England and Wales High Court (Commercial Court) Decisions

Sunport Shipping Ltd. & Ors v Atkin & Ors [2002] EWHC 235 (Commercial) (27th February, 2002)

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
[2002] EWHC 235 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		27 February 2002

Mr. Justice Cresswell

JUDGMENT: APPROVED BY THE COURT FOR HANDING DOWN (SUBJECT TO EDITORIAL CORRECTIONS)

Mr Justice Cresswell :

Introduction

1. The claimants sue on a war risks insurance of the m.v. “Kleovoulos of Rhodes” (“the vessel”). Having sailed from Colombia, the vessel was detained in Greece following the discovery of cocaine in a sea chest below the vessel’s waterline in August 1998. The vessel’s Master and crew were charged with drugs offences, but were all acquitted in January 2000. In the meantime, the vessel was detained for long enough to be deemed, by the terms of the insurance, a constructive total loss.
2. To the extent that evidence of foreign law and practice is relevant, the evidence before the Court is confined to the evidence of Professor Anagnostopoulos as to Greek law and practice (and of Snr Cordoba as to Colombian law and practice).
3. The central issue is whether the exclusion in clause 4.1.5 of the Institute War and Strikes Clauses, Hulls-Time of 1.10.83 (“the Institute Clauses”) applies. Clause 4.1.5 excluded from cover “loss, damage... arising from arrest, restraint, detainment, confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations”.
4. By the insurance, the vessel was insured, valued at US$ 8 million, against war and other perils on the terms of the Institute Clauses, with the deemed constructive total loss period (clause 3) reduced to 6 months.
5. The first claimant is the owner of the vessel, the third claimant is her manager and the fourth claimant her mortgagee. The second claimant was named as an assured in the governing insurance cover note which set out the terms of war risks cover for 12 months from 15 March 1998 on some 16 vessels. There is no live issue as to the claimants’ respective titles to sue on the insurance.
6. The defendants are the various underwriters who subscribed to the insurance.
7. After the vessel’s release the claimants sold the vessel for a net recovery of US$ 1,362,573 (US$ 2,150,678 less costs of maintaining the vessel after abandonment and costs of sale of US$ 788,105). These figures are agreed subject to liability.
8. The claimants say that the exclusion in clause 4.1.5 does not apply and claim US$ 6,637,427 and interest. The defendants say that the exclusion in clause 4.1.5 does apply and that no sum is payable.

Common Ground

9. The following facts and matters are common ground between the parties.
10. By a policy of marine insurance, numbered HM 136698, subscribed by the defendants for their respective proportions, the defendants agreed to insure the vessel, which was valued by the policy at US$8 million, against war and other perils for a period of 12 months from 15 March 1998.
11. The Policy incorporated the Institute Clauses (Hulls-Time) and covered among other things loss of or damage to the vessel caused by her detainment.
12. The Policy provided that if, as the result of detainment, the assured lost the free use and disposal of the vessel for a continuous period of 6 months, then, for the purposes of ascertaining whether the vessel was a constructive total loss, the assured would be deemed to have been deprived of the possession of the vessel without any likelihood of recovery.
13. The Policy provided (so far as material):-

“

1. PERILS

Subject always to the exclusions hereinafter referred to, this insurance covers loss of or damage to the Vessel caused by

1.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power

1.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat

1.3 derelict mines torpedoes bombs or other derelict weapons of war

1.4 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions

1.5 any terrorist or any person acting maliciously or from a political motive

1.6 confiscation or expropriation. ...

3. DETAINMENT

In the event that the Vessel shall have been the subject of capture seizure arrest restraint detainment confiscation or expropriation, and the Assured shall thereby have lost the free use and disposal of the Vessel for a continuous period of 6 months then for the purpose of ascertaining whether the Vessel is a constructive total loss the Assured shall be deemed to have been deprived of the possession of the Vessel without any likelihood of recovery.

4. EXCLUSIONS

This insurance excludes

4.1 loss damage liability or expense arising from ...

4.1.5 arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations.”

