SHIPPING INDUSTRY SUBMISSION TO INTERNATIONAL TASK FORCE ON
RANSOM PAYMENTS – 30 th May 2012 (Michele White, INTERTANKO)
1. Why we pay
The safety of our seafarers is paramount and not negotiable.
We must be certain that we can do whatever is necessary to secure their release in the event they are taken hostage. Payment of ransoms is the only guaranteed way to secure our seafarers ’ lives.
Industry has gone to great lengths to adopt practical measures to protect ships from hijack with hardening of vessels, the development and following of Best
Management Practice, and more recently with the reluctant engagement of private armed guards. Yet despite this, ships continue to be taken
– most recently on 10 th
May - the oil tanker SMYRNI.
If your vessel is taken there are few options:
1. Refuse to negotiate and/or refuse to pay. Do that and the ship and crew will not be returned
2. Rely on military intervention – so far we have seen no appetite for a military solution
3. Negotiate and pay
– however unpalatable this may seem it is the only hope of securing the release of the crew.
2. What happens if we are prevented from paying?
Humanitarian
We condemn the seafarers held hostage and any more who are taken to an ugly and uncertain future in the hands of violent and organized criminals in a society where life is cheap. We have reports from former hostages of degrading and humiliating treatment
– torture, sexual assault, mock execution, witnessing the death and execution of their fellow hostages
– that will be their future. The TOR for this Task
Force assume that a ransom ban will persuade pirates to stop attacking vessels – that assumes we are dealing with rational people. We are not. They will simply become more violent in order to exert more pressure to extort payment. They are desperate individuals who will risk their lives for the possibility of the prize a ransom payment promises.
The ICEBERG 1 is a shocking example of what happens when no one pays. Held for nearly 800 days, one seafarer has committed suicide, another has died, a further six are close to death – Yemeni, Indian, Filipino, Ghanaian, Sudanese, Pakistani – their lives may not mean much to some nations in this room but these nations are the lifeblood of global trade.
A universal worldwide ransom ban is simply not realistic. There will inevitably always be shipowners who can pay legally, consider themselves to be beyond the reach of prosecutors, or even those willing to take the risk of prosecution and defend

themselves on humanitarian grounds. Others may have the support of their governments and crown immunity. Others will find another way – witness the
‘reimbursement of expenses’ financed by Malaysia and Pakistan for the release of the ALBEDO.
Legal
From a legal point of view, pirates will not believe that there is no ability to pay given some will and some will not. They will continue to take ships and a two tier system will emerge – one where shipowners have to stand by and witness the sacrifice of their crew and ship, and another where shipowners can lawfully pay. There would of necessity be a flight to flag states that supported the latter. The ransom ban would thereby fail, as is pointed out in the Chatham House paper.
Equally importantly, as far as the legal industry is concerned in the UK, where a huge percentage of maritime law is undertaken, clients would leave for other jurisdictions where there is less expertise in general but more particularly little experience of piracy negotiations.
We believe that any ban on ransoms would likely violate the European Convention on Human Rights
– Article 2 – the right to life and Art 3 – the right to freedom from torture, inhumane and degrading treatment. We question also whether a ban would be unconstitutional in some states under national law. When a ban on ransoms was introduced in Colombia it was successfully challenged as being unconstitutional. We strongly advise this
Task Force to seek Counsel’s opinion on this point as that might provide you with a complete answer to whether prevention of ransoms is even feasible.
Insurance
Turning to insurance issues, vessels and cargo will be lost. The recently captured
SMYRNI, a 2011 built 156,000 deadweight oil tanker flagged in Liberia is carrying
135,000 tonnes of crude – rough value USD100 million Add to that the value of the vessel at US$ 58 million and we see both a significant prize and significant loss to be covered if no ransom can be paid.
We have a legal decision in the UK to say that a s hip taken for ransom is not ‘lost’ in insurance terms as there is always a chance to get it back at a price. However with a ransom ban that chance is gone and the cost of paying out for the loss of ship, cargo and crew will fall on the shipowners, their insurers and eventually the general public.
Higher premiums, if they do not become prohibitive, or even not written, which may well be possible, will have to be passed on with a higher price at the petrol pump, or for the raw and finished products carried by sea. Worse, if underwriters do not provide insurance, it will make vessels unseaworthy in that a vessel sailing without insurance is contradictory to SOLAS and will make th e vessel’s ISM certificate invalid.

