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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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Monday, 01 February 16
INDONESIA'S SECOND LARGEST COAL MINER ADARO ENERGY HAS PRODUCED 51.46 MT IN 2015; 8% LOWER COMPARED TO FY14
COALspot.com: Adaro Energy, the Indonesia’s second largest coal producer by volume has produced 51.46 Mt in 2015, 8% lower compared to ...
Sunday, 31 January 16
BDI CONTINUED ITS FALL AND CLOSE AT A FRESH RECORD LOW ON FRIDAY
COALspot.com: The Baltic Dry Index, which gauges the cost of shipping dry bulk including iron ore, cement, grain, coal and fertilizer, continued it ...
Friday, 29 January 16
INDONESIAN BENCHMARK COAL PRICE SETTLES DOWN $ 0.31, OR 0.58%, AT $ 53.20 A TON
COALspot.com: Low coal demand and excess supplies sent Indonesian benchmark coal price further down in January 2016. HBA has slumped by 0.58 ...
Friday, 29 January 16
U.S. COAL PRODUCTION OFF 2 PERCENT FROM LAST WEEK - EIA
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 13.1 milli ...
Thursday, 28 January 16
COAL REMAINS THE NO.1 FUEL FOR POWER GENERATION - EXXONMOBIL
COALspot.com: Energy demand trends from 2010 to 2040 are expected to vary significantly around the world, as countries move along very different tr ...
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- Economic Council, Georgia
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- Borneo Indobara - Indonesia
- New Zealand Coal & Carbon
- Savvy Resources Ltd - HongKong
- Sojitz Corporation - Japan
- Salva Resources Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Jindal Steel & Power Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- Therma Luzon, Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Videocon Industries ltd - India
- Xindia Steels Limited - India
- Carbofer General Trading SA - India
- Kepco SPC Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Bangladesh Power Developement Board
- Essar Steel Hazira Ltd - India
- Kumho Petrochemical, South Korea
- Bukit Baiduri Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Mines - Canada
- Independent Power Producers Association of India
- Cigading International Bulk Terminal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Edison Trading Spa - Italy
- Chettinad Cement Corporation Ltd - India
- Metalloyd Limited - United Kingdom
- Meralco Power Generation, Philippines
- Intertek Mineral Services - Indonesia
- Banpu Public Company Limited - Thailand
- Merrill Lynch Commodities Europe
- Central Java Power - Indonesia
- Indogreen Group - Indonesia
- Ministry of Finance - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- European Bulk Services B.V. - Netherlands
- Alfred C Toepfer International GmbH - Germany
- Global Business Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- The Treasury - Australian Government
- Oldendorff Carriers - Singapore
- SN Aboitiz Power Inc, Philippines
- Parry Sugars Refinery, India
- Timah Investasi Mineral - Indoneisa
- Electricity Authority, New Zealand
- Africa Commodities Group - South Africa
- Planning Commission, India
- Siam City Cement PLC, Thailand
- Thiess Contractors Indonesia
- CIMB Investment Bank - Malaysia
- London Commodity Brokers - England
- Uttam Galva Steels Limited - India
- Bulk Trading Sa - Switzerland
- PowerSource Philippines DevCo
- Tata Chemicals Ltd - India
- Standard Chartered Bank - UAE
- Price Waterhouse Coopers - Russia
- International Coal Ventures Pvt Ltd - India
- Star Paper Mills Limited - India
- Goldman Sachs - Singapore
- McConnell Dowell - Australia
- Bayan Resources Tbk. - Indonesia
- Marubeni Corporation - India
- Wilmar Investment Holdings
- IEA Clean Coal Centre - UK
- PetroVietnam Power Coal Import and Supply Company
- Sree Jayajothi Cements Limited - India
- Minerals Council of Australia
- Chamber of Mines of South Africa
- Coalindo Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- The State Trading Corporation of India Ltd
- Malabar Cements Ltd - India
- Orica Australia Pty. Ltd.
