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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, 01 December 15
TANKERS VERSUS BULKERS - JUST PLAYING CATCH UP? - CLARKSONS
It’s now more than a year since the tanker market took off. In mid-2014 tanker earnings picked up and since then have been in the $30-$40,000 ...
Monday, 30 November 15
ASSOCARBONI LOOKS AT COAL FROM A DIFFERENT ANGLE
ASSOCARBONI is in favour of an international mechanism to provide financial support to countries building high efficiency low emission coal plants. ...
Monday, 30 November 15
CS 5000 GAR COAL INDEX FIRM D-O-D; WEAK W-O-W
COALspot.com: The 5000 GAR CS (i) coal index up slightly day over day.
According to the system generated index, the CS 50 (5000 GAR coal) was ...
Monday, 30 November 15
CFR SOUTH CHINA COAL SWAPS REMAINED UNCHANGED FROM LAST WEEK
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery declined US$ 4.50 (9.78%) per ton month over month.
A commodity swap ...
Sunday, 29 November 15
CAPE INDEX SURGES 383 POINTS WEEK OVER WEEK, BOOSTS BALTIC DRY INDEX
COALspot.com: The Baltic Dry Index, a measure of shipping rates, fell to 498 points on 20 November and touched a 30-year low, but on 27 November th ...
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- Cement Manufacturers Association - India
- European Bulk Services B.V. - Netherlands
- Attock Cement Pakistan Limited
- Siam City Cement PLC, Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CNBM International Corporation - China
- Indo Tambangraya Megah - Indonesia
- IHS Mccloskey Coal Group - USA
- Mjunction Services Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Altura Mining Limited, Indonesia
- Trasteel International SA, Italy
- LBH Netherlands Bv - Netherlands
- South Luzon Thermal Energy Corporation
- Planning Commission, India
- Standard Chartered Bank - UAE
- Thiess Contractors Indonesia
- Bhushan Steel Limited - India
- Holcim Trading Pte Ltd - Singapore
- Georgia Ports Authority, United States
- San Jose City I Power Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Borneo Indobara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- Alfred C Toepfer International GmbH - Germany
- Sinarmas Energy and Mining - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Dalmia Cement Bharat India
- Manunggal Multi Energi - Indonesia
- Heidelberg Cement - Germany
- IEA Clean Coal Centre - UK
- Sakthi Sugars Limited - India
- Economic Council, Georgia
- Mintek Dendrill Indonesia
- Global Business Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Price Waterhouse Coopers - Russia
- Asmin Koalindo Tuhup - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- Directorate General of MIneral and Coal - Indonesia
- Wilmar Investment Holdings
- Lanco Infratech Ltd - India
- Orica Mining Services - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Bharathi Cement Corporation - India
- Australian Coal Association
- Minerals Council of Australia
- Aditya Birla Group - India
- Parry Sugars Refinery, India
- Kartika Selabumi Mining - Indonesia
- McConnell Dowell - Australia
- Goldman Sachs - Singapore
- Eastern Coal Council - USA
- Ministry of Finance - Indonesia
- Medco Energi Mining Internasional
- Mercator Lines Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Latin American Coal - Colombia
- Toyota Tsusho Corporation, Japan
- Ministry of Mines - Canada
- Baramulti Group, Indonesia
- Wood Mackenzie - Singapore
- OPG Power Generation Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Indika Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Riau Bara Harum - Indonesia
- Jaiprakash Power Ventures ltd
- White Energy Company Limited
- Kepco SPC Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Timah Investasi Mineral - Indoneisa
- Central Java Power - Indonesia
- Jindal Steel & Power Ltd - India
- Parliament of New Zealand
- The State Trading Corporation of India Ltd
- Renaissance Capital - South Africa
- Gujarat Sidhee Cement - India
- Energy Development Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Aboitiz Power Corporation - Philippines
- London Commodity Brokers - England
- TNB Fuel Sdn Bhd - Malaysia