14. On 19 August 1998, the vessel arrived at the port of Aliveri in Greece in order to discharge a cargo of coal which had been loaded at Puerto Prodeco in Colombia.
15. On the following day, 20 August 1998, the port authority at Aliveri required an underwater inspection of the vessel to be carried out by divers. During that inspection a large quantity (188.9kg) of cocaine was discovered in waterproof packaging behind a grill in a sea chest on the starboard side of the vessel, well below the waterline.
16. Immediately following that discovery the officers and crew of the vessel were charged with drugs offences under Greek criminal law and the vessel was detained pursuant to the provisions of the Narcotics Act (Act 1729/1987) as amended in connection with those alleged criminal offences. The Report on Seizure of the vessel read (in translation):

“Aliveri... Thursday 20th August 1998... enquiring into the transportation of drugs, an investigation which took place on 20.8.98 in relation to the crew of the “Kleovoulos of Rhodes”, a vessel sailing under the flag of Cyprus, we proceeded to take into possession -

1. the vessel above described and its certificates of seaworthiness ... as these items have a bearing on the above offence, and we appoint as custodian and sequestrator the Port Authority of Aliveri ...

Examining Magistrate

Signature”

17. On 17 September 1998, the first claimant formally applied to the Halkida District Court Committee for the release of the vessel, but the application was dismissed by a decision published on 30 November 1998.
18. On 17 December 1998, the claimants applied to the Halkida District Court for an order that the vessel be moved to the port of Piraeus, for her own safety.
19. On 25 January 1999, the Halkida District Court acceded to that application and ordered that the vessel be moved to Piraeus.
20. On or about 25 February 1999, the claimants gave notice of abandonment in writing which the defendants did not accept. As at that date, the vessel had remained under detention for a continuous period of over six months, and the claimants had not had the free use and disposal of the vessel during that six month period.
21. On 17 March 1999 the Athens Public Prosecutor of the Court of Appeal indicted the members of the crew with the same drugs offences.
22. The claimants did not make any other applications for the release of the vessel until 5 April 1999, when they then made an application to the Athens Court of Appeal.
23. The claimants’ application on 5 April 1999 to the Athens Court of Appeal resulted in a release of the vessel on 13 May 1999, subject to the provision of Dr 500 million bail.
24. The claimants applied for the condition of bail to be lifted on 7 June 1999 and this was granted on 6 July 1999.
25. The trial of the officers and crew was concluded on 10 January 2000, when they were all acquitted.
26. The defendants have not paid the sum of US$ 6,637,427 or any part thereof to the claimants.

The respective contentions of the parties summarised

27. The claimants say that the words “customs regulations” mean rules of law concerning duty levied on imports from abroad. The defendants’ case is that the words “customs regulations” mean any law which figuratively might be described as in the realm of customs, the words being wide enough to include smuggling of prohibited goods, substances or materials as well as smuggling of dutiable goods.
28. Thus the claimants argue for a narrow construction, the defendants for a wider construction, of the words “customs regulations”.
29. The defendants accept that if the claimants are correct as to the meaning of “customs regulations”, the exclusion in clause 4.1.5 does not apply in this case. Conversely the claimants accept that if the defendants are correct as to the meaning of “customs regulations”, there was in this case an “infringement of customs regulations”, subject to an issue as to causation. The claimants say that the loss and damages did not “arise from” “infringement of any customs regulations”. The defendants say that it did.
30. I turn to set out the main submissions of the parties.

The claimants’ submissions

31. Mr. Baker for the claimants submitted as follows.
32. The claimants accept that there was an infringement of the Greek Narcotics Act in this case.
33. The Greek Narcotics Act (and in particular Article 5 thereof) does not enact “customs regulations”. Criminal laws outlawing narcotics trafficking generally, and Article 5 of the Greek Narcotics Act in particular, are not customs rules or part of customs law at all.
34. Any detainment by reason of the planting of the cocaine on board the vessel was of very limited duration. It did not cause the claimants to be deprived of the vessel for anything like 6 months. It did not cause the loss of the vessel. The claimants were deprived of the vessel for 6 months (and more), i.e. the vessel was lost, because unfounded charges of drugs trafficking were brought against her officers and crew. Without those charges, the vessel would not (indeed, could not) have been detained for anything like 6 months.

