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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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Tuesday, 26 January 16
Q3'16 CFR SOUTH CHINA COAL SWAP DROPPED BELOW $41 A TON
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery rose US$ 0.82 (1.94%) per ton month over month.
A commodity swap is ...
Tuesday, 26 January 16
OUTLOOK FOR GLOBAL OIL MARKETS - OPEC SECRETARY GENERAL
Opening address by HE Abdalla S. El-Badri, OPEC Secretary General, at the Chatham House Conference: Middle East and North Africa Energy 2016, Theme ...
Monday, 25 January 16
5700 GAR COAL INDEX CLOSED $ 50.08 PER TON, $0.20 LOWER FROM LAST WEEK
COALspot.com: Average 5000 GAR coal index of Indonesian origin decline 1.35 percent week over week to averaging $39.39 per ton on this past Friday, ...
Monday, 25 January 16
SHOULD A DEFAULTING PARTY BE ENTITLED TO AN INNOCENT PARTY'S SAVING, FOLLOWING THEIR BREACH OF CONTRACT? - THE NEW FLAMENCO REVISITED
KNOWLEDGE TO ELEVATE
This case was addressed by the club in our of January 2015, when the High Court decision became available. The background ...
Monday, 25 January 16
DRY BULK SHIPPING: A MISERABLE START TO A NEW YEAR, WHERE THE MARKET STRUGGLES TO GROW AT ALL - BIMCO
The global production of steel dropped in 2015 compared to 2014, to a larger extent outside China, as China exported its surplus of steel to destin ...
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- Uttam Galva Steels Limited - India
- Commonwealth Bank - Australia
- Barasentosa Lestari - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bukit Asam (Persero) Tbk - Indonesia
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Wood Mackenzie - Singapore
- VISA Power Limited - India
- Heidelberg Cement - Germany
- Samtan Co., Ltd - South Korea
- Parliament of New Zealand
- Globalindo Alam Lestari - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- CNBM International Corporation - China
- Toyota Tsusho Corporation, Japan
- Savvy Resources Ltd - HongKong
- MS Steel International - UAE
- Indika Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Economic Council, Georgia
- Jindal Steel & Power Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Tata Chemicals Ltd - India
- Global Green Power PLC Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- ASAPP Information Group - India
- Sojitz Corporation - Japan
- South Luzon Thermal Energy Corporation
- Thiess Contractors Indonesia
- Chamber of Mines of South Africa
- Australian Coal Association
- GMR Energy Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petron Corporation, Philippines
- Global Business Power Corporation, Philippines
- Latin American Coal - Colombia
- Sarangani Energy Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Ministry of Finance - Indonesia
- White Energy Company Limited
- Iligan Light & Power Inc, Philippines
- London Commodity Brokers - England
- Mercator Lines Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Coalindo Energy - Indonesia
- SMC Global Power, Philippines
- Bulk Trading Sa - Switzerland
- Alfred C Toepfer International GmbH - Germany
- Central Java Power - Indonesia
- Eastern Energy - Thailand
- Edison Trading Spa - Italy
- Binh Thuan Hamico - Vietnam
- Bhushan Steel Limited - India
- Baramulti Group, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Energy Development Corp, Philippines
- Electricity Generating Authority of Thailand
- Romanian Commodities Exchange
- Coastal Gujarat Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kepco SPC Power Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Metalloyd Limited - United Kingdom
- Karbindo Abesyapradhi - Indoneisa
- Orica Mining Services - Indonesia
- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- European Bulk Services B.V. - Netherlands
- Directorate Of Revenue Intelligence - India
- Vedanta Resources Plc - India
- Georgia Ports Authority, United States
- Sindya Power Generating Company Private Ltd
- Goldman Sachs - Singapore
- PNOC Exploration Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Parry Sugars Refinery, India
- Mjunction Services Limited - India
- Wilmar Investment Holdings
- IEA Clean Coal Centre - UK
- Sinarmas Energy and Mining - Indonesia
- Indo Tambangraya Megah - Indonesia
- Australian Commodity Traders Exchange
- Siam City Cement - Thailand
- Intertek Mineral Services - Indonesia
- Medco Energi Mining Internasional
- New Zealand Coal & Carbon
- McConnell Dowell - Australia
- ICICI Bank Limited - India
- PowerSource Philippines DevCo
- Jaiprakash Power Ventures ltd
- Pipit Mutiara Jaya. PT, Indonesia
- PTC India Limited - India
- GVK Power & Infra Limited - India
- Orica Australia Pty. Ltd.
