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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, 07 September 15
CFR SOUTH CHINA COAL SWAPS ROSE 1.1 PER CENT WEEK OVER WEEK
COALspot.com: API 8 CFR South China Coal swap for 4Q’ 2015 delivery declined just US$ 1.52 (3 %) per MT month over month.
A commodity sw ...
Sunday, 06 September 15
AUTOMATION AND TECHNOLOGY IS CERTAINLY PART OF THE SOLUTION FOR IMPROVING PERFORMANCE AND EFFICIENCY TO MAKE THE MINE OPERATIONS MORE PROFITABLE, HOWEVER............ - LUKE JALSEVAC
"The Technology and Innovation in Mining 2015" production team at Information Exchange Group interviewed Luke Jalsevac, Director, Busines ...
Sunday, 06 September 15
THE CAPE SIZE INDEX ROSE 10.83 PER CENT WEEK OVER WEEK
COALspot.com: The BDI, the Baltic exchange's main sea freight index, which tracks rates for ships carrying dry bulk commodities, declined o ...
Saturday, 05 September 15
DRY BULK MARKET MAY SUFFER NOW, BUT IS BOUND FOR A RECOVERY THANKS TO A LIMITED FUTURE FLEET GROWTH - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The slow increase of dry bulk tonnage growth this year could turn into a solid indicator of the market’s future prospects. According to a rec ...
Friday, 04 September 15
U.S. COAL PRODUCTION FOR THE W/E AUGUST 29, UP SLIGHTLY; FALL 4.5 PERCENT Y-Y: EIA
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 18.7 million shor ...
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- Savvy Resources Ltd - HongKong
- Tata Chemicals Ltd - India
- Trasteel International SA, Italy
- TeaM Sual Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sojitz Corporation - Japan
- Kartika Selabumi Mining - Indonesia
- Bharathi Cement Corporation - India
- Global Green Power PLC Corporation, Philippines
- McConnell Dowell - Australia
- Simpson Spence & Young - Indonesia
- Parliament of New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Global Business Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Kepco SPC Power Corporation, Philippines
- Vedanta Resources Plc - India
- Independent Power Producers Association of India
- Manunggal Multi Energi - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Edison Trading Spa - Italy
- Videocon Industries ltd - India
- Samtan Co., Ltd - South Korea
- Indian Oil Corporation Limited
- Orica Mining Services - Indonesia
- Formosa Plastics Group - Taiwan
- Anglo American - United Kingdom
- Energy Development Corp, Philippines
- Kumho Petrochemical, South Korea
- Ceylon Electricity Board - Sri Lanka
- PNOC Exploration Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Bulk Trading Sa - Switzerland
- The Treasury - Australian Government
- Indian Energy Exchange, India
- Therma Luzon, Inc, Philippines
- Electricity Authority, New Zealand
- Larsen & Toubro Limited - India
- Baramulti Group, Indonesia
- Binh Thuan Hamico - Vietnam
- Pendopo Energi Batubara - Indonesia
- Ministry of Finance - Indonesia
- Bangladesh Power Developement Board
- Bahari Cakrawala Sebuku - Indonesia
- Central Electricity Authority - India
- Directorate Of Revenue Intelligence - India
- Economic Council, Georgia
- IEA Clean Coal Centre - UK
- Standard Chartered Bank - UAE
- Siam City Cement - Thailand
- Attock Cement Pakistan Limited
- Jorong Barutama Greston.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Sakthi Sugars Limited - India
- SMC Global Power, Philippines
- Meenaskhi Energy Private Limited - India
- Eastern Energy - Thailand
- Makarim & Taira - Indonesia
- SN Aboitiz Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Oldendorff Carriers - Singapore
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Cement Manufacturers Association - India
- Leighton Contractors Pty Ltd - Australia
- Semirara Mining Corp, Philippines
- MS Steel International - UAE
- Aditya Birla Group - India
- Port Waratah Coal Services - Australia
- Bukit Makmur.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Straits Asia Resources Limited - Singapore
- Rio Tinto Coal - Australia
- Bukit Baiduri Energy - Indonesia
- CNBM International Corporation - China
- Toyota Tsusho Corporation, Japan
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- Kideco Jaya Agung - Indonesia
- Australian Commodity Traders Exchange
- VISA Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Gujarat Sidhee Cement - India
- The State Trading Corporation of India Ltd
- Latin American Coal - Colombia
- Ministry of Transport, Egypt
- Madhucon Powers Ltd - India
- Malabar Cements Ltd - India
- Chamber of Mines of South Africa
- White Energy Company Limited
- Bhoruka Overseas - Indonesia
- Uttam Galva Steels Limited - India
- ASAPP Information Group - India
- Antam Resourcindo - Indonesia
- Global Coal Blending Company Limited - Australia
- Orica Australia Pty. Ltd.