Infringement

35. The claimants accept that an offence is committed contrary to the Greek Narcotics Act if someone in Colombia plants cocaine on a vessel bound for Greece so that, unknown to those on board or otherwise connected to the vessel, the vessel arrives in Greece with cocaine on board.

Customs Regulations

36. The word customs means duty levied upon imports from abroad (see Macfarlane, “Customs and Excise Law and Practice”). Since the creation of the EC, “abroad” in this context has meant, for Member States, outside the EC.
37. As a matter of dictionary definition “customs regulations” means rules of law concerning duty levied on imports from abroad. The Greek Narcotics Act has nothing to do with customs.
38. As to “customs regulations”: one is looking for “regulations” capable of being “infringed”, i.e. rules of law requiring things to be done or not to be done; “customs” is used to denote the required character of the rules of law (just as is “quarantine” and “trading”); “customs” means import duties as a matter of ordinary definition and as a legal term of art; there is a difference in character between law-breaking in connection with matters of revenue and law-breaking by bringing into a state an inherently illegal, absolutely prohibited, non-tradeable substance. There is a difference in character between infringements of customs law in relation to lawful trade and commerce, and drug smuggling.
39. It is nothing to the point that the Greek Customs Service is involved (amongst others) in the investigation of infringements of narcotics laws. It is an obvious administrative convenience – and no doubt a common practice worldwide – for national Customs Services to play a role in the policing of drug-trafficking laws. Because the remit of Customs Services is or may be wider than customs, “customs regulations” should not be equated with “laws policed by the Customs”. Drug-trafficking is not a customs matter because it is policed inter alia by Customs in particular. It is well recognised in law and in policy (both at national and Community level) that in their wider role - i.e. in fields beyond the collection and enforcement of customs duties - Customs Services are not administering or enforcing customs law/customs rules/customs regulations, but other laws.
40. The separate reference in Clause 4.1.5 to “quarantine regulations” and “trading regulations” should be noted. Sanctions (the paradigm “trading regulations”) involve boycotts of goods of certain origins and are policed inter alia at national borders by national Customs Services.
41. Where a legal term is used in a commercial contract, the rule of construction is to give that term its established legal meaning in the absence of positive admissible reason to depart therefrom (Lewison, “The Interpretation of Contracts”, 2^nd Ed., §4.08). See Nourse LJ in IDC Group v Clark [1992] 2 E.G.L.R. 184 @ 186C-D. See to similar effect Sydall v Castings Ltd [1967] 1 QB 302 at 313D-314C & 316B-317B per Diplock LJ, 319G-320E per Russell LJ.
42. There is an established legal meaning under English law for the term “customs regulations” (or the synonymous “customs rules”, or for that matter “customs law/legislation”), in that:

(1) European Community customs law applies directly in this jurisdiction and forms part of English law. Member States of the Community cannot have customs rules of their own and the customs rules laid down by the Community are the customs rules of each Member State. Thus, since 1977, at the latest, English customs rules are Community customs rules.

(2) Drugs fall wholly outside the scope of customs law. They are “wholly extra commercium” (Case C-3/97, Goodwin & Unstead, [1998] ECR I-3257 @ 3271, §15). As such, they “are not subject to customs regulations” (Case C-455/98, Tullihallitus v Kaupo Salumets, unreported, per A-G Saggio @ §18). This principle has been established in a series of judgments of the European Court of Justice starting in 1980.

(3) The entire corpus of customs law is comprised in, and therefore all customs rules are contained in, the EC Treaty Articles 23-27, the Customs Code and the Implementing Regulation.

(4) It is recognised that the jurisdictional competence of national Customs Services is or may be wider than the administration and enforcement of customs rules.

(The above propositions were developed by Mr. Morris on behalf of the claimants).

