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The Law and Economics of Piracy at Sea

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Piracy at Sea

Part of the book series: WMU Studies in Maritime Affairs ((WMUSTUD,volume 2))

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Abstract

A law and economics approach to combating piracy at sea is one that seeks to minimize total social costs arising both from acts of piracy themselves and from preventive and retributive efforts related to piracy. The goal, in economics terms, is the development of optimal policies to combat illegal behavior—policies that, according to Becker, “are part of an optimal allocation of resources.”

This Article was written in the author’s personal capacity, and any views expressed herein are those of the author alone and do not necessarily reflect the views of Greenberg Traurig, LLP. With great thanks to her husband Jared, whose love, support and patience for pirate puns make all things possible.

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Notes

  1. 1.

    Becker (1968), pp. 169–217 at 209.

  2. 2.

    Becker (1968), at 177.

  3. 3.

    Becker (1968), at 174.

  4. 4.

    Becker (1968), at 179.

  5. 5.

    Becker (1968), at 180.

  6. 6.

    Becker (1968), at footnote 12, 178 (noting a “presumed greater response to a change in the probability than in the punishment”).

  7. 7.

    Becker (1968), at 207–208.

  8. 8.

    Becker (1968), at 208.

  9. 9.

    Becker (1968), at 208.

  10. 10.

    Becker (1968), at 207.

  11. 11.

    Shavell (1985), pp. 1232–1263, at 1232–1262 (arguing that Becker’s assumption that fines are effective relies upon criminals having a certain amount of money in the first place); Sjögren and Skogh (2004), at 63 (noting that “in the event that there is a risk of insolvency, the fine will inevitably not have enough of a deterrent effect”); Bowles et al. (2005), pp. 275–295, at 275 (“fines may not lead to an optimal deterrence if the wrongdoer is judgment proof”); Coffee (1980), pp. 419–476.

  12. 12.

    Bowles et al. (2005), pp. 275–295 at 275 (“imposing a prison sanction is costly”); Posner (1980), pp. 400–418.

  13. 13.

    Dutton (2010), p. 197 at 219; Kontorovich (2010), pp. 243–275 at 245.

  14. 14.

    Becker (1968), at 209.

  15. 15.

    Baxley and Moorhouse (1984), pp. 404–412 (“Normally the economist is not interested in solving for a constrained optimum; rather his starting assumption is that an optimum is achieved and seeks to base predictions of behavioral responses on the assumption that optimizing will continue. For example, assuming a firm minimizes the cost of producing a given output, one wishes to know how changes in input prices will affect the firm’s behavior. Thus the problem is not ‘find the minimum,’ but ‘assuming the minimum is attained, what consequences can be deduced?’ An interesting result is that the economist is primarily interested in necessary conditions for an optimum and wishes profoundly that sufficient conditions were really necessary”).

  16. 16.

    ICC International Maritime Bureau, “Piracy and armed robbery against ships: report for the period of 1 January – 30 June 2011” (2011) (hereafter ICC 2011 Q2 Report); ICC International Maritime Bureau, “Piracy and armed robbery against ships: report for the period of 1 January – 31 December 2010” (2010) (hereafter ICC 2010 Annual Report).

  17. 17.

    Sterio (2009).

  18. 18.

    Reyes (2008), at 134; Rosenberg (2009), pp. 43–58 at 48 (“Maritime terrorist attacks or threats—that is, politically or ideologically motivated attacks against ships—have been scarce around the South China Sea”).

  19. 19.

    W. Wechsler, Principal Deputy Assistant Secretary of State for Political and Military Affairs, Testimony before the United States House Transportation and Infrastructure Subcommittee on Coast Guard and Maritime Transportation, “The U.S. Response to Maritime Piracy,” March 15, 2011; see also Vice Admiral W. Gortney, Commander, U.S. Naval Forces Central Command, House Armed Services Committee, March 5, 2009 [“(w)e look very, very carefully for a linkage between piracy and terrorism…and we do not see it”].

  20. 20.

    Reid (2011).

  21. 21.

    Kontorovich (2010), at 261.

  22. 22.

