Saturday, December 10, 2011

Su and Oldham on Insuring Maritime Trade with the Enemy in the Napoleonic Era

My Georgetown Law colleague James C. Oldham and Su J. Kim, an alumna and research fellow, have posted Insuring Maritime Trade with the Enemy in the Napoleonic Era, which is forthcoming in Texas International Law Journal.  Here is the abstract:
During the late eighteenth and early nineteenth centuries, England and France were continuously at war. Such upheaval naturally upset the maritime trade between England and the Continent. Although there had been free-trade voices in the eighteenth century who thought trade even with enemies made commercial sense, by the end of the eighteenth century, the law clearly held that trading with the enemy was illegal.

Strict adherence to the legal prohibition against trading with the enemy, however, would have devastated British commerce. It was in this environment that the British license system had been born. A license was a grant from the crown that allowed its holder to trade with the enemy. To supplement the license, simulated papers were used to evade capture and condemnation by the enemy. The use of simulated papers was acknowledged in courts of law, and marine insurance policies expressly authorized journeys that used simulated papers. Indeed, the underwriters sometimes refused to insure unless false papers were used.

Courts protected merchants by allowing them to recover under insurance policies, as long as those policies expressly allowed the use of simulated papers. The rationale was that this was necessary to protect British commerce. At first, the benefits of such policies applied only to British merchants, but in the early 1810s, first the Admiralty Court, then the common law courts, expanded the construction of insurance policies to benefit alien neutrals, and eventually alien enemies. The irony of these developments was that the end result in practical effect came close to the free trade voices that had later been crowded out by case law.