43. There is no reason to depart in this case from the dictionary and/or established legal meaning of the term “customs regulations”. It is particularly appropriate to have regard to considerations of certainty and an expectation of a careful and considered use of language, in the case of an exclusion clause in an insurance industry standard form used worldwide.
44. The Institute Clauses do not exclude detainment by reason of ordinary criminal legal process (Clause 4.1.6 having been construed as limited to civil proceedings). Clause 4.1.5 has reference to rules of law (“regulations”) of certain types, and certain types only - “quarantine regulations”, “customs regulations”, “trading regulations”. Each word connotes a body of rules of law of a certain character or nature.
45. For the above reasons, an “infringement of customs regulations” in Clause 4.1.5 is an infringement of customs rules and there was none such in the present case.
46. As to “The Anita” [1970] 2 Lloyd’s Rep 365 (Mocatta J.), [1971] 1 Lloyd’s Rep 487 (CA) (which concerned Clause 4(1)(e) of the predecessor to the Institute Clauses, an exclusion clause in the same terms as Clause 4.1.5, save that there was no mention of “trading regulations”):

(1) In “The Anita”, no question arose but that there had been an infringement of customs regulations.

(2) The vessel was lost as a result of a confiscation order pursuant to a much more recent law - Decree 4/65 promulgated in July 1965. Apart from questions which do not arise in the present case, the issue was whether that confiscation order, and the invocation and operation of Decree 4/65 generally, was a charade to mask what was in truth a straight executive decision to seize the vessel.

(3) The detainment of the vessel may have been under Decree 4/65, but it was by reason of the underlying failure to manifest/pay duty on dutiable goods.

Causation

47. It is common ground that the vessel was detained pursuant to the Greek Narcotics Act.
48. Clause 4.1.5 involves two “causation” stages: there must be detainment by reason of infringement of customs regulations and loss arising from that detainment. In the circumstances there was no detainment of the vessel by reason of infringement of customs regulations, the only detainment being by reason of the criminal proceedings against the officers and crew of the vessel. Further the loss of the vessel did not arise from detainment by reason of infringement of customs regulations, because any such detainment was only for the very short period required to secure the drugs found on board and was not the proximate cause of the loss of the vessel. The infringement was only capable of detaining the vessel for as long as it would take to clear the vessel of drugs. The (actual) infringement was not the reason for the detainment of the vessel. The “infringement” here is the fact (without more) that there was cocaine on the vessel. The vessel was detained because the officers and crew were charged with criminal offences, not because there were drugs on board.

The defendants’ submissions

49. Mr. Michael Thomas QC for all defendants (save the 30th) submitted as follows.

(1) Infringement of “customs regulations” for the purposes of the Policy.

