James, Partner, Clyde & Co
International trade and the movement of goods across oceans and international boundaries are critical to our way of life and impact our daily lives in ways that we do not always understand.
The importance of international trade and the conveyance of goods by sea permeates our common history. Rhodian law of the sea dates to 800 or 900 BCE. Parts of the Rhodian law were included in Justinian’s Codex in the 6th century. This code forms the very foundation of most legal systems today. These laws then found their way into the Laws of Oleron in the 11th century from where they were introduced by Richard 1 into England in about 1190 and incorporated into the Black Book of Admiralty in 13361.
Consideration of the profit of trade against the underlying risk of the venture lead to the sharing of the risk and the provision of marine insurance, initially out of Lloyds Coffee house in about 16862 and the later establishment of Lloyds. The shared risk gave impetus to international trade and lead to the development of marine insurance as we know it today. Its reach is breathtaking.
The Salem3 judgment in 1982 is directly linked to South Africa. At the time South Africa was the subject of an international oil embargo. An elaborate fraud was created whereby Kuwaiti oil destined for Italy and purchased by Shell was discharged at Durban without the knowledge of the purchaser. Some cargo was left onboard the vessel. The vessel sailed and was then scuttled off West Africa, the intention being to represent the sinking as due to the natural perils of the sea. The fraud was exposed. Shell, the unfortunate innocent purchaser of the oil, anticipating its delivery to Europe and having been deprived of valuable cargo, then claimed the value of the lost cargo from insurers under its marine cargo insurance policy. Clyde & Co represented insurers in the subsequent legal proceedings.
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In that matter, Lord Mustill quoted the then applicable, somewhat quaint wording of the Lloyds “Ship and Goods Policy” which gives us some insight into the breadth of marine insurance cover. It is worth quoting here:
“Touching the adventures and perils which we the assurers are contented to bear and do take upon us in this voyage: they are of the seas, men of war, fire, enemies, pirates, rovers, thieves, jettisons, letters of mart and countermart, surprisals, takings at sea, arrests, restraints and detainment of all kings, princes, and people, of what nation, condition, or quality soever, barratry of the master and mariners, and of all other perils, losses, and misfortunes, that have or shall come to the hurt, detriment or damage of the said goods and merchandises, and ship &c., or any part thereof.”
These policies, where they insure goods and not the vessel, normally apply from the time that the goods leave the warehouse and endure through the ordinary course of transit and terminate at either the destination named in the policy or at the final place of storage.
In Salem, Lord Mustill awarded the loss in full. On appeal, Shell only recovered the value of the scuttled cargo. The perils of the sea are subject to the terms of the contract!
South Africa recently experienced the horror of mob violence and destruction in Kwa Zulu Natal. Some warehouses were burnt to the ground by what appears to be a spree of looting and wanton destruction. The motives or reasons are another topic. Many of the goods destroyed in these warehouses had been imported into South Africa and were either at final destination or en route to final place of storage. Many of these products were insured against risk of loss or damage.
Cover for risk of damage from civil commotion and riot is often excluded and one is obliged to seek SASRIA cover for such risks. However marine policies sometimes include extension clauses covering these risks during the warehouse to warehouse transit.
Therefore, where goods were still effectively in transit, under the extended insurance for riot and civil commotion cover, these policies would respond to the loss.
The issue of marine insurance impacts our daily lives and is relevant to all of us, consumer, importer, exporter, carrier and bailee. It can trace its roots to the stele of Babylon around 2300 BCE4. It will continue to develop for as long as human endeavour thrives.