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Tuesday, 16 June 15
MERS: POTENTIAL CHARTERPARTY IMPLICATIONS - CLYDE & CO
 KNOWLEDGE TO ELEVATE
South Korea's current outbreak of Middle East Respiratory Syndrome (MERS) has been the focus of much international attention. The local impact of the outbreak has been severe, leading to nearly 3,000 schools being closed and over 5,500 people being quarantined as a result of possible contact with infected persons. The virus has so far infected over 150 people in the country and the World Health Organization (WHO) anticipates that cases will continue to surface despite indications that the outbreak is now being brought under control. Whilst public health experts do not anticipate any form of worldwide pandemic to result from the situation in South Korea, it is feared that there is scope for a regular pattern of MERS outbreaks to occur over the coming years.
The Potential Legal Impact of MERS on Charterparties
With cruise ships having cancelled calls to South Korean ports and confirmed cases of MERS in the port of Pyeongtaek, the outbreak may understandably give rise to concerns on the part of shipowners whose vessels are due to call in South Korea or the charterers of such vessels. Whether the outbreak will have legal implications on a charterparty will very much depend on the wording of the charterparty in question; standard form charterparties are unlikely to include wording dealing with outbreaks of infectious/contagious disease.
Safe Port Warranties
Shipowners are obliged to follow charterers' legitimate orders unless to do so would expose the crew to unacceptable risk. Whilst charterers under a time charter are obliged to nominate safe ports, in the absence of specific wording it is unlikely that an outbreak of MERS will render a port unsafe.
Even if an outbreak of disease is in the port city itself, as in Pyeongtaek, the port may remain safe as long as there are appropriate protective measures in place. As such, there is significant risk involved in an owner refusing an order to a port on the basis of unsafety owing to disease risk, since to do so wrongly would amount to breach of the charter for failure to follow a legitimate order.
If the facts are such that there is a significant risk to the health of the crew, then charterers may be asked to nominate an alternative port, but this may have knock-on consequences particularly if there are bills of lading issued. The best approach for owners will be to keep in close contact with their P&I Club who will be able to give timely and appropriate guidance as the situation develops.
Where a vessel is subject to a voyage charter, the prospective safety of a port is also an issue and the arguments are similar to those detailed above; as with time charters, it is likely to be difficult to demonstrate that a South Korean port is unsafe on account of MERS.
Quarantine and Deviation
In the event that a time-chartered vessel becomes subject to quarantine delays or is forced to deviate to land an ill crew member, the hire/off-hire provisions may result in the vessel being placed off-hire. The specific charterparty wording would need to be carefully considered to assess whether this might be the case.
Similar concerns also arise in relation to voyage charters. Shipowners may deviate for the safety of the crew but in such a scenario no additional freight will become payable, so such deviation is at their own expense. A defence of 'reasonable deviation' may come into play where the Hague or Hague-Visby Rules apply. In terms of quarantine, the usual position is that time spent/lost at the time of charterers' orders will count as laytime/demurrage, although this too will depend on the charterparty terms agreed.
Free Pratique
In order to commence laytime, a vessel requires free pratique clearance. Absent wording to the contrary in the charterparty, the usual position is that a master can give a valid notice of readiness (NOR) without first having all the customs documents and obtaining free pratique, provided that he has no reason to suppose that being document ready is anything other than a mere formality.
However, if the vessel has recently called to a port in an infected area, then the mere formality test may not assist, since the vessel is likely to be subject to quarantine delays while the health of the crew is ascertained. In such a scenario, unless a charterparty provision states otherwise, owners bear the risk of the delay, since they would be unable to give a valid NOR to start laytime running until free pratique clearance is obtained.
Force majeure
If the charterparty in question contains a force majeure clause, the question may also arise whether the MERS outbreak fulfils the requirements of a force majeure scenario. A typical clause of this type suspends and/or terminates performance of the charterparty on the occurrence of an extraordinary event, which is beyond the parties’ control and which impacts the ability of one or both of the parties to fulfil their contractual commitments. As such, force majeure is usually a high evidential hurdle to clear.
Whilst the WHO has described the MERS outbreak as 'large and complex', the organisation has not issued a travel ban relating to South Korea and although Hong Kong, Macau and Taiwan have advised against travelling to the country, their notices amounted to recommendations rather than official travel alerts. If the MERS outbreak becomes more widespread and/or travel bans are put in place, the possibility of the situation amounting to a force majeure event may strengthen, however, at present, the scope for force majeure appears limited, unless the wording of a particular clause is quite broadly drafted.
