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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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- Indika Energy - Indonesia
- Marubeni Corporation - India
- GAC Shipping (India) Pvt Ltd
- GMR Energy Limited - India
- San Jose City I Power Corp, Philippines
- Meralco Power Generation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- Agrawal Coal Company - India
- Posco Energy - South Korea
- The State Trading Corporation of India Ltd
- Thai Mozambique Logistica
- ASAPP Information Group - India
- Indian Oil Corporation Limited
- Singapore Mercantile Exchange
- Holcim Trading Pte Ltd - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Aboitiz Power Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Deloitte Consulting - India
- Independent Power Producers Association of India
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- Bhushan Steel Limited - India
- Electricity Authority, New Zealand
- Economic Council, Georgia
- Lanco Infratech Ltd - India
- Bhoruka Overseas - Indonesia
- Makarim & Taira - Indonesia
- Bukit Makmur.PT - Indonesia
- Parry Sugars Refinery, India
- Anglo American - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Romanian Commodities Exchange
- Wilmar Investment Holdings
- Sarangani Energy Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Rashtriya Ispat Nigam Limited - India
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- Heidelberg Cement - Germany
- Jorong Barutama Greston.PT - Indonesia
- Aditya Birla Group - India
- Bhatia International Limited - India
- Rio Tinto Coal - Australia
- Global Business Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Thiess Contractors Indonesia
- Energy Link Ltd, New Zealand
- AsiaOL BioFuels Corp., Philippines
- IHS Mccloskey Coal Group - USA
- Australian Commodity Traders Exchange
- Mjunction Services Limited - India
- Tamil Nadu electricity Board
- Grasim Industreis Ltd - India
- Coastal Gujarat Power Limited - India
- Jindal Steel & Power Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Baiduri Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Miang Besar Coal Terminal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vedanta Resources Plc - India
- Cement Manufacturers Association - India
- CIMB Investment Bank - Malaysia
- Mercator Lines Limited - India
- Attock Cement Pakistan Limited
- Antam Resourcindo - Indonesia
- Standard Chartered Bank - UAE
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- Bahari Cakrawala Sebuku - Indonesia
- CNBM International Corporation - China
- TeaM Sual Corporation - Philippines
- Star Paper Mills Limited - India
- Bulk Trading Sa - Switzerland
- Uttam Galva Steels Limited - India
- PowerSource Philippines DevCo
- Port Waratah Coal Services - Australia
- Medco Energi Mining Internasional
- Tata Chemicals Ltd - India
- Krishnapatnam Port Company Ltd. - India
- White Energy Company Limited
- Sical Logistics Limited - India
- Latin American Coal - Colombia
- McConnell Dowell - Australia
- Iligan Light & Power Inc, Philippines
- Oldendorff Carriers - Singapore
- Wood Mackenzie - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Savvy Resources Ltd - HongKong
- London Commodity Brokers - England
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Malabar Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Barasentosa Lestari - Indonesia
- Kartika Selabumi Mining - Indonesia
- Kepco SPC Power Corporation, Philippines
- Larsen & Toubro Limited - India
- Eastern Coal Council - USA
- Vijayanagar Sugar Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Central Java Power - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Maheswari Brothers Coal Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- India Bulls Power Limited - India
- Renaissance Capital - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- SMC Global Power, Philippines
- Essar Steel Hazira Ltd - India
- SMG Consultants - Indonesia
- Indian Energy Exchange, India
- The Treasury - Australian Government
- Metalloyd Limited - United Kingdom
- Ministry of Transport, Egypt
- Videocon Industries ltd - India
- Kaltim Prima Coal - Indonesia
- Africa Commodities Group - South Africa
- European Bulk Services B.V. - Netherlands
- Central Electricity Authority - India
- Toyota Tsusho Corporation, Japan
- PNOC Exploration Corporation - Philippines
- Mercuria Energy - Indonesia
- IEA Clean Coal Centre - UK
- New Zealand Coal & Carbon
- Xindia Steels Limited - India
- Therma Luzon, Inc, Philippines
- Gujarat Sidhee Cement - India
- Directorate Of Revenue Intelligence - India
- Dalmia Cement Bharat India
- Ceylon Electricity Board - Sri Lanka
- Edison Trading Spa - Italy
- Sree Jayajothi Cements Limited - India
- Trasteel International SA, Italy
- South Luzon Thermal Energy Corporation
- Indonesian Coal Mining Association
- Ambuja Cements Ltd - India
- International Coal Ventures Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Bharathi Cement Corporation - India
- Baramulti Group, Indonesia
- Ind-Barath Power Infra Limited - India
- Australian Coal Association
- Chettinad Cement Corporation Ltd - India
- Semirara Mining Corp, Philippines
- GVK Power & Infra Limited - India
- LBH Netherlands Bv - Netherlands
- MS Steel International - UAE
- Indo Tambangraya Megah - Indonesia
- Interocean Group of Companies - India
- Minerals Council of Australia
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- Karaikal Port Pvt Ltd - India
- VISA Power Limited - India
- Goldman Sachs - Singapore
- Parliament of New Zealand
- ICICI Bank Limited - India
- Orica Mining Services - Indonesia
- Kideco Jaya Agung - Indonesia
- Bangladesh Power Developement Board
- Petron Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Global Coal Blending Company Limited - Australia
- Straits Asia Resources Limited - Singapore
- Globalindo Alam Lestari - Indonesia
- Sojitz Corporation - Japan
- Salva Resources Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- PTC India Limited - India
- Sinarmas Energy and Mining - Indonesia
- Eastern Energy - Thailand
- Planning Commission, India
- Merrill Lynch Commodities Europe
- SN Aboitiz Power Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Borneo Indobara - Indonesia
- Orica Australia Pty. Ltd.
- Energy Development Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Georgia Ports Authority, United States
- Ministry of Mines - Canada
- Binh Thuan Hamico - Vietnam
- Samtan Co., Ltd - South Korea
- Electricity Generating Authority of Thailand
- Meenaskhi Energy Private Limited - India
- Banpu Public Company Limited - Thailand
- Semirara Mining and Power Corporation, Philippines
- Ministry of Finance - Indonesia
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Kumho Petrochemical, South Korea
- The University of Queensland
- Simpson Spence & Young - Indonesia
- Coal and Oil Company - UAE
- Altura Mining Limited, Indonesia
- Chamber of Mines of South Africa
- Mintek Dendrill Indonesia
- Jaiprakash Power Ventures ltd
- Power Finance Corporation Ltd., India
- Siam City Cement - Thailand
- OPG Power Generation Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
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