    Leeson (2010), pp. 1219–1220. For the more general proposition that criminals are rational actors, see Becker (1968); Fiorentini and Peltzman (1995). See also Chalk (2009) (stating that “piracy is, above all, an economically driven phenomenon”).

  23. 23.

    Kahn (1995–1996), pp. 293–331; Rosenberg (2009); Kraska and Wilson (2009).

  24. 24.

    Ploch et al. (2011) (“unlike pirate attacks in Strait of Malacca or Nigeria, where ships are boarded either to take the vessel or its contents, pirates off the Horn of Africa routinely take the target vessel’s crew hostage in return for ransom payments.”) (hereafter CRS 2011).

  25. 25.

    “Ransom payments are the lifeblood of Somali pirates…Somali pirates have yet to display an interest in stealing cargo or reusing pirated ships for other purposes (other than temporarily as mother ships).” Pearson (2009). See also Guha and Guha (2011), pp. 147–150 (citing Carbin 2009, pp. 51–57).

  26. 26.

    Shepherd (2002), pp. 159–201.

  27. 27.

    Leeson (2009); see also CRS 2011 (“The total economic costs of piracy, though large in an absolute sense, are nevertheless only a small fraction of the total value of worldwide shipborne commerce”).

  28. 28.

    Wallis (2010).

  29. 29.

    See Rosenberg (2009), pp. 43 and 47.

  30. 30.

    See One Earth 2010.

  31. 31.

    See One Earth 2010 (“commercial shipping insurance premiums for vessels in the Gulf of Aden increased tenfold in 2008”) [U.N. Sec. Council, Monitoring Group on Somalia, Report of the Monitoring Group on Somalia Pursuant to Sec. Council Resolution 1811 (2008), 266, U.N. Doc. S/2008/769 (December 10, 2008), para. 128].

  32. 32.

    Chalk (2009), at 4.

  33. 33.

    CRS 2011, citing One Earth 2010 (“As ransom payments have increased…so has the length of ransom negotiations, which on average doubled from 2009 to 2010”).

  34. 34.

    See One Earth 2010.

  35. 35.

    Chalk (2009), at 4.

  36. 36.

    Chalk (2009), at 4.

  37. 37.

    One Earth 2010 (estimating the annual cost of piracy at between $7 and 12 billion); O’Connell and Descovich (2010); Wright (2008); CRS 2011, at 13.

  38. 38.

    See ICC 2011 Q2 Report; ICC 2010 Annual Report.

  39. 39.

    Wright (2011) citing One Earth 2010.

  40. 40.

    Geopolicity (2011).

  41. 41.

    Geopolicity (2011).

  42. 42.

    Becker (1968), at 178.

  43. 43.

    Smigel A, 1965, Crime and punishment: an economic analysis, Unpublished M.A. thesis, Columbia University, New York.

  44. 44.

    Ehrlich I, 1967, The supply of illegitimate activities, Unpublished manuscript, Columbia University, New York.

  45. 45.

    CRS 2011, at 18.

  46. 46.

    One Earth 2010, at 15.

  47. 47.

    Rosenberg (2009).

  48. 48.

    Hagen (2010).

  49. 49.

    See generally Rosenberg (2009).

  50. 50.

    Kontorovich (2010), at 262.

  51. 51.

    Kontorovich (2010), at 262.

  52. 52.

    See generally ICC 2011 Q2 Report; ICC 2010 Annual Report.

  53. 53.

    CRS 2011 [“(T)he incremental financial cost could be larger due to the need to expend additional fuel to transit to and from the Gulf of Aden region”].

  54. 54.

    CRS 2011 (“The delays associated with this waiting can impose costs on ship operators that could be greater than the cost of paying an occasional ransom”).

  55. 55.

    Dutton (2011) (cited in Hallwood and Micelli 2011, at 10).

  56. 56.

    UNSC, Report of the Special Adviser to the Secretary-General on Legal Issues Related to Piracy off the Coast of Somalia, S/2011/30, January 25, 2011 (estimating that 90 % of pirates captured by patrols are released and not prosecuted); CRS 2011 (“Nine out of ten Somali pirates apprehended by naval patrols are reportedly released because no jurisdiction is prepared to prosecute them.”); “Pirates jailed in 17 nations as prosecutions rise,” Associated Press, March 15, 2011; Hallwood and Micelli (2011), at 8–9.