- GAC Shipping (India) Pvt Ltd
- Borneo Indobara - Indonesia
- European Bulk Services B.V. - Netherlands
- IHS Mccloskey Coal Group - USA
- Renaissance Capital - South Africa
- Chettinad Cement Corporation Ltd - India
- Indonesian Coal Mining Association
- Semirara Mining and Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Wilmar Investment Holdings
- Gujarat Electricity Regulatory Commission - India
- Vizag Seaport Private Limited - India
- CIMB Investment Bank - Malaysia
- Bhatia International Limited - India
- San Jose City I Power Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Africa Commodities Group - South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Parry Sugars Refinery, India
- Meralco Power Generation, Philippines
- Energy Link Ltd, New Zealand
- Mjunction Services Limited - India
- Billiton Holdings Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Sical Logistics Limited - India
- Riau Bara Harum - Indonesia
- Electricity Generating Authority of Thailand
- Altura Mining Limited, Indonesia
- Merrill Lynch Commodities Europe
- Kobexindo Tractors - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GVK Power & Infra Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- South Luzon Thermal Energy Corporation
- Coastal Gujarat Power Limited - India
- Ministry of Mines - Canada
- Alfred C Toepfer International GmbH - Germany
- Kapuas Tunggal Persada - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Goldman Sachs - Singapore
- Agrawal Coal Company - India
- Jindal Steel & Power Ltd - India
- Bhushan Steel Limited - India
- ICICI Bank Limited - India
- Holcim Trading Pte Ltd - Singapore
- Coal and Oil Company - UAE
- SMG Consultants - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Maheswari Brothers Coal Limited - India
- Mercator Lines Limited - India
- London Commodity Brokers - England
- Aboitiz Power Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- OPG Power Generation Pvt Ltd - India
- Mintek Dendrill Indonesia
- Georgia Ports Authority, United States
- Thai Mozambique Logistica
- Salva Resources Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Australian Coal Association
- Mercuria Energy - Indonesia
- Coalindo Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Eastern Coal Council - USA
- Wood Mackenzie - Singapore
- Siam City Cement PLC, Thailand
- Deloitte Consulting - India
- TNB Fuel Sdn Bhd - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Romanian Commodities Exchange
- AsiaOL BioFuels Corp., Philippines
- Indika Energy - Indonesia
- Heidelberg Cement - Germany
- Carbofer General Trading SA - India
- Posco Energy - South Korea
- Planning Commission, India
- Xindia Steels Limited - India
- Dalmia Cement Bharat India
- Metalloyd Limited - United Kingdom
- Essar Steel Hazira Ltd - India
- Commonwealth Bank - Australia
- Sindya Power Generating Company Private Ltd
- PTC India Limited - India
- The University of Queensland
- Central Java Power - Indonesia
- Banpu Public Company Limited - Thailand
- Intertek Mineral Services - Indonesia
- GMR Energy Limited - India
- Medco Energi Mining Internasional
- Indogreen Group - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Singapore Mercantile Exchange
- Karaikal Port Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Thiess Contractors Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asmin Koalindo Tuhup - Indonesia
- Marubeni Corporation - India
- Indo Tambangraya Megah - Indonesia
- India Bulls Power Limited - India
- Jaiprakash Power Ventures ltd
- Minerals Council of Australia
- Petron Corporation, Philippines
- Power Finance Corporation Ltd., India
- Lanco Infratech Ltd - India
- LBH Netherlands Bv - Netherlands
- Interocean Group of Companies - India
- International Coal Ventures Pvt Ltd - India
- Grasim Industreis Ltd - India
- PowerSource Philippines DevCo
- New Zealand Coal & Carbon
- GN Power Mariveles Coal Plant, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Star Paper Mills Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
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