ON THE HORIZON - The high seas

Introduction

Naturally, the industry has taken as many practical steps as possible to try and ensure commercial vessels are not used as drug mules.  This might be by establishing watches for divers or small boats in ports known for fixing narcotics to the hull below the waterline, rotating crews on vessels trading in areas with a high risk of coercion, or submitting all individuals boarding the vessel to searches and bag checks.   However, the drug industry is nothing, if not imaginative – take the Orion V, a livestock carrier, where 4.5 tonnes of cocaine were found hidden in the vessel’s cattle feed silos.  So, clearly drug smuggling continues and when drugs are found on board a commercial vessel, be that a tanker, bulker or container ship, the consequences can be far ranging.  The criminal implications are of course a matter for the authorities in the jurisdiction where the drugs are discovered, and it is these criminal issues that usually hit the headlines.  Behind the scenes, there is also a team dealing with the commercial consequences of drugs being found on board a vessel – that is the issue this article addresses.

Detention and delays

The simple point is that a drugs bust will inevitably interfere with the vessel’s trading.  There are numerous ways a vessel found with narcotics on board may be delayed.  Taking the Scot Bremen as an example, it was reported that the Master called authorities when he discovered five crew members were concealing suspicious packages, but the weather was too bad for the police to come out to the anchorage so the tanker waited overnight.   Five crew members were then detained by police and the Master was also questioned as a witness.  The Scot Bremen was then cleared to leave, but replacement crew members still had to be arranged.   Reports suggest that the Scot Bremen had a fairly swift turnaround time before it was released by authorities (less than a week) – but it can be weeks or even months before the relevant authorities release the vessel from detention, particularly in jurisdictions where the legal processes move slowly. 

These delays will impact the charterparty or chain of charterparties for the vessel.  The vessel may be in the midst of a charterparty when the drugs are discovered or shortly due to be delivered into a new one.  Setting the criminal aspects aside, if there is delay and disruption to the charterparties, various legal questions arise and may well include: who is paying for this?  Is the vessel off-hire if the vessel and/or the crew are detained by the authorities whilst they conduct their investigation?   Who is covering the port costs whilst the vessel is detained?  If the vessel loses its next fixture due to delay and/or detention, who bears the cost of that? 

Risk allocation

The answer is likely found in the terms of the particular charterparty; so, the first step is to conduct a careful review of the various charterparty terms.  It is not uncommon for the parties to try to legislate for this type of incident in the terms of the charterparty, particularly if the vessel is trading in parts of the world known for drug smuggling.  The parties may have incorporated an industry standard clause, such as the BIMCO U.S. Ant-Drug Abuse Act 1986 Clause for Time Charter Parties 2013 (which generally holds charterers liable for the cost and delay of drug smuggling).  Or, there may be a bespoke clause that apportions liability as per the parties’ commercial agreement – for example, the delay, costs, expenses and fines arising out of drug smuggling are for owners’ account if caused by crew, and are for charterers’ account if caused by charterers’ agents (e.g. stevedores).

In circumstances where owners and charterers both point the finger at the other and the matter ends up in arbitration, a commercial arbitration can quickly become an attempt to prove who brought the drugs on board and how.   In other words, even though there are no criminal liability issues at stake, parties to a commercial arbitration may need to delve into the facts that make up the criminal act in order to determine who pays for the commercial, financial consequences under the charterparty.  

Practical steps for a dispute

There are some key things to think about for both an owner and a charterer:

1. Facts – the specific facts of the matter will be important and can help build a convincing picture one way or the other. That said, it may never be possible to know precisely how the drugs made their way on board so the point will turn on who paints the most credible picture.   For example, if charterers argue that the crew brought the drugs on board, can they show it was physically possible for the crew to carry that volume of narcotics without detection?   If the argument is that the crew were coerced by a local cartel, how much time did the crew spend ashore?  Does the crew speak the local language?  Does that vessel regularly run that route or is the first time that particular crew visited that particular port?  If owners argue the stevedores dropped the drugs into the cargo hold, can they point to a method for stevedores to do this?  Did the stevedores bring bags of tools or food parcels with them onto the vessel and if so, were these searched?  Establishing answers to questions like these early on can be critical.
2. P&I Club and local law assistance – close cooperation with the vessel’s P&I Club will be of significant help as the Club will typically play a role on both the P&I and FD&D sides of the issue. Further, there will invariably be a criminal investigation taking place in the relevant jurisdiction where the drugs were discovered.  It is important to have a local lawyer instructed in that jurisdiction who, first and foremost, may be able to help with the release of the vessel and/or provide real time updates about when the vessel may be released.  The P&I Club is also likely to be able to assist with locating a suitable lawyer in the relevant jurisdiction.  Later, a local lawyer may be able to obtain evidence gathered by the local authority which may prove useful in the arbitration. For example, crew statements taken by the police or CCTV gathered by the authorities.  
3. Crew – it is often difficult to obtain witness statements from working seafarers for any type of commercial arbitration (because they are busy on board a vessel and/or are no longer employed by owners), let alone in circumstances where accusations have been made about drug smuggling. It is important to take witness statements as quickly as possible rather than waiting until the arbitration is well under way.  Further, a credible Master can go a long way as a witness if you are acting for owners but it is not always easy to ensure Masters are available to give evidence; as soon as a hearing is fixed, arrangements should be made for any key witnesses to be brought off vessels at the appropriate time, in a way that minimises any impact to owners’ trading patterns.   
4. Experts – there are very few experts available in the market to give evidence on how drugs may be brought onto a vessel, where they are likely to be hidden, the specific risks and safety measures at certain ports and the methods used by drug cartels to smuggle narcotics. Conflict checking an expert as soon as possible, even if arbitration has not yet been commenced, can be crucial.    
5. Settlement – arbitrations of this nature are often all or nothing. The Tribunal will determine, on the balance of probabilities, who is likely to be responsible for the drug smuggling and this will likely decide the question of who is responsible for the financial fall out.    It is therefore always worth exploring settlement if it has been difficult to obtain evidence and ascertain the full facts of the matter (particularly if the local authority has not arrested or convicted anyone).     

The author of this article, Hayley Broome, along with Partner, Max Lemanski, have previously acted for clients in respect of the commercial issues arising out of drug smuggling.  If you would like further advice, please contact Hayley or Max.