Drug Smugglers Cost To Maritime Sector

Tom Gorrard-Smith, of Clyde & Co, looks at a recent court decision in which the court ruled that detention arising from drug smuggling is an insured peril under Institute War and Strikes Clauses Hulls 1/10/83

Thwarting the efforts of traffick-ers transporting drugs by ocean is an increasingly difficult task for customs authorities worldwide. With traffickers using more and more creative measures to avoid seizure, the search methods now being adopted by authorities to stem the flow of drugs being carried by ships are now, in turn, increasingly extensive in their scope and often involve delays to vessels while divers are engaged to undertake underwater surveys.

In the last couple of years such underwater surveys have enabled authorities to make significant seizures, in particular in 2013 when 101kg of cocaine with a street value of €7,000,000 was found stuffed into a missile-shaped container attached to the hull of the Delta Laguna, a Dutch cargo ship that has sailed to Rotterdam from Venezuela. In the Atlasnavios-Navegacao Ld v Navigators Insurance Co Ltd and Others (The B Atlantic) [2014] EWHC 4133 (Comm) the issue as to whether shipowners could claim a constructive total loss in respect of a detention by customs authorities due to drug smuggling allegations was brought before the UK's Commercial Court in late 2014.

Background

In 2007 after the vessel, the B Atlantic, had completed loading of a cargo of coal in Lake Maracaibo, Venezuela for discharge in Italy a customary underwater inspection of its hull was undertaken by authorities. Three bags strapped to the hull containing 132kg of cocaine were discovered 10 metres below the waterline and the vessel was immediately detained by the authorities and the crew arrested. The court in Venezuela proceeded to charge the master and second officer with complicity in the drug smuggling and pursuant to local law ordered the continuation of the vessel's detention for an unspecified period.

After attempts were made by owners to release the vessel failed, it was abandoned by owners some two years later and was subsequently confiscated by the Venezuelan authorities pursuant to a court order. The vessel was insured for US$14,135,000 under a war risks policy on terms of the Institute War & Strikes Clauses Hull 1/10/83 as amended and the owners proceeded to claim for the insured value of the ship in addition to sue and labour expenses in the sum of US$5,872,392. War risk underwriters, however, denied...