresh threats of kidnapping by Abu Sayyaf Group - news report; also abduction of 2 fishermen on the Sri Dewi 1 on 11 Sept 2018.
 There have been six unsuccessful attempts, five involved bulk carrier and one in a product tanker in 2017.
 'mines, torpedoes, bombs, rockets, shells, explosives or other similar weapons of war.' (club Rule 4.3(3))
 per club Rule 3.1.4
 Section 4 (d) of the Act
 For example, Supreme Court Judgment No. 2338/2526
 Section 340 of Thai Penal Code, as amended in 1971
 It should be noted that, where a war risks policy includes piracy as a specific named peril, there may be overlap between P&I liabilities covered by war risk P&I underwriter and those covered by the club.