Pirates of the Arabian

“Up until a few short months ago, my idea of a pirate was Johnny Depp,” says Lawrence Rutkowski, the 56-year-old head of Seward & Kissel’s transportation finance practice.

That changed last Thanksgiving evening when Rutkowski received a phone call from James Christodoulou, the CEO of Industrial Shipping Enterprises Corp. (ISEC), for whom Rutkowski acts as general counsel. It seemed an ISEC vessel, the Biscaglia, and its crew of 28, had been hijacked by Somali pirates in the Gulf of Aden, and there was a ransom demand.

The first priority, Rutkowski says, was getting the crew out safely. But he notes the number of legal issues that arose during negotiations.

“You have to be mindful of the fact that the decisions you’re making affect other people’s assets as well,” he says. “If we divert freshwater use from keeping the cargo warm—which, in this case, was palm oil—to crew use, because there was limited access to potable water, what does that mean in terms of responsibility to the cargo owner?”

Then there’s insurance. Does it cover, say, damage to the ship caused by a decision you’ve made in order to save the crew?

Don’t forget the banks. “This vessel,” explains Rutkowski, “like 99 percent of the vessels that ply the waters in trade, was mortgaged, so the bank had to be kept abreast. They had to consent to have certain payments made”—although, he adds, funding a ransom is “one thing the banks aren’t going to do.”

Finally, says Rutkowski, “If we agree to pay a ransom, are we violating any U.S. law? This was the first U.S.-based company to have a vessel hijacked,” so Rutkowski was, shall we say, navigating uncharted waters.

“The U.S. Office of Foreign Assets Control has a whole series of prohibitions that relate to North Korea, to Cuba, to Iran, and other countries as well, to make sure money doesn’t flow to people who are on the designated bad list. But the pirates didn’t fall into any of those categories because they hadn’t yet made the watch list.”

The ISEC crisis management team operated out of a room in the Sheraton Hotel in Weehawken, N.J. While Christodoulou spoke on the phone with the two pirate negotiators—Abbas and Hussein, both of whom, Rutkowski reports, spoke “reasonably fluent English”—Rutkowski and his fellow team members whizzed BlackBerry messages back and forth.

Of the ransom, Rutkowski says, “We can’t divulge the amount. But it had to be, without breaking any money-laundering laws, converted to cash and parachuted in to the pirates.”

Which raises the question: Why didn’t the Navy intervene—as it did spectacularly in the April 2009 hijacking?

“One of the key differences,” explains Rutkowski, “was that the Maersk Alabama involved a U.S.-flagged ship with a U.S. crew on a U.S. aid mission. The Navy had a legal right to do anything they wanted to do. Our vessel was crewed by Bangladeshis and Indians, and it flew the flag of the Republic of Liberia. Not only was the U.S. Navy not nearby, but there was no clear legal jurisdiction for it to intervene.”

Even so, it all worked out. “[The pirates] left the vessel and its crew and the vessel set sail to Salalah,” Rutkowski says. “The pirates faded back into the Somali coastline.”

And Rutkowski experienced a new aspect of lawyering. “It was the first time we’ve ever had to negotiate with someone that had an AK-47 in their hands,” he says.