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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, 03 November 15
API 5 FOB NEWCASTLE COAL SWAPS DECLINE CONTINUES
COALspot.com: API 5 FOB Newcastle Coal swap for Q4’ 2015 delivery slid $1.84 per ton (4.34%) month over month to US$ 40.54 per ton. The swap ...
Tuesday, 03 November 15
EU OIL MAJORS FACE FURTHER EARNINGS DECLINE IN Q415 - FITCH RATINGS
The sharp drop in major European oil companies' third-quarter profits is likely to be extended in the fourth quarter as refining margins, which ...
Monday, 02 November 15
DESPITE CHALLENGING MARKET CONDITIONS, ADARO LOWERS COSTS, DEBT AND DELIVERS STRONG FREE CASH FLOW
COALspot.com: Despite challenging market conditions, Adaro lowers costs, lowers debt and delivers strong free cash flow.
The Indonesia’s ...
Monday, 02 November 15
CFR SOUTH CHINA COAL SWAPS CLOSED ON A WEAK NOTE
COALspot.com: API 8 CFR South China Coal swap for 4Q’ 2015 delivery declined US$ 1.81(3.71 %) per ton month over month.
A commodity swap ...
Sunday, 01 November 15
THE FREIGHT MARKET SENTIMENT REMAINS WEAK
This week’s freight market sentiment remains weak compared to last week.
The Baltic Dry Index (BDI), an economic indicator issued daily ...
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- Central Electricity Authority - India
- Videocon Industries ltd - India
- Coalindo Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Tata Chemicals Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Binh Thuan Hamico - Vietnam
- Chamber of Mines of South Africa
- European Bulk Services B.V. - Netherlands
- Sarangani Energy Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Power Finance Corporation Ltd., India
- Semirara Mining Corp, Philippines
- Star Paper Mills Limited - India
- Kobexindo Tractors - Indoneisa
- Port Waratah Coal Services - Australia
- Sical Logistics Limited - India
- Bukit Baiduri Energy - Indonesia
- VISA Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bhatia International Limited - India
- PowerSource Philippines DevCo
- Toyota Tsusho Corporation, Japan
- Eastern Coal Council - USA
- Kideco Jaya Agung - Indonesia
- Posco Energy - South Korea
- Sojitz Corporation - Japan
- Indian Oil Corporation Limited
- Petron Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Essar Steel Hazira Ltd - India
- Rio Tinto Coal - Australia
- Anglo American - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Gujarat Electricity Regulatory Commission - India
- Timah Investasi Mineral - Indoneisa
- Banpu Public Company Limited - Thailand
- Siam City Cement - Thailand
- Bangladesh Power Developement Board
- Altura Mining Limited, Indonesia
- Medco Energi Mining Internasional
- Energy Development Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- The Treasury - Australian Government
- Global Business Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Samtan Co., Ltd - South Korea
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- GVK Power & Infra Limited - India
- Independent Power Producers Association of India
- Iligan Light & Power Inc, Philippines
- Africa Commodities Group - South Africa
- PTC India Limited - India
- Bhushan Steel Limited - India
- Economic Council, Georgia
- Oldendorff Carriers - Singapore
- PNOC Exploration Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Ind-Barath Power Infra Limited - India
- Energy Link Ltd, New Zealand
- OPG Power Generation Pvt Ltd - India
- Attock Cement Pakistan Limited
- Meenaskhi Energy Private Limited - India
- Marubeni Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- Planning Commission, India
- Mintek Dendrill Indonesia
- Interocean Group of Companies - India
- Therma Luzon, Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- ASAPP Information Group - India
- Trasteel International SA, Italy
- International Coal Ventures Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- GAC Shipping (India) Pvt Ltd
- Alfred C Toepfer International GmbH - Germany
- Karaikal Port Pvt Ltd - India
- Electricity Authority, New Zealand
- Borneo Indobara - Indonesia
- ICICI Bank Limited - India
- AsiaOL BioFuels Corp., Philippines
- Malabar Cements Ltd - India
- MS Steel International - UAE
- Thiess Contractors Indonesia