- Semirara Mining Corp, Philippines
- Indian Energy Exchange, India
- Thai Mozambique Logistica
- Karaikal Port Pvt Ltd - India
- Posco Energy - South Korea
- Vizag Seaport Private Limited - India
- Indian Oil Corporation Limited
- Bhatia International Limited - India
- Ind-Barath Power Infra Limited - India
- Trasteel International SA, Italy
- Holcim Trading Pte Ltd - Singapore
- Meenaskhi Energy Private Limited - India
- Standard Chartered Bank - UAE
- Indonesian Coal Mining Association
- Renaissance Capital - South Africa
- Aditya Birla Group - India
- Bukit Makmur.PT - Indonesia
- Central Electricity Authority - India
- Malabar Cements Ltd - India
- Xindia Steels Limited - India
- Gujarat Sidhee Cement - India
- Bhoruka Overseas - Indonesia
- Power Finance Corporation Ltd., India
- Straits Asia Resources Limited - Singapore
- Carbofer General Trading SA - India
- TNB Fuel Sdn Bhd - Malaysia
- Rio Tinto Coal - Australia
- OPG Power Generation Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Altura Mining Limited, Indonesia
- Makarim & Taira - Indonesia
- Cement Manufacturers Association - India
- Gujarat Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- The Treasury - Australian Government
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Mintek Dendrill Indonesia
- Videocon Industries ltd - India
- Formosa Plastics Group - Taiwan
- Chettinad Cement Corporation Ltd - India
- Electricity Authority, New Zealand
- Eastern Coal Council - USA
- Africa Commodities Group - South Africa
- AsiaOL BioFuels Corp., Philippines
- Rashtriya Ispat Nigam Limited - India
- Krishnapatnam Port Company Ltd. - India
- Kaltim Prima Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Lanco Infratech Ltd - India
- Coal and Oil Company - UAE
- Directorate General of MIneral and Coal - Indonesia
- Dalmia Cement Bharat India
- Salva Resources Pvt Ltd - India
- Ministry of Transport, Egypt
- Bank of Tokyo Mitsubishi UFJ Ltd
- Borneo Indobara - Indonesia
- SMG Consultants - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Planning Commission, India
- Interocean Group of Companies - India
- Agrawal Coal Company - India
- Maheswari Brothers Coal Limited - India
- Oldendorff Carriers - Singapore
- Essar Steel Hazira Ltd - India
- Aboitiz Power Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- San Jose City I Power Corp, Philippines
- Indogreen Group - Indonesia
- Madhucon Powers Ltd - India
- Manunggal Multi Energi - Indonesia
- Sical Logistics Limited - India
- Port Waratah Coal Services - Australia
- IHS Mccloskey Coal Group - USA
- Asmin Koalindo Tuhup - Indonesia
- Simpson Spence & Young - Indonesia
- India Bulls Power Limited - India
- CIMB Investment Bank - Malaysia
- Bangladesh Power Developement Board
- International Coal Ventures Pvt Ltd - India
- Ambuja Cements Ltd - India
- Merrill Lynch Commodities Europe
- Independent Power Producers Association of India
- Bukit Baiduri Energy - Indonesia
- Singapore Mercantile Exchange
- Deloitte Consulting - India
- The State Trading Corporation of India Ltd
- Sree Jayajothi Cements Limited - India
- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- Siam City Cement PLC, Thailand
- Kohat Cement Company Ltd. - Pakistan
- Marubeni Corporation - India
- Tamil Nadu electricity Board
- Meralco Power Generation, Philippines
- Antam Resourcindo - Indonesia
- Sakthi Sugars Limited - India
- Minerals Council of Australia
- Banpu Public Company Limited - Thailand
- Billiton Holdings Pty Ltd - Australia
- Kumho Petrochemical, South Korea
- Energy Link Ltd, New Zealand
- Price Waterhouse Coopers - Russia
- PetroVietnam Power Coal Import and Supply Company
- Global Coal Blending Company Limited - Australia
- Timah Investasi Mineral - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- Anglo American - United Kingdom
- The University of Queensland
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Star Paper Mills Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Ministry of Mines - Canada
- Therma Luzon, Inc, Philippines
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