- Sical Logistics Limited - India
- Billiton Holdings Pty Ltd - Australia
- Sarangani Energy Corporation, Philippines
- Romanian Commodities Exchange
- Eastern Coal Council - USA
- VISA Power Limited - India
- IHS Mccloskey Coal Group - USA
- Maharashtra Electricity Regulatory Commission - India
- Posco Energy - South Korea
- Energy Link Ltd, New Zealand
- Rio Tinto Coal - Australia
- Mercator Lines Limited - India
- Coastal Gujarat Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- GMR Energy Limited - India
- Latin American Coal - Colombia
- San Jose City I Power Corp, Philippines
- TeaM Sual Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Altura Mining Limited, Indonesia
- Gujarat Sidhee Cement - India
- PNOC Exploration Corporation - Philippines
- Wood Mackenzie - Singapore
- Agrawal Coal Company - India
- Meenaskhi Energy Private Limited - India
- Indian Oil Corporation Limited
- Makarim & Taira - Indonesia
- PTC India Limited - India
- ASAPP Information Group - India
- Sakthi Sugars Limited - India
- Heidelberg Cement - Germany
- India Bulls Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Barasentosa Lestari - Indonesia
- Ind-Barath Power Infra Limited - India
- Lanco Infratech Ltd - India
- MS Steel International - UAE
- OPG Power Generation Pvt Ltd - India
- Mintek Dendrill Indonesia
- Antam Resourcindo - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bhoruka Overseas - Indonesia
- Indian Energy Exchange, India
- Samtan Co., Ltd - South Korea
- Globalindo Alam Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kaltim Prima Coal - Indonesia
- Straits Asia Resources Limited - Singapore
- Power Finance Corporation Ltd., India
- Renaissance Capital - South Africa
- Gujarat Mineral Development Corp Ltd - India
- SMG Consultants - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- South Luzon Thermal Energy Corporation
- Iligan Light & Power Inc, Philippines
- Mjunction Services Limited - India
- Deloitte Consulting - India
- GAC Shipping (India) Pvt Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Karaikal Port Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Siam City Cement - Thailand
- Thai Mozambique Logistica
- Madhucon Powers Ltd - India
- CNBM International Corporation - China
- Binh Thuan Hamico - Vietnam
- Bharathi Cement Corporation - India
- Singapore Mercantile Exchange
- Mercuria Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Pendopo Energi Batubara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Parliament of New Zealand
- Aboitiz Power Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Energy Development Corp, Philippines
- Commonwealth Bank - Australia
- Indika Energy - Indonesia
- Central Electricity Authority - India
- Simpson Spence & Young - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Bhatia International Limited - India
- GVK Power & Infra Limited - India
- Larsen & Toubro Limited - India
- Gujarat Electricity Regulatory Commission - India
- Bahari Cakrawala Sebuku - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Bukit Asam (Persero) Tbk - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Maheswari Brothers Coal Limited - India
- White Energy Company Limited
- Miang Besar Coal Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
- Petron Corporation, Philippines
- Coal and Oil Company - UAE
- Karbindo Abesyapradhi - Indoneisa
- Manunggal Multi Energi - Indonesia
- Georgia Ports Authority, United States
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tamil Nadu electricity Board
- Australian Coal Association
- ICICI Bank Limited - India
- Bukit Makmur.PT - Indonesia
- Indonesian Coal Mining Association
- Neyveli Lignite Corporation Ltd, - India
- The University of Queensland
- Kobexindo Tractors - Indoneisa
- Medco Energi Mining Internasional
- GN Power Mariveles Coal Plant, Philippines
- Bhushan Steel Limited - India
- Australian Commodity Traders Exchange
- Eastern Energy - Thailand
- Attock Cement Pakistan Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ambuja Cements Ltd - India
- Ministry of Transport, Egypt
- Vizag Seaport Private Limited - India
- Anglo American - United Kingdom
- Sindya Power Generating Company Private Ltd
- Dalmia Cement Bharat India
- Grasim Industreis Ltd - India
- Aditya Birla Group - India
- Trasteel International SA, Italy
- Electricity Generating Authority of Thailand
- Toyota Tsusho Corporation, Japan
- SMC Global Power, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Cement Manufacturers Association - India
- Indo Tambangraya Megah - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Formosa Plastics Group - Taiwan
- Port Waratah Coal Services - Australia
- Vedanta Resources Plc - India
- Orica Mining Services - Indonesia
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