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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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Wednesday, 25 November 15
INDIA'S POWER GENERATORS FACE LOW, FALLING UTILISATION RATE - FITCH
COAlspot.com: Fitch Ratings says in a new report that the utilisation rate of India's thermal power generation capacity continued to decline in ...
Wednesday, 25 November 15
BIG CHINESE COPPER PROCESSORS DEFEND MARGINS THROUGH R&D, SAYS FITCH
Large Chinese copper processors are focusing on higher value-added products and investing in R&D to enhance their technical know-how to maintai ...
Wednesday, 25 November 15
BIMCO LAUNCHES ANTI-CORRUPTION CLAUSE FOR SHIPPING CONTRACTS WORLDWIDE
COALspot.com: BIMCO, is the world’s largest international shipping association, with 2,200 members in around 130 countries, has now launched ...
Wednesday, 25 November 15
TANKER MARKET INSIGHT - GEORGE VASTARDIS
We have already noticed obvious signs of activity mainly West of Suez, which are currently driving the clean MR market to higher levels. Over the p ...
Tuesday, 24 November 15
COAL SUPPLY PRESSURE PUTS INDONESIAN HBA IN FREE FALL
The coal industry is slowly recognizing that, the current coal price level is not a decrease in price, but a change in pricing to corresp ...
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- Parliament of New Zealand
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Riau Bara Harum - Indonesia
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Sinarmas Energy and Mining - Indonesia
- Bulk Trading Sa - Switzerland
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- Gujarat Electricity Regulatory Commission - India
- Bhoruka Overseas - Indonesia
- Ministry of Mines - Canada
- Kepco SPC Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Parry Sugars Refinery, India
- Sakthi Sugars Limited - India
- Jaiprakash Power Ventures ltd
- London Commodity Brokers - England
- Formosa Plastics Group - Taiwan
- Tamil Nadu electricity Board
- Xindia Steels Limited - India
- Rio Tinto Coal - Australia
- Leighton Contractors Pty Ltd - Australia
- Larsen & Toubro Limited - India
- GMR Energy Limited - India
- Maheswari Brothers Coal Limited - India
- Coastal Gujarat Power Limited - India
- SMG Consultants - Indonesia
- Medco Energi Mining Internasional
- Global Green Power PLC Corporation, Philippines
- Indogreen Group - Indonesia
- Attock Cement Pakistan Limited
- Indian Energy Exchange, India
- Borneo Indobara - Indonesia
- Coal and Oil Company - UAE
- IHS Mccloskey Coal Group - USA
- Binh Thuan Hamico - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Vijayanagar Sugar Pvt Ltd - India
- Goldman Sachs - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ceylon Electricity Board - Sri Lanka
- Thiess Contractors Indonesia
- Ambuja Cements Ltd - India
- The University of Queensland
- Georgia Ports Authority, United States
- Kalimantan Lumbung Energi - Indonesia
- Jindal Steel & Power Ltd - India
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- Central Electricity Authority - India
- Sarangani Energy Corporation, Philippines
- Planning Commission, India
- Carbofer General Trading SA - India
- Africa Commodities Group - South Africa
- Meenaskhi Energy Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- IEA Clean Coal Centre - UK
- Kobexindo Tractors - Indoneisa
- Star Paper Mills Limited - India
- OPG Power Generation Pvt Ltd - India
- Ministry of Finance - Indonesia
- Bukit Baiduri Energy - Indonesia
- Edison Trading Spa - Italy
- PetroVietnam Power Coal Import and Supply Company
- Renaissance Capital - South Africa
- Heidelberg Cement - Germany
- Holcim Trading Pte Ltd - Singapore
- Orica Mining Services - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- International Coal Ventures Pvt Ltd - India
- Coalindo Energy - Indonesia
- The Treasury - Australian Government
- Interocean Group of Companies - India
- San Jose City I Power Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Commonwealth Bank - Australia
- Gujarat Sidhee Cement - India
- Bahari Cakrawala Sebuku - Indonesia
- New Zealand Coal & Carbon
- Mintek Dendrill Indonesia
- Price Waterhouse Coopers - Russia
- The State Trading Corporation of India Ltd
- Bharathi Cement Corporation - India
- Bayan Resources Tbk. - Indonesia
- GVK Power & Infra Limited - India
- Altura Mining Limited, Indonesia
- Kaltim Prima Coal - Indonesia
