Scuttling of Ships

By Binita Shrikant Hathi, Partner, LEX Nexus, Advocates & Solicitors, Mumbai, India

The scenario when vessels become casualty due to it being deliberately sunk has been titled as the “Rust Bucket” fraud or better known as “Scuttling” fraud. Research has revealed that with a few notable exceptions, it is usually the ship-owners who commit these crimes. These ship owners are easily identifiable as they fall in a peculiar category that can be easily identified and pinpointed. Scuttling fraud is a fraud that is mostly aimed at the hull and its insurers alone, or sometimes against both hull and cargo. This fraud is committed in a situation wherein a ship has completed or is about to complete its economic life, but prior to commission of this crime certain important factors have to be taken into consideration like the age of the ship, its condition and the prevailing freight market.

There is no derth of men who are prepared to scuttle ships, obviously at a price-this fact is quite popular amongst those who have been a victim of this fraud i.e. those who have suffered loss due to this type of fraud , as also those whose task it is to investigate these types of suspicious losses. It has been observed that those who perpetuate this type of fraud like a deceitful owner may commit this fraud by either paying his own crew a sum to scuttle the ship during the course of a journey, or alternatively may employ a different crew, whose sole mission will be to sink the vessel in the course of a voyage, fictitious or otherwise. In the oceans there are deeps or trenches whose floor is far beyond the reach of divers by ordinary means, as divers can operate effectively or moderately effectively only at relatively shallow depths of ocean. The crew who is planning to scuttle a ship will usually settle the ship in question in such areas which is not easily accessible or is absolutely inaccessible to divers, but if for some reason they are unable to do so than the next course adopted by them is to falsify the ship’s actual position in the casualty report. Whatever tactics may be adopted to scuttle a ship, once a ship is scuttled and thereby destroyed the ship will be beyond investigation.

When the ship is intentionally sunk perhaps by use of explosives or some other technique, it can be said that the ship in question has been “scuttled”. The most common technique employed to destroy a vessel is blowing up the targeted vessel by using explosives. One more equally effective and just as difficult to prove method, which is usually employed to scuttle ships, are those instances where ships are intentionally destroyed by use of arson. A major benefit to criminals in instances where ships are intentionally destroyed by use of arson is that the ship in question need not even be at ocean, but the most important prerequisite in such cases is that the port in which the supposed accident occurs has no competent fire fighters. The criminal activity can therefore be effectively concealed, as in such situation a violent enough fire will often destroy proof that the vessel in question has been deliberately destroyed by arson, as will also destroy the proof of origin of the supposed fire.

From what has been mentioned above we can say that there are certain preconditions for a victorious scuttling fraud namely:

(a) There should be a vessel that is subject to an insurance policy,

(b) There should be men ready and willing to destroy the vessel (obviously at a price!) and

Once the above precondition is fulfilled it is a very simple task to scuttle vessels by using any of the abovementioned methods.

The next logical question that arises in one’s mind is how can one possibly identify a potentially defrauding, deceitful ship owner? This question is certainly very important and significant, particularly to insurance and cargo interests, so that they will be able to detect these species and or categories of frauds as also owners/persons committing these fraud . Researchers on the basis of in depth study and analysis of casualties, wherein vessels have been known or suspected to have been intentionally scuttled have noted that with the certain notable exception the scuttled vessels are the mostly property of very small operators and they sail mostly under a flag of convenience.

From what is stated aforesaid one can draw up the requirements or a blue plan of a successful scuttling fraud:

1] First requirement is to be able to identify or pinpoint a vessel not less than 15 years old,

2] Second requirement is that such vessel should be owned by a one ship company,

3] Third requirement is that such a one ship company should be situated or registered in a tax haven country,

4] Fourth requirement is that the vessel in question should be sailing under a flag of convenience and

5] Lastly crew of the vessel should be Greek, Asian or Oriental crew.

Having suggested a typical case of scuttling fraud drawn from past experience, one must not lose sight of the possibility and or the certainty of the existence of much wider spread of crimes involving destruction of vessels. For past 30 years or more frauds of massive nature have been perpetrated all through the world and many of them have had maritime links.

Lately, as reported in March 2000, a Taiwanese vessel, bulk carrier “Hualien No. 1” also disappeared while it was sailing in the Taiwan Strait. The operator of the vessel is the Japanese shipping firm - Dowa Line. A search and rescue operation which though has been mounted, has so far been unsuccessful. It is very difficult to determine at this stage whether the vessel has been deliberately scuttled or has become a victim of other widespread malady prevalent in maritime community- PIRACY ? ? ?