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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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Friday, 26 June 15
INDONESIA COAL PRODUCTION FALLS BETWEEN JAN-MAY : JG
The Ministry of Energy and Mineral Resources announced that coal production declined to 166 million tons between January and May, a 19 percent drop ...
Friday, 26 June 15
COAL PRODUCTION IN THE U.S ROSE 6.0% WEEK OVER WEEK, SAYS EIA
COALspot.com – United States the second largest coal producer in the world has produced approximately totaled an estimated 16.3 million short ...
Thursday, 25 June 15
THE PORT OF NEWCASTLE SHIPPED 13.31% MORE COAL IN MAY 2015 COMPARED TO APRIL 2015
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port, has shipped $1.18 billio ...
Thursday, 25 June 15
CAPESIZE: PERIOD INTEREST REMAINED STRONG FOR A SECOND WEEK - INTERMODAL
COALspot.com: Following those depressive last six months, the BDI closed off on last Friday noting a substantial weekly increase, which pushed the ...
Wednesday, 24 June 15
PANAMAXES: THE OUTLOOK REMAINS NEGATIVE AS DEMAND FOR COAL IS DIMINISHING - YANNIS OLZIERSKY
As we get closer to the end of June, we can safely say that the 1st half of the year is leaving the dry bulk market with a bitter taste that we all ...
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- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Standard Chartered Bank - UAE
- Price Waterhouse Coopers - Russia
- Kumho Petrochemical, South Korea
- Sarangani Energy Corporation, Philippines
- Dalmia Cement Bharat India
- CIMB Investment Bank - Malaysia
- Grasim Industreis Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Larsen & Toubro Limited - India
- Merrill Lynch Commodities Europe
- ASAPP Information Group - India
- Bukit Baiduri Energy - Indonesia
- Baramulti Group, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Vizag Seaport Private Limited - India
- Indian Oil Corporation Limited
- Billiton Holdings Pty Ltd - Australia
- Oldendorff Carriers - Singapore
- London Commodity Brokers - England
- Attock Cement Pakistan Limited
- Ceylon Electricity Board - Sri Lanka
- Mjunction Services Limited - India
- Banpu Public Company Limited - Thailand
- Eastern Coal Council - USA
- Mercator Lines Limited - India
- Salva Resources Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Port Waratah Coal Services - Australia
- Kartika Selabumi Mining - Indonesia
- Indonesian Coal Mining Association
- Deloitte Consulting - India
- Coalindo Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- India Bulls Power Limited - India
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- MS Steel International - UAE
- The University of Queensland
- Wood Mackenzie - Singapore
- Electricity Authority, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Gujarat Electricity Regulatory Commission - India
- Jindal Steel & Power Ltd - India
- Trasteel International SA, Italy
- Orica Australia Pty. Ltd.
- Makarim & Taira - Indonesia
- Straits Asia Resources Limited - Singapore
- Krishnapatnam Port Company Ltd. - India
- Global Green Power PLC Corporation, Philippines
- Tamil Nadu electricity Board
- Medco Energi Mining Internasional
- Petron Corporation, Philippines
- GVK Power & Infra Limited - India
- Samtan Co., Ltd - South Korea
- Directorate Of Revenue Intelligence - India
- Electricity Generating Authority of Thailand
- IHS Mccloskey Coal Group - USA
- Aditya Birla Group - India
- GMR Energy Limited - India
- Star Paper Mills Limited - India
- Ministry of Transport, Egypt
- Tata Chemicals Ltd - India
- Kideco Jaya Agung - Indonesia
- Formosa Plastics Group - Taiwan
- The Treasury - Australian Government
- Africa Commodities Group - South Africa
- Global Business Power Corporation, Philippines
- Ministry of Mines - Canada
- OPG Power Generation Pvt Ltd - India
- Indika Energy - Indonesia
- Siam City Cement - Thailand
- Wilmar Investment Holdings
- GAC Shipping (India) Pvt Ltd
- Meralco Power Generation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Makmur.PT - Indonesia
- VISA Power Limited - India
- Sakthi Sugars Limited - India
- Orica Mining Services - Indonesia
- Sical Logistics Limited - India
- Commonwealth Bank - Australia
- Ind-Barath Power Infra Limited - India
- Antam Resourcindo - Indonesia
