Piracy, Kidnap & Ransom

A closer look at the UK’s new laws.

Piracy, Kidnap & Ransom: UK Bans Ransom Payments by Insurers

On 26 November 2014 the British Home Secretary introduced the Counter-Terrorism and Security Bill (the Bill) to Parliament, part of which deals specifically with prohibiting the payment of insurance claims in respect of payments made in response to terrorist demands.

The insurers of Piracy, Kidnap and Ransom, and extortion policies will be particularly affected.

The Payment of Ransoms at Common Law

The new Bill, if enacted, will alter the present position at common law.

At common law, until now, the payment of ransoms has not been prohibited, as was recently considered in detail and confirmed by the Court of Appeal in Masefield AG v Amlin Corporate Member Ltd.,1 a case concerning the hijacking of a vessel off Somalia by pirates. The court surveyed the state of previous authority, industry practice and government policy, noting that:

There is something of an unexpressed complicity: between the pirates, who threaten liberty but by and large not the lives of crews and maintain their ransom demands at levels which industry can tolerate; the world of commerce, which has introduced precautions but advocates the freedom to meet the realities of the situation by the use of ransom payments; and the world of government, which stops short of deploring the payment ransom but stands aloof, participates in naval operations but on the whole is unwilling to combat pirates with force …. In these morally muddied waters, there is no clearly identified public policy, no substantially incontestable public interest, which could lead the courts, as matters stand at present, to state that the payment of ransom should be regarded as a matter which stands beyond the pale, without any legitimate recognition.

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Source: cozen.com