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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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Sunday, 21 June 15
SPOT RATE AVERAGES FOR FREIGHT FROM INDONESIA TO INDIA REMAIN STRONG THIS WEEK
COALspot.com: The freight market was quite firm this week compared to last week. The BDI was up 21% week on week and closed at 779 points. The cape ...
Friday, 19 June 15
U.S. WEEKLY COAL PRODUCTION UP SLIGHTLY COMPARED TO LAST WEEK; CONTINUES TO BE DOWN FROM LAST YEAR
COALspot.com – United States the second largest coal producer in the world has produced approximately totaled an estimated 15.4 million short ...
Friday, 19 June 15
INDONESIA'S COAL-TRAFFICKING PROBLEM REQUIRES IMPARTIAL INQUIRY - JAKARTA GLOBE
Indonesia, the leading supplier to the seaborne thermal coal market, produces 420 million tons of coal per year, according to its official tally.
...
Thursday, 18 June 15
DRY BULK SHIPPING: LOWEST FLEET GROWTH IN 10 YEARS MAY NOT PROVE ENOUGH AS DEMAND IS NOT KEEPING PACE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The demand side of things in the dry bulk market seems unable to keep pace with even the slightest fleet growth, a sign of the demise that the indu ...
Thursday, 18 June 15
THE FAR EAST HANDYSIZE, HANDYMAX, SUPRAMAX MARKET REMAINED STEADY LAST WEEK - INTERMODAL
COALspot.com: The Dry Bulk market closed off on Friday (last week) noting small gains on the back of stronger performance in the Panamax segment, w ...
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- Directorate Of Revenue Intelligence - India
- GN Power Mariveles Coal Plant, Philippines
- Kalimantan Lumbung Energi - Indonesia
- IHS Mccloskey Coal Group - USA
- Meralco Power Generation, Philippines
- New Zealand Coal & Carbon
- Merrill Lynch Commodities Europe
- Sojitz Corporation - Japan
- Leighton Contractors Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- VISA Power Limited - India
- Kaltim Prima Coal - Indonesia
- Samtan Co., Ltd - South Korea
- Karaikal Port Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Videocon Industries ltd - India
- Vizag Seaport Private Limited - India
- Electricity Authority, New Zealand
- Antam Resourcindo - Indonesia
- Thiess Contractors Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Finance - Indonesia
- Kumho Petrochemical, South Korea
- Vedanta Resources Plc - India
- Borneo Indobara - Indonesia
- Wilmar Investment Holdings
- Bahari Cakrawala Sebuku - Indonesia
- Orica Australia Pty. Ltd.
- Port Waratah Coal Services - Australia
- Siam City Cement PLC, Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Heidelberg Cement - Germany
- Coastal Gujarat Power Limited - India
- PTC India Limited - India
- Ministry of Transport, Egypt
- Aditya Birla Group - India
- Mercuria Energy - Indonesia
- Agrawal Coal Company - India
- McConnell Dowell - Australia
- Chettinad Cement Corporation Ltd - India
- Marubeni Corporation - India
- Medco Energi Mining Internasional
- GAC Shipping (India) Pvt Ltd
- Deloitte Consulting - India
- Trasteel International SA, Italy
- Gujarat Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Parry Sugars Refinery, India
- Chamber of Mines of South Africa
- The University of Queensland
- Eastern Coal Council - USA
- Simpson Spence & Young - Indonesia
- Metalloyd Limited - United Kingdom
- Goldman Sachs - Singapore
- Australian Commodity Traders Exchange
- Bhoruka Overseas - Indonesia
- Bayan Resources Tbk. - Indonesia
- Standard Chartered Bank - UAE
- Barasentosa Lestari - Indonesia
- Indian Energy Exchange, India
- Kepco SPC Power Corporation, Philippines
- Star Paper Mills Limited - India
- Larsen & Toubro Limited - India
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Intertek Mineral Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coalindo Energy - Indonesia
- Bhatia International Limited - India
- Rio Tinto Coal - Australia
- Australian Coal Association
- Jindal Steel & Power Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Energy Development Corp, Philippines
- San Jose City I Power Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- Africa Commodities Group - South Africa
- Central Electricity Authority - India
- Ind-Barath Power Infra Limited - India
- Carbofer General Trading SA - India
- Baramulti Group, Indonesia
- Globalindo Alam Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Bukit Baiduri Energy - Indonesia
- Riau Bara Harum - Indonesia
- PowerSource Philippines DevCo
