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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, 10 March 16
IT FEELS SAFE TO SAY THAT THE MARKET IS SLOWLY AND PAINFULLY REGAINING ITS BALANCE
With the BDI marking its third consecutive positive weekly closing, it feels safe to say that the market is regaining its balance; slowly and painf ...
Wednesday, 09 March 16
U.S. COAL EXPORTS DECLINED 24% (74 MMST) IN 2015; COAL PRODUCTION IS EXPECTED TO DECREASE BY 111 MMST IN 2016 - EIA
U.S. Coal Supply
EIA estimates that U.S. coal production for February 2016 was 54 million short tons (MMst), a 4 MMst (7%) decrease from the prev ...
Wednesday, 09 March 16
RI MAY HAVE TO IMPORT COAL FOR FUTURE POWER PLANTS: STUDY - THE JAKARTA POST
With coal prices continuing to decline, Indonesia will struggle to provide the coal needed to fire up its power stations in the near future, a stud ...
Tuesday, 08 March 16
INDONESIA HIKES COAL BENCHMARK PRICE FOR THE FIRST TIME IN 12 MONTHS
COALspot.com: Low coal demand and excess supplies sent Indonesian benchmark coal price further deep in February 2016, but up slightly in Mar ...
Tuesday, 08 March 16
THE DRY CARGO MARKET ENDURED ONE OF ITS MOST DIFFICULT YEARS IN 2015, EXPERIENCING LOWS NOT SEEN SINCE THE MID 1980S - CLARKSONS
Whilst shipping and offshore markets have seen some good opportunities during 2015, overall there have been unprecedented challenges, so we are ver ...
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- Ind-Barath Power Infra Limited - India
- Wood Mackenzie - Singapore
- Sree Jayajothi Cements Limited - India
- Global Coal Blending Company Limited - Australia
- IHS Mccloskey Coal Group - USA
- Intertek Mineral Services - Indonesia
- Formosa Plastics Group - Taiwan
- ICICI Bank Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Minerals Council of Australia
- Bhatia International Limited - India
- Gujarat Electricity Regulatory Commission - India
- Chettinad Cement Corporation Ltd - India
- Aboitiz Power Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Sakthi Sugars Limited - India
- GAC Shipping (India) Pvt Ltd
- Anglo American - United Kingdom
- Africa Commodities Group - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- SN Aboitiz Power Inc, Philippines
- IEA Clean Coal Centre - UK
- Manunggal Multi Energi - Indonesia
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- Neyveli Lignite Corporation Ltd, - India
- Planning Commission, India
- Coalindo Energy - Indonesia
- Attock Cement Pakistan Limited
- Maheswari Brothers Coal Limited - India
- Indian Oil Corporation Limited
- Billiton Holdings Pty Ltd - Australia
- Latin American Coal - Colombia
- LBH Netherlands Bv - Netherlands
- Makarim & Taira - Indonesia
- Ministry of Transport, Egypt
- Cigading International Bulk Terminal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Essar Steel Hazira Ltd - India
- Bukit Baiduri Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- CNBM International Corporation - China
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Parliament of New Zealand
- Bhoruka Overseas - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Altura Mining Limited, Indonesia
- TeaM Sual Corporation - Philippines
- Chamber of Mines of South Africa
- London Commodity Brokers - England
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Mineral Development Corp Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Grasim Industreis Ltd - India
- Simpson Spence & Young - Indonesia
- Heidelberg Cement - Germany
- Siam City Cement PLC, Thailand
- Singapore Mercantile Exchange
- Energy Link Ltd, New Zealand
- Price Waterhouse Coopers - Russia
- Economic Council, Georgia
- AsiaOL BioFuels Corp., Philippines
- Antam Resourcindo - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Sarangani Energy Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Renaissance Capital - South Africa
- Global Green Power PLC Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Malabar Cements Ltd - India
- Mjunction Services Limited - India
- Leighton Contractors Pty Ltd - Australia
- Bangladesh Power Developement Board
- International Coal Ventures Pvt Ltd - India
- GVK Power & Infra Limited - India
- Australian Coal Association
- Mintek Dendrill Indonesia
- Ambuja Cements Ltd - India
- Trasteel International SA, Italy
- Asmin Koalindo Tuhup - Indonesia
- White Energy Company Limited
- Indika Energy - Indonesia