  57. 57.

    Kontorovich (2009).

  58. 58.

    Notably, while piracy is classified as a crime for which universal jurisdiction exists, related crimes committed against ships at sea are not necessarily subject to universal jurisdiction. See Andersen et al. (2009), at 7.

  59. 59.

    See Burgess (2008); Cherif Bassiouni (2001), pp. 81 and 108 (“Piracy is deemed the basis of universal criminal jurisdiction.”); The Lotus Case (France v. Turkey), Permanent Court of International Justice (1927) (“Piracy…is…an offence against the law of nations; and as the scene of the pirate’s operations is the high seas, which it is not the right or the duty of any nation to police, he is denied the protection of the flag he may carry, and is treated as an outlaw, as the enemy of mankind—hostis humani generis—whom any nation may in the interest of all capture and punish”).

  60. 60.

    See Kontorovich and Art (2010).

  61. 61.

    Rosenberg (2009), at 15.

  62. 62.

    Kontorovich (2010), pp. 243–275, at 251.

  63. 63.

    Andersen et al. (2009), at 8.

  64. 64.

    Andersen et al. (2009), at 10.

  65. 65.

    Goodwin (2006), p. 973; Kontorovich (2004), p. 183.

  66. 66.

    Marts (2010).

  67. 67.

    See Middleton (2008).

  68. 68.

    Marts (2010).

  69. 69.

    Marts (2010); United Nations S.C. Res. 1897, para. 2; United Nations S.C. Res. 1846, para. 2; Smallman (2011); Gettleman (2010).

  70. 70.

    CRS 2011.

  71. 71.

    One Earth 2010; see also “Piracy on an Almost Industrial Scale,” Defence Management (June, 17, 2010).

  72. 72.

    “Somali Pirates Get Hefty Ransom,” Al Jazeera (November 10, 2010).

  73. 73.

    CRS 2011.

  74. 74.

    U.S. Assistant Secretary of State for Political-Military Affairs Shapiro (2010); see also CRS 2011 (“Ransom payments are considered to be problematic because they encourage pirates to continue their attacks with the expectation that insurance and shipping companies will decide that ransoms are cost effective relative to the insured values of personnel and cargo”).

  75. 75.

    Gienger (2011).

  76. 76.

    Marts (2010).

  77. 77.

    CRS 2011 (“Political will may be present in some countries, but many governments lack sufficient laws and judicial capacity to effectively prosecute suspected pirates”); Garamone (2008) (“One of the challenges that … you have in piracy clearly is, if you are intervening and you capture pirates, is there a path to prosecute them?”); Kulish (2008) at A8; see Kontorovich (2010), pp. 243–275 at 263 [describing three of the “largest hurdles to domestic prosecution of pirates” as “(1) proving ‘pirate’ status, (2) the costs of trial, and (3) the potential embarrassments in detaining suspects”].

  78. 78.

    One Earth 2010 (estimating the costs per pirate prosecution at approximately $52,000 in the region (in Kenya, the Seychelles or Somaliland), $246,000 in Europe, and $336,000 in the United States).

  79. 79.

    “Kenya ends co-operation in hosting Somali pirate trials,” BBC News (October 1, 2010).

  80. 80.

    CRS 2011 [“(O)ne of the greatest challenges to prosecuting Somali pirates appears to be determining where to incarcerate them”]; Warner (2010).

  81. 81.

    Kontorovich (2010), pp. 243–275, at 256.

  82. 82.

    Noto (2010), p. 87 (“Money is the motivating force behind Somali piracy. Somalia has no functional economy, and ransom payments from hijacked ships inject millions of dollars into the region”).

  83. 83.

    Press Release, Security Council, Security Council Authorizes States to Use Land-Based Operations in Somalia, as Part of Fight Against Piracy off Coast, Unanimously Adopting 1851, U.N. Doc. SC/9541 (December 16, 2008) [hereinafter S.C. Res. 1851 Press Release] (statement of U.S. Secretary of State Condoleezza Rice).

  84. 84.

    Becker (1968), at 179.

  85. 85.

    Becker (1968), at 177.

  86. 86.

    Becker (1968), at 177.

  87. 87.