- CIMB Investment Bank - Malaysia
- Semirara Mining Corp, Philippines
- Attock Cement Pakistan Limited
- Bhushan Steel Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Xindia Steels Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Sical Logistics Limited - India
- Indian Oil Corporation Limited
- Gujarat Mineral Development Corp Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Ceylon Electricity Board - Sri Lanka
- London Commodity Brokers - England
- International Coal Ventures Pvt Ltd - India
- Makarim & Taira - Indonesia
- Aboitiz Power Corporation - Philippines
- Sindya Power Generating Company Private Ltd
- Kobexindo Tractors - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Holcim Trading Pte Ltd - Singapore
- Bukit Makmur.PT - Indonesia
- Savvy Resources Ltd - HongKong
- ICICI Bank Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ASAPP Information Group - India
- Formosa Plastics Group - Taiwan
- Malabar Cements Ltd - India
- Oldendorff Carriers - Singapore
- Eastern Energy - Thailand
- Indonesian Coal Mining Association
- OPG Power Generation Pvt Ltd - India
- Madhucon Powers Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Pipit Mutiara Jaya. PT, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Dalmia Cement Bharat India
- Wood Mackenzie - Singapore
- Timah Investasi Mineral - Indoneisa
- Manunggal Multi Energi - Indonesia
- Essar Steel Hazira Ltd - India
- Sakthi Sugars Limited - India
- Miang Besar Coal Terminal - Indonesia
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Bangladesh Power Developement Board
- The State Trading Corporation of India Ltd
- Billiton Holdings Pty Ltd - Australia
- IEA Clean Coal Centre - UK
- PetroVietnam Power Coal Import and Supply Company
- Maheswari Brothers Coal Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Mintek Dendrill Indonesia
- Georgia Ports Authority, United States
- Kartika Selabumi Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- European Bulk Services B.V. - Netherlands
- Economic Council, Georgia
- Siam City Cement - Thailand
- Global Business Power Corporation, Philippines
- Mjunction Services Limited - India
- Straits Asia Resources Limited - Singapore
- Toyota Tsusho Corporation, Japan
- Thai Mozambique Logistica
- Cement Manufacturers Association - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- India Bulls Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Electricity Generating Authority of Thailand
- Tamil Nadu electricity Board
- Price Waterhouse Coopers - Russia
- Bulk Trading Sa - Switzerland
- Energy Link Ltd, New Zealand
- Gujarat Sidhee Cement - India
- Indogreen Group - Indonesia
- Orica Mining Services - Indonesia
- Banpu Public Company Limited - Thailand
- Latin American Coal - Colombia
- Binh Thuan Hamico - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Tata Chemicals Ltd - India
- Power Finance Corporation Ltd., India
- White Energy Company Limited
- AsiaOL BioFuels Corp., Philippines
- SN Aboitiz Power Inc, Philippines
- Minerals Council of Australia
- Coal and Oil Company - UAE
- Bharathi Cement Corporation - India
- Sarangani Energy Corporation, Philippines
- MS Steel International - UAE
- GVK Power & Infra Limited - India
- Interocean Group of Companies - India
- SMC Global Power, Philippines
- Anglo American - United Kingdom
- Petron Corporation, Philippines
- Ministry of Mines - Canada
- GMR Energy Limited - India
- Grasim Industreis Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Ambuja Cements Ltd - India
- Renaissance Capital - South Africa
- Romanian Commodities Exchange
- Independent Power Producers Association of India
- Central Java Power - Indonesia
- The Treasury - Australian Government
- Posco Energy - South Korea
- Alfred C Toepfer International GmbH - Germany
- Planning Commission, India
- Kideco Jaya Agung - Indonesia
- Global Green Power PLC Corporation, Philippines
- Commonwealth Bank - Australia
- Asmin Koalindo Tuhup - Indonesia
- South Luzon Thermal Energy Corporation
- Edison Trading Spa - Italy
- Mercator Lines Limited - India
- PNOC Exploration Corporation - Philippines
- SMG Consultants - Indonesia
- CNBM International Corporation - China
- Lanco Infratech Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Singapore Mercantile Exchange
- Indo Tambangraya Megah - Indonesia
- Meenaskhi Energy Private Limited - India
- TeaM Sual Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Parliament of New Zealand
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