Marine Insurance Update - Nima Sarl v The Deves Insurance Public Co Ltd ('Prestrioka') Court of Appeal - 30 July 2002

In a marine voyage policy to which English law applies, where the insurance (risk) attaches under the Transit Clause of the Institute Cargo Clauses but the ship, instead of sailing for the destination specified in the policy, sails for any other destination, the insurance will retrospectively be deemed never to have attached at all.

The Court of Appeal recently delivered its reserved judgment in a marine cargo policy claim arising from a so-called 'phantom ship' fraud.

As Potter LJ explained in the leading judgment:

"It appears that a 'phantom' ship or vessel is a term used .. to describe a vessel which has no valid classification, is not registered with any recognised ship registry and is usually operated by criminals. It is employed as a vehicle for fraud on cargo owners, the modus operandi being that, as part of a pre-arranged scheme to which the owners and/or master are party, shortly after leaving the port of shipment ostensibly bound for the port to which the vessel's cargo is contracted to be delivered, delays en route are reported during which the phantom vessel in fact proceeds to a new location to discharge her cargo and achieve her disappearance usually by assuming a new identity. Phantom ship frauds are a phenomenon well known in Far East shipping circles Ö"

The claimant purchased a rice cargo on CIF Dakar terms. The defendant insured the cargo for "all risks as per the Institute Cargo Clauses (A)" in respect of a voyage "from Kohsichang, Thailand to Dakar port, Senegal", aboard MV "PRESTRIOKA". The policy was expressly subject to English law and practice. The cargo was duly loaded on board but after sailing from Kohsichang the ship simply disappeared and the cargo was never delivered.

The central legal question was whether and when the risk attached under the policy.

The Transit Clause 8 of the ICC(A) ("the Transit Clause"), provides:

"8.1 This insurance attaches from the time the goods leave the warehouse or place of storage at the place named herein for the commencement of the transitÖ"

Section 44 of the Marine Insurance Act 1906 ("s.44"), provides

"Where the destination is specified in the policy, and the ship, instead of sailing for that destination, sails for any other destination, the risk does not attach."

The claimant argued that the Transit Clause should be interpreted as displacing s.44, because, where the policy contains a Transit Clause, the insurance attaches when the goods leave the warehouse. Therefore it...