50. The starting-point, in considering whether there has been an infringement of customs regulations for the purposes of clause 4.1.5 of the War and Strikes Clauses, must be the Policy itself. The phrase “infringement of customs regulations”, like the remainder of the Policy, accordingly falls to be construed in accordance with English law. The meaning of the phrase was considered in “The Anita” by Mocatta J [1970] 2 Lloyd’s Rep 365 and the Court of Appeal [1971] 1 Lloyd’s Rep 487. In that case, “The Anita” was detained in Vietnam after smuggled transistor radios and other unmanifested goods were found on board. Although Vietnam had at the time a Customs Code in force, the detention was not pursuant to that Code, but to the order of a Special Court, which was promulgated under (in effect) an emergency decree. Both Mocatta J and the Court of Appeal found that the detainment was a detainment by reason of an infringement of customs regulations.
51. This approach to the exception has also been adopted by the editors of Arnould’s Law of Marine Insurance and Average (16th ed. 1981), vol. II, para. 906, and vol. III (1997), para. 357. The US Court of Appeals expressed a similar view in Blaine Richards & Co. Inc. v. Marine Indemnity Insurance Co. (1981) AMC 1. (See also the unreported decision of Toulson J in The “Aliza Galacial” (11/05/01) in which it was held that the expression “trading regulations” in the same clause must be given a “businesslike interpretation”.)
52. The defendants’ case, based on these authorities, is as follows. Events and the legal consequences of events are to be regarded as “infringements of customs regulations” if they are “within the realm of Customs”, to adopt the language of counsel in “The Anita”. As a matter of English law, laws relating to the smuggling of controlled drugs are clearly within the realm of Customs - see the relevant provisions of the Customs and Excise Management Act 1979 (in particular section 50), read with the Misuse of Drugs Act 1971. As a matter of English law the import of controlled substances gives rise to offences under both enactments. Similarly, the events which resulted in the vessel’s detention were, if a commonsense view is taken, clearly “within the realm of customs”. The discovery of the drugs on the vessel meant that a person or persons unknown was guilty of smuggling, and that in turn gave rise to the detention of the vessel pursuant to provisions designed to deal with the importation of prohibited goods - smuggling. However the local law characterises its provisions, those events, and smuggling, are matters within the realm of Customs.
53. This approach, quite apart from according with the authorities, is right as a matter of principle. It would be odd if the question of whether there had been an infringement of Customs regulations depended on the niceties of the local law.
54. There is no basis for defining "customs regulations" in the context of a policy of insurance of this kind as equivalent to "rules of law concerning duty levied on imports". That is inconsistent with English law authority.
55. The Institute Clauses, including what is now exception 4.1.5, long pre-date the European material relied on by the claimants and are the subject of settled interpretation. That material cannot inform the construction of the exception.
56. It is impossible to separate out, as the claimants seek to do, regulations relating to import duty and regulations relating to other functions of the Customs organisation. This is clear from the English legislation: the principal statute concerned with customs and excise in the UK, the Customs and Excise Management Act 1979, contains extensive provisions relating to smuggling, including the smuggling of controlled drugs. HM Customs & Excise regards the "fight against drug smuggling" as one of its primary roles. [See in particular the Customs and Excise Management Act 1979 (Part II (Administration); Part III (Customs and Excise Control Areas); Part IV (Control of Importation) including section 50 (Penalty for improper importation of goods); Part V (Control of Exportation); Part VI (Control of Coastwise Traffic); Part VII (Customs and Excise Control: Supplementary Provisions) including sections 81-87 (Prevention of smuggling)) and the Misuse of Drugs Act 1971 (section 2 (Controlled drugs and their classification); section 3 (Restriction of Importation and Exportation of Controlled Drugs) and Schedule 2).

As to the position in about 1959 see the Customs and Excise Act 1952 (section 44 (Forfeiture of goods improperly imported) and section 45 (Penalty for improper importation of goods etc)) and the Dangerous Drugs Act 1951 (Part III (Cocaine etc) and Part V section 13 (Application of Customs Acts)].

57. Further, Article 20 of the Greek Narcotics Act makes clear that the Greek Customs Service is (as one would expect) involved in the investigation of infringements of narcotics laws.

(2) Was the detainment “by reason of” the infringement?

58. The defendants submit that the answer to this question is Yes. The vessel was detained (and it is accepted that there was a detainment for the purposes of the Policy) because drugs were discovered on the vessel. That was a clear case of smuggling, by an unidentified person or persons as Prof. Anagnostopoulos said in para. 2.2 of his report: "There can be no dispute that the vessel had been used for transport and import of drugs into Greece". But for that smuggling - infringement of customs regulations - the vessel would not have been detained. According to the decision of the Court in Chalkis/Halkida published 30 November 1998, she was detained in order to facilitate investigation into the infringement, and as security in case her permanent confiscation was required in the future. The order pursuant to which she was detained refers to the vessel’s detention being on the ground that it had “a bearing” on the offence of the transportation of drugs. That order was reviewed by the Greek Court in Chalkis/Halkida on 16 November 1998, but was never revoked and remained in force until the vessel’s eventual release some 8 months later.
59. As to the claimants’ submission that the operative cause of the detainment was the bringing of charges against the crew, charges were brought only because the drugs had been discovered on board the vessel - that is to say, because of the infringement. A similar argument was advanced in “The Anita” , in which it was said that the operative cause of the vessel’s detainment was the making of a wrong decision by the Vietnamese court; it was held that this did not break the chain of causation and that the smuggling remained the operative cause of the detainment - see the judgments of Fenton Atkinson LJ at page 494 and Sir Gordon Willmer at page 495. The position is the same here: the infringement therefore continued to be the operative cause of the vessel’s detention, up until the time of her release.
60. Miss Hopkins followed Mr. Thomas and responded to Mr. Morris’ submissions as to European Community Customs Law. Miss Hopkins submitted that EU legislation and case-law relating to customs duties is irrelevant to the construction of the Policy. Even if it has any relevance, in fact it affords no clear definition of "customs regulations" that can assist the claimants.