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Manunggal Multi Energi - Indonesia
- Renaissance Capital - South Africa
- Eastern Energy - Thailand
- Cement Manufacturers Association - India
- SMG Consultants - Indonesia
- Antam Resourcindo - Indonesia
- Mercuria Energy - Indonesia
- Dalmia Cement Bharat India
- Jindal Steel & Power Ltd - India
- White Energy Company Limited
- Vizag Seaport Private Limited - India
- Kartika Selabumi Mining - Indonesia
- Metalloyd Limited - United Kingdom
- Parliament of New Zealand
- IEA Clean Coal Centre - UK
- Tamil Nadu electricity Board
- CIMB Investment Bank - Malaysia
- Singapore Mercantile Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Latin American Coal - Colombia
- Wood Mackenzie - Singapore
- Bukit Makmur.PT - Indonesia
- Makarim & Taira - Indonesia
- India Bulls Power Limited - India
- Aditya Birla Group - India
- Grasim Industreis Ltd - India
- Xindia Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- Barasentosa Lestari - Indonesia
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Kepco SPC Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Ambuja Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- Thai Mozambique Logistica
- Minerals Council of Australia
- Semirara Mining and Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Bharathi Cement Corporation - India
- Indian Energy Exchange, India
- Merrill Lynch Commodities Europe
- Deloitte Consulting - India
- Larsen & Toubro Limited - India
- The University of Queensland
- London Commodity Brokers - England
- Heidelberg Cement - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Agrawal Coal Company - India
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
- Orica Mining Services - Indonesia
- Mjunction Services Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Commonwealth Bank - Australia
- Cigading International Bulk Terminal - Indonesia
- CNBM International Corporation - China
- Karbindo Abesyapradhi - Indoneisa
- Coastal Gujarat Power Limited - India
- Sakthi Sugars Limited - India
- Global Green Power PLC Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Wilmar Investment Holdings
- Sindya Power Generating Company Private Ltd
- Bhoruka Overseas - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Coal and Oil Company - UAE
- Savvy Resources Ltd - HongKong
- New Zealand Coal & Carbon
- Indika Energy - Indonesia
- Australian Commodity Traders Exchange
- Krishnapatnam Port Company Ltd. - India
- LBH Netherlands Bv - Netherlands
- Siam City Cement PLC, Thailand
- Lanco Infratech Ltd - India
- Directorate Of Revenue Intelligence - India
- Mercator Lines Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Mines - Canada
- Meralco Power Generation, Philippines
- Jaiprakash Power Ventures ltd
- Indo Tambangraya Megah - Indonesia
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Formosa Plastics Group - Taiwan
- Miang Besar Coal Terminal - Indonesia
- Goldman Sachs - Singapore
- Australian Coal Association
- GN Power Mariveles Coal Plant, Philippines
- Riau Bara Harum - Indonesia
- Ministry of Finance - Indonesia
- Carbofer General Trading SA - India
- The State Trading Corporation of India Ltd
- Straits Asia Resources Limited - Singapore
- McConnell Dowell - Australia
- Gujarat Mineral Development Corp Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Pendopo Energi Batubara - Indonesia
- Electricity Generating Authority of Thailand
- Indonesian Coal Mining Association
- Gujarat Sidhee Cement - India
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Chettinad Cement Corporation Ltd - India
- Kumho Petrochemical, South Korea
- Central Java Power - Indonesia
- Salva Resources Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Uttam Galva Steels Limited - India
- Madhucon Powers Ltd - India
- TeaM Sual Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Leighton Contractors Pty Ltd - Australia
- Vedanta Resources Plc - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Georgia Ports Authority, United States
- Baramulti Group, Indonesia
- Maheswari Brothers Coal Limited - India
- Parry Sugars Refinery, India
- Pipit Mutiara Jaya. PT, Indonesia
- GMR Energy Limited - India
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