Comment
The South Korean government is working alongside the WHO to bring the current MERS outbreak under control, however as with any outbreak of infectious/contagious disease, the situation may raise concerns for shipowners and charterers who are aware of the potential disruption such incidents can cause.
Parties may wish to consider managing the risk associated with such outbreaks by inserting contagious/infectious disease clauses into prospective charterparties, thus avoiding the ambiguity which can arise in this area.
By Ik Wei Chong, Bethan Bradley and Aislinn Fawcett
About Clyde & Co
Clyde & Co is a dynamic, rapidly expanding global law firm focused on providing a complete legal service to clients in our core sectors.
Clyde & Co advises businesses that are at the heart of worldwide commerce and trade.
If you believe an article violates your rights or the rights of others, please contact us.
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Thursday, 07 April 16
PANAMAX RATES ARE FIRMING IN BOTH HEMISHEPHERES - FEARNLEYS
Capesize
With a great volume our of west Australia, rates were finally moving to upper 3's. and stabilizing towards the middle of the week in ...
Thursday, 07 April 16
BIMCO AND GIIGNL PUBLISH A GROUNDBREAKING VOYAGE CHARTER PARTY FOR LNG TRADE
BIMCO and the International Group of Liquefied Natural Gas Importers (GIIGNL) have today jointly issued the first definitive voyage charter party & ...
Wednesday, 06 April 16
HOW LONG SHIPPING CRISIS WILL BE; WHEN SHOULD OWNERS EXPECT THE BULK CARRIERS TO BECOME PROFITABLE? - INTERMODAL
It is the consensus that dry bulk shipping has been in a crisis for quite some time now. Bulk carrier values are at historical low levels, therefor ...
Tuesday, 05 April 16
DRY BULK REVISITS 1980S LOWS AND FACES UNCERTAIN LONGER TERM OUTLOOK - MSI | HELLENIC SHIPPING NEWS
With the market near bottom, attention is turning to the length of the downturn, the effect on asset values and the impact of broader demand side c ...
Monday, 04 April 16
THE LOADING, AND SUBSEQUENT DISCHARGE, OF UNSAFE NICKEL ORE - ALL TIME TO 'COUNT' - THE STANDARD CLUB
KNOWLEDGE TO ELEVATE
In a recent, published, London arbitration award the English tribunal has held that all time lost as a result of loading, ...
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- Indika Energy - Indonesia
- Meralco Power Generation, Philippines
- Makarim & Taira - Indonesia
- IEA Clean Coal Centre - UK
- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- PNOC Exploration Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- Aditya Birla Group - India
- IHS Mccloskey Coal Group - USA
- Jindal Steel & Power Ltd - India
- Central Electricity Authority - India
- Sarangani Energy Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Central Java Power - Indonesia
- Global Business Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Romanian Commodities Exchange
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Formosa Plastics Group - Taiwan
- OPG Power Generation Pvt Ltd - India
- Parry Sugars Refinery, India
- Bangladesh Power Developement Board
- Sical Logistics Limited - India
- Therma Luzon, Inc, Philippines
- Savvy Resources Ltd - HongKong
- Altura Mining Limited, Indonesia
- Medco Energi Mining Internasional
- Power Finance Corporation Ltd., India
- Electricity Generating Authority of Thailand
- Sindya Power Generating Company Private Ltd
- Tamil Nadu electricity Board
- Malabar Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- South Luzon Thermal Energy Corporation
- Mercator Lines Limited - India
- Gujarat Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- LBH Netherlands Bv - Netherlands
- Port Waratah Coal Services - Australia
- Madhucon Powers Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Samtan Co., Ltd - South Korea
- Marubeni Corporation - India
- Edison Trading Spa - Italy
- Globalindo Alam Lestari - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kobexindo Tractors - Indoneisa
- GVK Power & Infra Limited - India
- MS Steel International - UAE
- Star Paper Mills Limited - India
- Siam City Cement - Thailand
- CNBM International Corporation - China
- Vizag Seaport Private Limited - India
- Kumho Petrochemical, South Korea
- Metalloyd Limited - United Kingdom
- Grasim Industreis Ltd - India
- Minerals Council of Australia
- Vijayanagar Sugar Pvt Ltd - India
- New Zealand Coal & Carbon
- ASAPP Information Group - India
- The University of Queensland
- Maheswari Brothers Coal Limited - India
- Bhoruka Overseas - Indonesia
- Manunggal Multi Energi - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Vedanta Resources Plc - India
- Bharathi Cement Corporation - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Tata Chemicals Ltd - India
- Singapore Mercantile Exchange
- White Energy Company Limited