ANALYSIS AND CONCLUSIONS

61. The issue for decision is whether the loss fell within the exclusion set out in clause 4.1.5 which I repeat for convenience

“This insurance excludes

4.1 loss damage liability or expense arising from ...

4.1.5 arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations.”

62. The defendants, who rely on exception 4.1.5, must discharge the burden of bringing themselves within it.
63. The words “detainment... by reason of infringement of any customs or trading regulations”

a) must be construed in accordance with English law;

b) must be given a businesslike interpretation (Lord Denning MR in “The Anita” [1971] 1 Lloyd’s Rep at p 492); and

c) must be given a wide meaning to the extent that they are intended to cover laws in force, not in a particular country, economic union of countries or geographical area, but in the particular country concerned which could be anywhere in the world (see “The Anita” supra and Arnould’s Law of Marine Insurance and Average 16th edn volume II (1981) para 906 and volume III (1997) para 357).

(See further the US Court of Appeals in Blaine Richards & Co Inc v Marine Indemnity Insurance Co (1981) AMC 1 - the exception to be construed in a “reasonable manner”; and Toulson J in the “Aliza Glacial” (11/05/01) - “trading regulations” in the same clause to be given a “businesslike interpretation”.)

64. Exception 4.1.5 (without the words “or trading”) has been in use (according to the parties) since at least 1959. The words “or trading” were added in 1983. (See Arnould volume III chapter 1 paragraph 8, and chapter 4 paragraph 307 which states “...many expressions have been retained which have acquired settled meanings, many of the current provisions are identical or almost identical to those in previous editions of these clauses, and it appears to have been the intention of the draftsmen to strike much the same balance as before.”)
65. In “The Anita”, Mocatta J and the Court of Appeal held that the detainment was a detainment by reason of an infringement of customs regulations.
66. Mocatta J said ([1970] 2 Lloyd’s Rep at page 383):

“Since [the exception] forms part of the Institute clauses and its application may arise in relation to events in a wide variety of countries, it does not seem to me that the words “customs regulations” should as a matter of construction be restricted to what in any particular jurisdiction may be designated as a customs code. This view is strengthened by the use of the word “any”. As a matter of ordinary use of the English language the words seem to me to cover the provisions of art. 5 of decree 4/65, whether the prohibition by the legislation in force relates to avoidance of the payment of duty, the absence of an import licence or a list of absolutely prohibited goods. I do not think this conclusion is affected by the fact that art. 5 appears in a decree enacted for the national safety in a time of grave military and political crisis”.

67. In the Court of Appeal Lord Denning MR said ([1971] 1 Lloyd’s Rep at page 492), that the exception was applicable because:

“... The words “customs regulations” must be given a businesslike interpretation. They cover the customs code of 1931 which dates from the French regime. Also the special decree no. 4/65 which was passed by the new regime in Vietnam to deal with emergency conditions. The regulations contained in it were plainly broken [Decree 4/65 contained art. 5 “[These] Are punishable by imprisonment: Those who import or attempt to import products or goods whose import is prohibited by the legislation in force” [page 490].] ...it was proved and admitted that it was a plain case of deliberate smuggling - such as would be condemned by any Court in any civilised country...”

and later at page 493

“... On the facts of this case there was a clear breach of the customs regulations...”

At page 493, Fenton Atkinson LJ said:

“... for the purposes of this case I can see no distinction between smuggling and infringement of customs regulations...”

Sir Gordon Willmer said at page 495:

“Here was a ship confiscated because those on board were found to have been in breach of customs regulations. The ordinary man, if asked what was the reason for the ship’s confiscation, would surely reply that it was by reason of the members of the crew having been caught smuggling...”

