23 Nov 2014

New law to ban payment of ransoms


Marine and international trade alert email

The UK Government is to introduce new measures to make the payment of ransoms an offence; there are concerns about the implications for marine insurance and K&R policies; there was little detail in today's speech by the Home Secretary; the details of the measure will become clear when the Bill is published on Wednesday. We will issue a Bulletin on the new measures once they have been published.

At present the payment of ransom to pirates is not illegal (Masefield AG v Amlin Corporate Member Ltd (The Bunga Melati Dua)). However, the position is likely to be different so far as payment to terrorists is concerned. It is an offence under the Terrorism Act 2000 if any person provides money and knows (or has reasonable cause to suspect) that it will or may be used for the purposes of terrorism.

The UK Government has today announced new measures to address ransom demands by terrorists. The proposals raise the concern that they may also have an effect (possibly unintended) on piracy ransoms.

In a speech on terrorism the Home Secretary, Theresa May, announced a package of new measures intended to assist in dealing with the threat of terrorism. These will be set out in a new Counter-Terrorism and Security Bill, which will be introduced on Wednesday, 26 November.

The measures include a proposal to make the payment of ransoms a criminal offence. For many companies a key issue will be whether this applies only in the context of terrorism or whether it might also apply to ransoms paid to pirates. So far there is very little guidance as to the details of the proposed measures. In her speech, the Home Secretary said:

"The new powers will help us to... make sure British companies are not inadvertently funding ransom payments...

To put an end to uncertainty about insurance and reinsurance payments for kidnap and ransom, and to help prevent an important element of terrorist financing, the Bill will amend existing law to make sure UK-based insurance firms do not provide cover for the payment of terrorist ransoms. To put this important issue into context, along with oil sales, taxation and extortion, the UN estimates that ransom payments raised up to £28 million for ISIL in the last twelve months alone. A new offence will apply to ransom payments once the Bill is introduced."

Nothing further is yet known about the detail of the measures, or their possible impact on insurers. This is an issue where insurers need to know exactly where they stand, and one where clarity of legislation is essential.

We will issue a Bulletin on the new measures once they have been published.


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