- Kumho Petrochemical, South Korea
- Pendopo Energi Batubara - Indonesia
- MS Steel International - UAE
- Aditya Birla Group - India
- Indian Oil Corporation Limited
- Makarim & Taira - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bhatia International Limited - India
- Power Finance Corporation Ltd., India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Jorong Barutama Greston.PT - Indonesia
- Mercuria Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Ind-Barath Power Infra Limited - India
- Chamber of Mines of South Africa
- LBH Netherlands Bv - Netherlands
- Singapore Mercantile Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- GAC Shipping (India) Pvt Ltd
- Sical Logistics Limited - India
- Chettinad Cement Corporation Ltd - India
- Cement Manufacturers Association - India
- Sree Jayajothi Cements Limited - India
- Siam City Cement - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Electricity Generating Authority of Thailand
- Kideco Jaya Agung - Indonesia
- Tata Chemicals Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Economic Council, Georgia
- Straits Asia Resources Limited - Singapore
- Metalloyd Limited - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- Baramulti Group, Indonesia
- Australian Coal Association
- Mjunction Services Limited - India
- Mercator Lines Limited - India
- AsiaOL BioFuels Corp., Philippines
- Marubeni Corporation - India
- Eastern Coal Council - USA
- Indika Energy - Indonesia
- Bangladesh Power Developement Board
- Meralco Power Generation, Philippines
- Banpu Public Company Limited - Thailand
- PNOC Exploration Corporation - Philippines
- ICICI Bank Limited - India
- TeaM Sual Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- VISA Power Limited - India
- Salva Resources Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Eastern Energy - Thailand
- Iligan Light & Power Inc, Philippines
- Trasteel International SA, Italy
- Independent Power Producers Association of India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Merrill Lynch Commodities Europe
- PowerSource Philippines DevCo
- Grasim Industreis Ltd - India
- CIMB Investment Bank - Malaysia
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- Gujarat Mineral Development Corp Ltd - India
- South Luzon Thermal Energy Corporation
- Minerals Council of Australia
- Energy Development Corp, Philippines
- Videocon Industries ltd - India
- Siam City Cement PLC, Thailand
- Global Coal Blending Company Limited - Australia
- Electricity Authority, New Zealand
- SN Aboitiz Power Inc, Philippines
- Petron Corporation, Philippines
- Thai Mozambique Logistica
- Billiton Holdings Pty Ltd - Australia
- Intertek Mineral Services - Indonesia
- ASAPP Information Group - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CNBM International Corporation - China
- Aboitiz Power Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Miang Besar Coal Terminal - Indonesia
- Australian Commodity Traders Exchange
- Kartika Selabumi Mining - Indonesia
- Malabar Cements Ltd - India
- Central Java Power - Indonesia
- Manunggal Multi Energi - Indonesia
- Ministry of Transport, Egypt
- Rashtriya Ispat Nigam Limited - India
- Antam Resourcindo - Indonesia
- Energy Link Ltd, New Zealand
- Wood Mackenzie - Singapore
- Toyota Tsusho Corporation, Japan
- Timah Investasi Mineral - Indoneisa
- Barasentosa Lestari - Indonesia
- Madhucon Powers Ltd - India
- Bukit Makmur.PT - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Posco Energy - South Korea
- Bhushan Steel Limited - India
- Oldendorff Carriers - Singapore
- Indo Tambangraya Megah - Indonesia
- PTC India Limited - India
- Savvy Resources Ltd - HongKong
- Sojitz Corporation - Japan
- Global Business Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- SMC Global Power, Philippines
- McConnell Dowell - Australia
- Indonesian Coal Mining Association
- Dalmia Cement Bharat India
- India Bulls Power Limited - India
- European Bulk Services B.V. - Netherlands
- Orica Australia Pty. Ltd.
- Latin American Coal - Colombia
- Simpson Spence & Young - Indonesia
- Vedanta Resources Plc - India
- Romanian Commodities Exchange
- Samtan Co., Ltd - South Korea
- Sindya Power Generating Company Private Ltd
- Wilmar Investment Holdings
- Semirara Mining Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Standard Chartered Bank - UAE
- Deloitte Consulting - India
- Agrawal Coal Company - India
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