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25 Oct 2017

Stephenson Harwood secures Supreme Court victory in landmark general average case

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Law firm Stephenson Harwood LLP has represented the successful shipowners, in a claim arising from the seizure of the MV Longchamp by Somali pirates. The case, Mitsui & Co Ltd v Beteiligungsgesselschaft LPG Tankerflotte MBH & Co KG, saw the Supreme Court overturn a Court of Appeal decision and restore the original High Court decision.

The case centred on whether general average contributions could be claimed in relation to the vessel's operating expenses incurred during the period of ransom negotiation with the pirates. The Judge at first instance had upheld the adjustment of the average adjusters, Stichling Hahn Hilbrich, which had allowed such expenses. This decision was overturned by the Court of Appeal. The Supreme Court today reinstated the original decision, and confirmed that the expenses – namely crew wages and high risk bonus, maintenance and bunkers consumed – were recoverable in general average, as they represented an alternative course of action to paying the pirates' initial ransom demands, and led to a saving (of in excess of US$4 million) in the ransom eventually paid.

The initial ransom demand was US$6 million. After 51 days of negotiation, this was reduced to US$1.85 million. The expenses incurred were US$160,000.

"I am very pleased that the Supreme Court has upheld the original adjustment and initial decision of Deputy Judge Stephen Hofmeyr QC, holding that the expenses incurred during this negotiation period were allowable," said Duncan McDonald, partner, Stephenson Harwood. "General average is a technical area of practice, on which there are very few Court decisions. This judgment will provide guidance to average adjusters, shipowners, charterers, cargo interests and their insurers alike."

The Stephenson Harwood team was led by London-based marine and international trade partner Duncan McDonald, who was assisted by associate Mary Dodwell.

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