- SMG Consultants - Indonesia
- Star Paper Mills Limited - India
- Coalindo Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- Pipit Mutiara Jaya. PT, Indonesia
- Simpson Spence & Young - Indonesia
- Samtan Co., Ltd - South Korea
- Intertek Mineral Services - Indonesia
- Semirara Mining Corp, Philippines
- Kumho Petrochemical, South Korea
- The University of Queensland
- Bukit Baiduri Energy - Indonesia
- Bangladesh Power Developement Board
- Kobexindo Tractors - Indoneisa
- Iligan Light & Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Oldendorff Carriers - Singapore
- ASAPP Information Group - India
- Rio Tinto Coal - Australia
- PNOC Exploration Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Singapore Mercantile Exchange
- New Zealand Coal & Carbon
- Videocon Industries ltd - India
- GN Power Mariveles Coal Plant, Philippines
- MS Steel International - UAE
- Energy Link Ltd, New Zealand
- TeaM Sual Corporation - Philippines
- Meralco Power Generation, Philippines
- Xindia Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- Pendopo Energi Batubara - Indonesia
- Coastal Gujarat Power Limited - India
- Mercuria Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Karbindo Abesyapradhi - Indoneisa
- SMC Global Power, Philippines
- Indonesian Coal Mining Association
- Kapuas Tunggal Persada - Indonesia
- Malabar Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- The Treasury - Australian Government
- Ceylon Electricity Board - Sri Lanka
- Australian Commodity Traders Exchange
- Electricity Generating Authority of Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Makarim & Taira - Indonesia
- Central Electricity Authority - India
- Petrochimia International Co. Ltd.- Taiwan
- Sojitz Corporation - Japan
- Electricity Authority, New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Posco Energy - South Korea
- Kaltim Prima Coal - Indonesia
- Chamber of Mines of South Africa
- PowerSource Philippines DevCo
- Indogreen Group - Indonesia
- Eastern Energy - Thailand
- Africa Commodities Group - South Africa
- Siam City Cement - Thailand
- Rashtriya Ispat Nigam Limited - India
- Globalindo Alam Lestari - Indonesia
- Larsen & Toubro Limited - India
- Marubeni Corporation - India
- Straits Asia Resources Limited - Singapore
- Edison Trading Spa - Italy
- Anglo American - United Kingdom
- CIMB Investment Bank - Malaysia
- GVK Power & Infra Limited - India
- Semirara Mining and Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Indian Oil Corporation Limited
- Essar Steel Hazira Ltd - India
- Deloitte Consulting - India
- Cigading International Bulk Terminal - Indonesia
- Antam Resourcindo - Indonesia
- Indian Energy Exchange, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coal and Oil Company - UAE
- Thai Mozambique Logistica
- Billiton Holdings Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- Salva Resources Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Agrawal Coal Company - India
- GAC Shipping (India) Pvt Ltd
- Carbofer General Trading SA - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Bulk Trading Sa - Switzerland
- Tata Chemicals Ltd - India
- Commonwealth Bank - Australia
- Vedanta Resources Plc - India
- Ministry of Transport, Egypt
- Karaikal Port Pvt Ltd - India
- VISA Power Limited - India
- Sical Logistics Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhatia International Limited - India
- Uttam Galva Steels Limited - India
- Port Waratah Coal Services - Australia
- Interocean Group of Companies - India
- Romanian Commodities Exchange
- International Coal Ventures Pvt Ltd - India
- ICICI Bank Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Bukit Makmur.PT - Indonesia
- Vizag Seaport Private Limited - India
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Bahari Cakrawala Sebuku - Indonesia
- Merrill Lynch Commodities Europe
- Bhoruka Overseas - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Petron Corporation, Philippines
- Tamil Nadu electricity Board
- PTC India Limited - India
- Ambuja Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Savvy Resources Ltd - HongKong
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