- CIMB Investment Bank - Malaysia
- London Commodity Brokers - England
- VISA Power Limited - India
- Petron Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- GAC Shipping (India) Pvt Ltd
- Cement Manufacturers Association - India
- European Bulk Services B.V. - Netherlands
- Larsen & Toubro Limited - India
- Ministry of Finance - Indonesia
- Siam City Cement PLC, Thailand
- Chettinad Cement Corporation Ltd - India
- Parliament of New Zealand
- Sree Jayajothi Cements Limited - India
- Rio Tinto Coal - Australia
- The State Trading Corporation of India Ltd
- PowerSource Philippines DevCo
- Neyveli Lignite Corporation Ltd, - India
- Indian Energy Exchange, India
- Mercuria Energy - Indonesia
- McConnell Dowell - Australia
- AsiaOL BioFuels Corp., Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Latin American Coal - Colombia
- Miang Besar Coal Terminal - Indonesia
- Meenaskhi Energy Private Limited - India
- SN Aboitiz Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Agrawal Coal Company - India
- Asmin Koalindo Tuhup - Indonesia
- Xindia Steels Limited - India
- Coal and Oil Company - UAE
- India Bulls Power Limited - India
- Jaiprakash Power Ventures ltd
- Gujarat Mineral Development Corp Ltd - India
- Borneo Indobara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Deloitte Consulting - India
- Eastern Coal Council - USA
- Cigading International Bulk Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Economic Council, Georgia
- Semirara Mining Corp, Philippines
- Commonwealth Bank - Australia
- Orica Mining Services - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Eastern Energy - Thailand
- Antam Resourcindo - Indonesia
- Renaissance Capital - South Africa
- Chamber of Mines of South Africa
- Pendopo Energi Batubara - Indonesia
- Orica Australia Pty. Ltd.
- Lanco Infratech Ltd - India
- GMR Energy Limited - India
- Alfred C Toepfer International GmbH - Germany
- Directorate General of MIneral and Coal - Indonesia
- Trasteel International SA, Italy
- Goldman Sachs - Singapore
- Riau Bara Harum - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Electricity Authority, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Wilmar Investment Holdings
- Ambuja Cements Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Gujarat Sidhee Cement - India
- Ministry of Mines - Canada
- Sojitz Corporation - Japan
- Bayan Resources Tbk. - Indonesia
- Indonesian Coal Mining Association
- Kepco SPC Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Global Coal Blending Company Limited - Australia
- Barasentosa Lestari - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Baramulti Group, Indonesia
- Indogreen Group - Indonesia
- Straits Asia Resources Limited - Singapore
- Ind-Barath Power Infra Limited - India
- Carbofer General Trading SA - India
- GN Power Mariveles Coal Plant, Philippines
- Bukit Baiduri Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Oil Corporation Limited
- Energy Development Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Merrill Lynch Commodities Europe
- Anglo American - United Kingdom
- Essar Steel Hazira Ltd - India
- Binh Thuan Hamico - Vietnam
- Thai Mozambique Logistica
- Leighton Contractors Pty Ltd - Australia
- Billiton Holdings Pty Ltd - Australia
- Dalmia Cement Bharat India
- Petrochimia International Co. Ltd.- Taiwan
- Planning Commission, India
- Wood Mackenzie - Singapore
- Posco Energy - South Korea
- Energy Link Ltd, New Zealand
- Attock Cement Pakistan Limited
- SMG Consultants - Indonesia
- Simpson Spence & Young - Indonesia
- Independent Power Producers Association of India
- Georgia Ports Authority, United States
- Standard Chartered Bank - UAE
- Bhatia International Limited - India
- Videocon Industries ltd - India
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
- Kartika Selabumi Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Bhushan Steel Limited - India
- Kideco Jaya Agung - Indonesia
- Price Waterhouse Coopers - Russia
- Uttam Galva Steels Limited - India
- San Jose City I Power Corp, Philippines
- Salva Resources Pvt Ltd - India
- Africa Commodities Group - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Directorate Of Revenue Intelligence - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Banpu Public Company Limited - Thailand
- Sakthi Sugars Limited - India
- SMC Global Power, Philippines
- Thiess Contractors Indonesia
- Intertek Mineral Services - Indonesia
- Australian Coal Association
- Coastal Gujarat Power Limited - India
- Mintek Dendrill Indonesia
- The Treasury - Australian Government
- Heidelberg Cement - Germany
- PTC India Limited - India
- Karaikal Port Pvt Ltd - India
- Coalindo Energy - Indonesia
- Oldendorff Carriers - Singapore
- Mjunction Services Limited - India
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