68. The decision of the Court of Appeal in “The Anita” provided authoritative guidance to the market on the meaning of the words “customs regulations” in exclusion 4.1.5. There is a need for certainty in commercial law. Where an expression in a standard form Policy used in the world of marine insurance has acquired a settled meaning, the courts will generally apply that meaning in the interests of certainty. Such a meaning will not be altered or narrowed by subsequent events (such as, for example, the development of European Community Customs Law).
69. According to Arnould volume II at para 906 in “The Anita” “ it was held that the words “customs regulations” are to be given a wide meaning, and as referring to laws in force in the country concerned, whatever their form, which deal with smuggling or other offences in the realm of customs”. (See further Arnould volume III at para 357). The phrase “in the realm of customs” is found in the argument of counsel (Mr. Mustill QC) at first instance ([1970] 2 Lloyd’s Rep at 369).
70. I reject the claimants’ contention that in context the words “customs regulations” should be narrowly construed as meaning rules of law concerned with duties levied on imports.
71. In my judgment (in the light of “The Anita”) in context the words “customs regulations” are wide enough to include provisions having the force of law in the country concerned (i) as to import or export duties or licences and (ii) as to import or export of controlled drugs and other prohibited goods, substances or materials
72. In the present case it is common ground that:-

(i) There was an infringement of the laws of Greece, the policing of which was within the jurisdiction (amongst others) of the Greek customs authorities.

(ii) In Greek law drug offences are set out in Act 1729/87 on Narcotic Drugs (as amended by Acts 2161/93 and 2479/97). Article 20 of the Narcotics Act makes clear that the Greek Customs service is (amongst others) involved in the investigation of infringements of narcotics laws. There was an infringement of the Act on Narcotic Drugs on the facts of the present case. The arrival of the vessel in Greek territorial waters with drugs on board constituted an infringement.

(iii) In Greek law customs offences are set out in Act 1165/18 as amended. Articles 100 et seq establish the criminal offences of contraband. The import of cocaine (being absolutely prohibited) is a criminal offence under art 5 of Act 1729/87, but does not constitute a criminal offence under art 100 Act 1165/18 or an infringement of any other non-criminal (administrative law) customs statutes. Such (other) statutes do not apply to cocaine.

(iv) In the course of a criminal investigation for drug offences means of transport used for the commission of the alleged offences may be seized, if their seizure is deemed necessary for the purposes of the investigation (Articles 262 et seq CCP) and/or if it can be reasonably assumed that these will be confiscated by a trial court’s decision pursuant to Article 19 of Act 1729/87. “...seizure of the vessel as a means for the transport of cocaine [was] effected by virtue of the above statutory provisions. ...the vessel had been used for transport and import of drugs into Greece, while the participation of the crew [in] drug trafficking was prima facie assumed and ought to be further investigated” (Professor Anagnostopoulos paragraph 2.2).

(v) The majority decision No 329/1998 (published 30.11.98) of the Judicial Council of Chalkis/Halkida on the application by owners for release of the vessel held that there was no power to release seized means of transport of drugs since these might be confiscated by the trial court and dismissed the application as inadmissible. Moreover, the majority of the Judicial Council held that the application should be rejected on the merits, even if it was admissible, because detainment of the vessel was necessary for as long as the investigation was continuing.

“Infringement of any customs...regulations”

73. It follows from the above that in my judgment there was in the present case an “infringement of any customs...regulations”. I repeat that in my judgment in context the words “customs regulations” are wide enough to include provisions having the force of law in the country concerned (i) as to import or export duties or licences and (ii) as to import or export of controlled drugs and other prohibited goods, substances or materials.
74. Act 1729/87 on Narcotic Drugs (as amended) contained provisions having the force of law in Greece as to import of cocaine. It is common ground that there was an infringement of the Act on Narcotic Drugs on the facts of the present case. The arrival of the vessel in Greek territorial waters with drugs on board constituted an infringement.