Commercial
Without a guaranteed exit strategy, seafarers may refuse to sail. This would have a severe impact on global trade. 90% of global trade is dependent on seafarers and ships. For example as far as UK revenue is concerned a VLCC calling Milford Haven is the equivalent of £350 million in revenue for the Exchequer. Monthly deliveries at
Milford Haven amount to 10,000 KB barrels of oil
– the equivalent of 5 300,000 deadweight VLCCS. Monthly revenue would theref ore be roughly £1.75 bn or £20bn per annum – a significant loss to the UK economy alone.
Seafarers may also refuse to sail with a ship that is flagged with a state that bans ransom payments.
For the region itself, the majority of ships would avoid the region completely thus having an immeasurable impact on food aid, the regional economies and world trade costs. It might result in an embargo on import of oil into East Africa which might lead to a collapse of the East African economies. There may also be a significant effect on Egyptian revenue if vessels stopped transiting the Gulf of Aden.
In short the banning of ransoms is a commercially strategic issue with significant geo-political ramifications. The value of global trade at risk is therefore totally disproportionate to the size of the ransom payments themselves.
Environmental
If we cannot pay ships would be abandoned to their fate off the Somali coast. The
IRENE SL hijacked in 2011 was carrying over 2 million barrels of crude oil. That is 8 times the amount lost in the Exxon Valdez spill in 1989 and about 40% of the crude oil estimated to have been lost from the Deepwater Horizon. If a tanker is lost and pollutes the East African coast there will be no oil major to pick up the bill and no one to mobilize an anti-pollution task force or to pay the victims of that spill.
Co-operation - Sharing of information – financial flows
Finally we fully support initiatives that seek to track the money paid to pirates with a view to bringing the pirates and their financiers to justice. We have worked with
Interpol and participated in Working Group 5 to achieve this end. Our owners have been encouraged to co-operate with law enforcement post hijack and we believe good progress was being made prior to the creation of this Task Force, which has left us with something of a stalemate. Please be aware that sharing of information will not be possible if it is used to curtail ransom payments. If ransom payments are driven underground, any ability to track them will be jeopardized.
Right now, the ransom lawyers are on the very margins of their ability to raise physical dollars to pay ransoms. These dollars do not come from UK or US banks who have been frightened off by talk of a ransom ban. So I would ask this task force to please not make it any more difficult than it already is to raise the funds necessary to save our seafarers.

Conclusion
Governments and shipowners hold a joint responsibility for ensuring the safety and welfare of seafarers. Should you decide to prevent ransoms, shipowners cannot be expected to share responsibility beyond their control In those circumstances, the fate of seafarers held for ransom will become the responsibility of states, including any consequential collateral damage to life or property.
The prevention of payment of ransoms is for the reasons I have given ill conceived and misguided. It would not be a disincentive to pirates; indeed it is naïve to even expect them to react. We believe that the time, effort and expertise of this Task
Force would be better spent exploring ways to support Working Group 5; to increase the risk to pirates via investigation and prosecution or by regulating the movement of money in the region.
The deaths of 19 US soldiers in Mogadishu in 1993 led to the withdrawal of US and
UN troops from Somalia. Would the death of the 157 seafarers and countless fishermen currently held hostage be any less of a tragedy? I challenge any of the governments in this room to take responsibility for the human tragedy that might follow a ransom ban.
Chairman, we do not make these points lightly – piracy is at the forefront of all our agendas but we truly believe that stopping ransom payments is firstly unachievable, and in any event would not stop piracy.