- Eastern Energy - Thailand
- Mercator Lines Limited - India
- Bukit Makmur.PT - Indonesia
- PowerSource Philippines DevCo
- Central Electricity Authority - India
- Miang Besar Coal Terminal - Indonesia
- ASAPP Information Group - India
- Kumho Petrochemical, South Korea
- Uttam Galva Steels Limited - India
- Karaikal Port Pvt Ltd - India
- Merrill Lynch Commodities Europe
- The Treasury - Australian Government
- Australian Commodity Traders Exchange
- Samtan Co., Ltd - South Korea
- Wilmar Investment Holdings
- Gujarat Sidhee Cement - India
- Dalmia Cement Bharat India
- Borneo Indobara - Indonesia
- Directorate Of Revenue Intelligence - India
- The University of Queensland
- Rio Tinto Coal - Australia
- Eastern Coal Council - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Authority, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Oldendorff Carriers - Singapore
- Timah Investasi Mineral - Indoneisa
- Standard Chartered Bank - UAE
- Edison Trading Spa - Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- SMC Global Power, Philippines
- Siam City Cement - Thailand
- McConnell Dowell - Australia
- PetroVietnam Power Coal Import and Supply Company
- MS Steel International - UAE
- Star Paper Mills Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Interocean Group of Companies - India
- Electricity Generating Authority of Thailand
- Binh Thuan Hamico - Vietnam
- Lanco Infratech Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Ministry of Finance - Indonesia
- Sojitz Corporation - Japan
- Vedanta Resources Plc - India
- Vijayanagar Sugar Pvt Ltd - India
- Parry Sugars Refinery, India
- PNOC Exploration Corporation - Philippines
- Commonwealth Bank - Australia
- Therma Luzon, Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Coal and Oil Company - UAE
- San Jose City I Power Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kartika Selabumi Mining - Indonesia
- Power Finance Corporation Ltd., India
- CIMB Investment Bank - Malaysia
- Agrawal Coal Company - India
- VISA Power Limited - India
- Romanian Commodities Exchange
- Madhucon Powers Ltd - India
- Global Business Power Corporation, Philippines
- Indogreen Group - Indonesia
- Thai Mozambique Logistica
- Petrochimia International Co. Ltd.- Taiwan
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Indo Tambangraya Megah - Indonesia
- Kepco SPC Power Corporation, Philippines
- Tamil Nadu electricity Board
- Carbofer General Trading SA - India
- Bayan Resources Tbk. - Indonesia
- European Bulk Services B.V. - Netherlands
- Independent Power Producers Association of India
- Sical Logistics Limited - India
- Larsen & Toubro Limited - India
- Vizag Seaport Private Limited - India
- Tata Chemicals Ltd - India
- Pendopo Energi Batubara - Indonesia
- Energy Development Corp, Philippines
- Deloitte Consulting - India
- Krishnapatnam Port Company Ltd. - India
- Toyota Tsusho Corporation, Japan
- Orica Australia Pty. Ltd.
- Xindia Steels Limited - India
- South Luzon Thermal Energy Corporation
- Bahari Cakrawala Sebuku - Indonesia
- Kideco Jaya Agung - Indonesia
- Thiess Contractors Indonesia
- Port Waratah Coal Services - Australia
- Bulk Trading Sa - Switzerland
- Aditya Birla Group - India
- Indian Energy Exchange, India
- SMG Consultants - Indonesia
- Meralco Power Generation, Philippines
- Banpu Public Company Limited - Thailand
- Kobexindo Tractors - Indoneisa
- Petron Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Barasentosa Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The State Trading Corporation of India Ltd
- Mercuria Energy - Indonesia
- Videocon Industries ltd - India
- Georgia Ports Authority, United States
- TNB Fuel Sdn Bhd - Malaysia
- Bhushan Steel Limited - India
- Posco Energy - South Korea
- Marubeni Corporation - India
- PTC India Limited - India
- Cement Manufacturers Association - India
- New Zealand Coal & Carbon
- Bharathi Cement Corporation - India
- Jindal Steel & Power Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Coastal Gujarat Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Jaiprakash Power Ventures ltd
- Metalloyd Limited - United Kingdom
- India Bulls Power Limited - India
- GMR Energy Limited - India
- Baramulti Group, Indonesia
- Ministry of Mines - Canada
- Semirara Mining and Power Corporation, Philippines
- Medco Energi Mining Internasional
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