“Loss damage...arising from...detainment...by reason of infringement of any customs...regulations”

75. In “The Anita” at p 493 Lord Denning MR said:

“Looking at this case quite broadly, it seems to me to raise simply a point on causation. Was the confiscation of “The Anita” due to a breach of the customs regulations of Vietnam? or was it due to political intervention unconnected with the breach? On the facts of this case there was a clear breach of the customs regulations: and everything followed in direct sequence from it, namely, the discovery of the hiding place, the seizure of the vessel, the proceedings before the Special Court, and the sentence of confiscation. The Judge seems to have recognised this sequence of events. He decided against the underwriters solely because he thought they had to prove that the Special Court acted in good faith within its jurisdiction and free from political interference. I do not think the burden was on them to prove all that. Suffice it for them to prove the breach of regulations and that the confiscation was the result of it. That they proved. They are, therefore, exempt under the exclusion clause.”

76. In the present case in my judgment the loss and damage arose from detainment by reason of infringement of customs regulations. I repeat that it is common ground that there was an infringement of the Act on Narcotic Drugs on the facts of the present case. The arrival of the vessel in Greek territorial waters with drugs on board constituted an infringement.
77. In the course of a criminal investigation for drug offences means of transport used for the commission of the alleged offences may be seized, if their seizure is deemed necessary for the purposes of the investigation (Articles 262 et seq CCP) and/or if it can be reasonably assumed that these will be confiscated by a trial court’s decision pursuant to Article 19 of Act 1729/87. Seizure of the vessel as the means of transport of cocaine was effected by virture of the above statutory provisions. The vessel had been used for transport and import of drugs into Greece, while the participation of the crew in drug trafficking was prima facie assumed and ought to be further investigated.
78. I specifically reject the claimants’ submissions as to causation including (without limitation) the contentions that “any detainment was only for the very short period required to secure the drugs found on board” and “the infringement was only capable of detaining the vessel for as long as it would take to clear the vessel of drugs”.
79. The majority decision (30.11.98) of the Judicial Council of Chalkis/Halkida on the application by owners for release of the vessel held that the application should be rejected on the merits, even if it was admissible, because detainment of the vessel was necessary for as long as the investigation was continuing.
80. The Defence (paragraphs 8 and 9) pleaded that the claimants did not act as prudent uninsured and failed to take measures to minimise their loss in that they made “no further application for the release of the vessel, whether to the Halkida District Court or to any other court (and in particular the court in Athens) prior to 5 April 1999”. Although this point in the Defence is no longer pursued, the claimants’ answer in paragraph 7 of the Amended Reply should be noted:

“The only two courts to which an application for the release of the vessel could be made were the Halkida District Court and (subsequently) the Athens Court of Appeal...the claimants made an application for the release of the vessel to the Halkida District Court Committee on 17 September 1998. When that application was dismissed, by a decision published on 30 November 1998, it was reasonable of the claimants not to re-apply to the Halkida District Court because (i) it was highly unlikely that the Halkida District Court would make a different decision on any re-application; (ii) a further failed application to the Halkida District Court would have delayed and further prejudiced an application to the Athens Court of Appeal.

As regards the Athens Court of Appeal, the claimants made their application (on 5 April 1999) at the first opportune moment. No application could be made until the investigating court (i.e. the Halkida District Court) had completed its investigation and transferred the Court file to the Athens Court of Appeal. The Halkida District Court’s investigation continued into late January 1999, with supplementary interviews of the crew being conducted on 21 January 1999. The court file was transferred to the Athens Court of Appeal on 10 February 1999. Thereafter, in order to ensure that the application was made in the most favourable possible circumstances, the claimants had to allow time for the file to be assigned to a prosecutor nominated by the Court and for that prosecutor to familiarise himself with the court file.”

81. Thus the loss and damage arose from detainment by reason of infringement of customs regulations. There was an infringement of customs regulations. The Halkida District Court held (30 November 1998) that detention was necessary for as long as the investigation was continuing. The claimants themselves plead that the investigation continued into late January 1999.
82. It follows that for the reasons set out above in my judgment exclusion 4.1.5 applied and the claim therefore fails.