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Commercial Question

Holding the law to ransom

updated on 19 June 2012


Are pirate ransoms legal and should we pay them?


An estimated 33,000 vessels pass through the shipping corridor of the Gulf of Aden each year. This level of traffic has encouraged a rapid rise in the number of pirate attacks in recent years. Piracy is now big business in the lawless country of Somalia, with the International Maritime Bureau reporting a record high of 455 pirate attacks in 2010. Furthermore, ransoms paid totaled $95 million last year and, according to one study, total losses were actually around $12 billion once costs such as insurance premiums, re-routing of vessels and security measures were taken into account.

Research suggests that pirates operate in organised syndicates. These syndicates are split between the pirates who conduct the maritime attacks and the pirates onshore in Somalia, who organise the syndicate before and after a vessel has been captured. Pirate attacks usually involve two or more skiffs (ie, small and basic fishing boats) which are now commonly supported by a hijacked vessel, known as a ‘mothership'. The use of a mothership has allowed the operating range of the skiffs to increase far into the Indian Ocean, with much less physical risk for the pirates. Once a vessel is captured, ransoms are extracted by leveraging the lives of the hijacked crew. Pirates frequently demand the ransom payment in $50 or $100 notes, which are then packaged up and parachuted from a plane into an area of sea near to the captured vessel.

Questions are often raised, however, as to whether the payment of ransoms is legal. Consideration is therefore given to two potential pitfalls which could affect the legality of paying ransoms; anti-terrorist legislation and the Proceeds of Crime Act. There are other EU and international laws relating to piracy including, for example, President Obama's Executive Order on Somalian Piracy, but these do not affect the legality of paying ransoms in the United Kingdom and are, therefore, not considered in this article.

Under Section 14(1)(a) of the Terrorism Act 2000 it is an offence to provide funds when the user knows, or has reasonable cause to suspect, that the funds may be used for the purpose of terrorism. This legislation is not limited to acts within the United Kingdom and the definition of terrorism is wide, covering political, religious and ideological motivations. There have been many allegations claiming that pirates are linked to terrorist groups, such as al-Qaida and al-Shabaab (an Islamic organisation in Southern Somalia). The government, however, has stated that they have no evidence that terrorists are using piracy as a means of raising funds. If pirates were to be classed as terrorists, the payment of ransoms to them would be prohibited. Unsurprisingly perhaps, many pirates have made it clear that they are interested only in money and that there is no political or religious agenda behind their attacks. With no definitive evidence suggesting otherwise, such allegations remain mere speculation. Pirates should, for the time being, be regarded as thieves and not terrorists.

Part 7 of the Proceeds of Crime Act 2002 creates several offences in respect of money laundering. In relation to Somalian piracy, the most relevant sections are Sections 327, 328 and 329 which deal with the offences of transferring, facilitating the acquisition and possessing criminal property. These sections initially suggest that a ransom should be considered to be the "proceeds of crime". However, both the definition of criminal property in Section 340(3) of the act and obiter opinions in R v Louizou (2005) clarify that a ransom payment, subject to it being financed from a lawful source, does not become criminal property until it is in the hands of the pirates. Paying a ransom, therefore, does not breach this statute.

There are numerous moral and economic arguments as to why paying ransoms to pirates should be made illegal. Essentially, money is being paid to criminal organisations that kidnap vessels and their crews for financial reward. Piracy is so profitable that pirate syndicates are selling shares in their planned attacks, allowing for further investment in larger boats, better equipment and more weapons. Despite denials by the government, rumours still circulate that al-Shabaab is providing combat training to pirates and receiving maritime training in return.

On the other hand, there are many reasons as to why the law should stay as it is. Prohibiting ransoms would eliminate the proven tool for hostage resolution. Somalian pirates have so far upheld their promises and generally have not made it their practice to torture or kill the crew as part of the negotiations process (although it is worth noting that over 60 crew members have died as a consequence of pirate attacks) as the knowledge that a ransom will be paid turns the kidnap into a predictable business transaction. Prohibiting ransoms seems unlikely to deter pirate attacks and the effect of rendering them illegal would be to criminalise the owners who are simply victims of extortion.

Despite a number of potential obstacles, the payment of pirate ransoms is currently legal. The law also supports, therefore, what is arguably the morally correct response, as ransom payments are currently the only option available to ensure that the victims of a hijacking are released. By allowing the payment of pirate ransoms, the law does its duty in protecting the lives of the innocent crew.

Rachel Bernie is a second-year trainee at Ince & Co LLP.