    Kaplan (2009); Chalk (2009) at 6.

  88. 88.

    de Grot et al. (2011) [citing Coggins B 2010. Global patterns of maritime piracy and non-traditional threat (2000–2009) Unpublished].

  89. 89.

    de Grot et al. (2011) [citing Coggins B 2010. Global patterns of maritime piracy and non-traditional threat (2000–2009) Unpublished].

  90. 90.

    Percy and Shortland (2010).

  91. 91.

    See “Capture Pirates, on Land and Sea,” New York Times (April 9, 2009); Dutton (2010); One Earth 2010.

  92. 92.

    See Burgess (2008).

  93. 93.

    Dutton (2010), at 26.

  94. 94.

    Hallwood and Micelli (2011), at 16.

  95. 95.

    Hallwood and Micelli (2011), at 17.

  96. 96.

    Dutton (2010) at 32 [citing the Proposed Programme Budget for 2010 of the International Criminal Court, International Criminal Court, Assembly of States Parties, ICC-ASP 8/10 (July 17, 2009)].

  97. 97.

    Report of Jack Lang, UN Special Advisor on Legal Issues Related to Piracy Off the Coast of Somalia, Report, January 2011.

  98. 98.

    Koremenos et al. (2001), at 8–9 (“If states want to promote a common interest, what kinds of institutions might they design to aid their efforts? They might first ask whether they need an international institution at all. Perhaps their national capacities are more than adequate, or they are converging on tactic arrangements that require little collaboration. If they could benefit from explicit cooperation, they would ask whether current institutions could be extended to cover the issue, in whole or in part”).

  99. 99.

    Andersen et al. (2009), at 12.

  100. 100.

    Andersen et al. (2009), at 11.

  101. 101.

    Lang (2011).

  102. 102.

    Andersen et al. (2009), at 12.

  103. 103.

    United Nations Security Council Resolution (S.C. Res.) 1816; U.N.S.C. Res. 1838; U.N.S.C. Res. 1844; U.N.S.C. Res. 1846; U.N.S.C. Res. 1851; U.N.S.C. Res. 1897; U.N.S.C. Res. 1918.

  104. 104.

    United Nations Security Council Resolution (S.C. Res.) 1816; U.N.S.C. Res. 1838; U.N.S.C. Res. 1844; U.N.S.C. Res. 1846; U.N.S.C. Res. 1851; U.N.S.C. Res. 1897; U.N.S.C. Res. 1918.

  105. 105.

    CRS 2011.

  106. 106.

    Torchia (2009) (describing French eight-person military teams used in 2009 to guard fishing boats, costing $162,000 per week); CRS 2011 (“If Navy ships that are forward deployed to the Indian Ocean/Persian Gulf region were diverted from their current missions in that region to a mission of escorting U.S.-flagged commercial ships in the Gulf of Aden…there would be an opportunity cost in terms of those ships not performing their currently assigned missions”).

  107. 107.

    Chalk (2009), at 5.

  108. 108.

    CRS 2011 [“(T)he incremental financial cost could be larger due to the need to expend additional fuel to transit to and from the Gulf of Aden region”].

  109. 109.

    CRS 2011 (“The number of naval ships that would be needed to completely halt piracy in the Gulf of Aden and the waters of Somalia’s eastern coast is probably much larger than the force currently operating there”).

  110. 110.

    Becker (1968), at 180.

  111. 111.

    CRS 2011 at 23.

  112. 112.

    Andersen et al. (2009), at 16.

  113. 113.

    Chalk (2009), at 4.

  114. 114.

    Andersen et al. (2009), at 10; Lang (2011) (25 proposals to assist countries and encouragement to those countries to incorporate the crime of piracy into their domestic laws).

  115. 115.

    CRS 2011 (describes a UN Office on Drugs and Crime project facilitating “so-called ‘shiprider’ arrangements in which regional law enforcement personnel seconded to international vessels to perform anti-piracy arrest and investigation functions”).

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Kaprove, C.S. (2013). The Law and Economics of Piracy at Sea. In: Mejia, Jr., M., Kojima, C., Sawyer, M. (eds) Piracy at Sea. WMU Studies in Maritime Affairs, vol 2. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-39620-5_8

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