"MSC ARIES" - MSC operated vessel seized by Iranian authorities for "violation of maritime laws"

On 13 April 2024, the Portuguese flagged container ship "MSC ARIES" was boarded by Iranian commandos in the Strait of Hormuz as it was passing through international waters. The vessel was taken to Iranian waters and has been held there ever since. Although the crew were released in May 2024, it is yet to be determined as to what will happen to cargo that was on board the vessel.

Iranian authorities claim to have seized and detained the vessel on “judicial grounds” for allegedly breaching maritime laws by turning off its AIS transmitter and endangering the safety of navigation. However, several media reports have suggested that the Iranians’ actions are politically motivated given the tension in the region and the fact that several other vessels were seized on similar grounds.

Media reports state that the cargo on board is valued at US$93.6 million and discussions are ongoing regarding the release of the containers on board the vessel to facilitate shipment to their intended destinations.

As the one-year anniversary of the taking of the vessel approaches, insurers are under increased pressure to review their policies and prepare for claims being advanced by assureds who may wish to claim on the basis that they have suffered a constructive total loss (“CTL”) of their cargoes, subject to the terms of the respective policies. To date, parties appear to have adopted a “wait and see” approach, in particular where the carrier has not issued a statement which suggests that they will abandon the cargo or the voyage. 

Where English law applies, under s 60 of the Marine Insurance Act 1906 (MIA), as applicable to cargo, there is a CTL where the assured is deprived of the possession of his cargo by a peril insured against, and (a) it is unlikely that he can recover the cargo within a reasonable time, having regard to the circumstances of the case, including the nature of the cargo, or (b) the cost of recovering the cargo would exceed its value when recovered. (Where applicable, the CTL clause 13 of the Institute Cargo Clauses (A) is to similar effect.)

Under MIA s 61, the assured can elect to treat a CTL as a partial loss or abandon the cargo to the insurer and claim a total loss. By s 62, if the assured elects the latter it must usually give notice of abandonment with reasonable diligence after the receipt of reliable information of the loss.

The deprivation of possession must be caused by an insured risk or peril and the circumstances in which the vessel and cargo have been taken and detained, which are currently unclear, will need to be considered carefully to determine the operative risk(s) or peril(s).

In particular, it will be necessary to determine whether any deprivation has been caused by a marine risk as opposed to a war risk (non-piratical seizure etc.) or strikes risk (e.g. politically or ideologically motivated act). War and strikes risks are typically excluded from marine all risks cover such as the Institute Cargo Clauses (A) 1/1/09 and insured separately e.g. under the Institute War Clauses (Cargo) 1/1/09 and Institute Strikes Clauses (Cargo) 1/1/09. This will be particularly important in relation to questions of coverage for forwarding expenses based on a loss of the voyage or adventure. Such expenses will typically be covered by a marine all risks cover, where the voyage or adventure is part of the subject-matter insured, and such claims are contemplated in particular by the Forwarding Charges Clause 12 of the ICC (A), but are typically excluded under war and strikes clauses which exclude ‘any claim based upon loss of or frustration of the voyage or adventure’.

Insurers would be well advised to review their policies in anticipation of potential claims.

Clyde & Co currently represents various insurers and cargo interests and are in active discussions with MSC. It has been reported that the containers have been discharged from the vessel and may soon be shipped out of Iran, suggesting that it is the carrier’s intention to proceed with the voyage albeit the timeline for this is yet to be determined. Craig and Sara will be very happy to answer any questions relating to the issues raised in this article and the incident.