- Marubeni Corporation - India
- Anglo American - United Kingdom
- Siam City Cement PLC, Thailand
- Gujarat Sidhee Cement - India
- Sree Jayajothi Cements Limited - India
- Savvy Resources Ltd - HongKong
- Lanco Infratech Ltd - India
- Pendopo Energi Batubara - Indonesia
- Ambuja Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- Latin American Coal - Colombia
- Sindya Power Generating Company Private Ltd
- Power Finance Corporation Ltd., India
- Australian Coal Association
- Indogreen Group - Indonesia
- Planning Commission, India
- San Jose City I Power Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Altura Mining Limited, Indonesia
- Thai Mozambique Logistica
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maharashtra Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- CNBM International Corporation - China
- Independent Power Producers Association of India
- SMG Consultants - Indonesia
- New Zealand Coal & Carbon
- Central Electricity Authority - India
- Chettinad Cement Corporation Ltd - India
- Coastal Gujarat Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Australian Commodity Traders Exchange
- Binh Thuan Hamico - Vietnam
- Kepco SPC Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Xindia Steels Limited - India
- McConnell Dowell - Australia
- IEA Clean Coal Centre - UK
- Meenaskhi Energy Private Limited - India
- Indian Energy Exchange, India
- Asmin Koalindo Tuhup - Indonesia
- Metalloyd Limited - United Kingdom
- Cement Manufacturers Association - India
- GN Power Mariveles Coal Plant, Philippines
- Bharathi Cement Corporation - India
- South Luzon Thermal Energy Corporation
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bangladesh Power Developement Board
- Agrawal Coal Company - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Romanian Commodities Exchange
- Renaissance Capital - South Africa
- Bhushan Steel Limited - India
- Economic Council, Georgia
- Jorong Barutama Greston.PT - Indonesia
- Mintek Dendrill Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Holcim Trading Pte Ltd - Singapore
- ICICI Bank Limited - India
- Indo Tambangraya Megah - Indonesia
- Ministry of Finance - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bayan Resources Tbk. - Indonesia
- Edison Trading Spa - Italy
- Essar Steel Hazira Ltd - India
- Semirara Mining Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Bhatia International Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Uttam Galva Steels Limited - India
- Vedanta Resources Plc - India
- TNB Fuel Sdn Bhd - Malaysia
- TeaM Sual Corporation - Philippines
- PTC India Limited - India
- Global Coal Blending Company Limited - Australia
- Bhoruka Overseas - Indonesia
- Interocean Group of Companies - India
- Iligan Light & Power Inc, Philippines
- Energy Development Corp, Philippines
- Toyota Tsusho Corporation, Japan
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Bulk Trading Sa - Switzerland
- Parry Sugars Refinery, India
- Central Java Power - Indonesia
- Rio Tinto Coal - Australia
- Chamber of Mines of South Africa
- PNOC Exploration Corporation - Philippines
- The State Trading Corporation of India Ltd
- Minerals Council of Australia
- Coal and Oil Company - UAE
- European Bulk Services B.V. - Netherlands
- Mercuria Energy - Indonesia
- Singapore Mercantile Exchange
- Goldman Sachs - Singapore
- Carbofer General Trading SA - India
- Manunggal Multi Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Neyveli Lignite Corporation Ltd, - India
- Kalimantan Lumbung Energi - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- Heidelberg Cement - Germany
- Simpson Spence & Young - Indonesia
- White Energy Company Limited
- Sojitz Corporation - Japan
- Thiess Contractors Indonesia
- Georgia Ports Authority, United States
- Madhucon Powers Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- LBH Netherlands Bv - Netherlands
- Kaltim Prima Coal - Indonesia
- SMC Global Power, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Therma Luzon, Inc, Philippines
- Parliament of New Zealand
- International Coal Ventures Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Riau Bara Harum - Indonesia
- PowerSource Philippines DevCo
- Energy Link Ltd, New Zealand
- Kapuas Tunggal Persada - Indonesia
- Eastern Energy - Thailand
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