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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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Thursday, 04 June 15
DRY BULK MARKET FAILED TO OFFER ANY POSITIVE SURPRISES - INTERMODAL
COALspot.com: This has been another week that the Dry Bulk market failed to offer any positive surprises, while the BDI, which is still faring belo ...
Wednesday, 03 June 15
SHIPPING MARKET INSIGHT - VASSILIS LOGOTHETIS
For some time now the Dry Bulk market has been severely affected by China’s slowing GDP growth rate that occurs in the background of increase ...
Tuesday, 02 June 15
FOB INDONESIA COAL Q3 SWAP ADVANCED 1.73% MONTH OVER MONTH
COALspot.com: Indonesian coal swap for delivery Q3 2015 gains month on month and lost week over week, this past week.
The Q3 swap was climbed ...
Tuesday, 02 June 15
FOB RICHARDS BAY COAL SWAPS; Q3'15 CLOSED HIGHER THAN Q1'16
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q3' 2015 up month over month and week over week.
The Q3 swap was up US$ 0.80 (1 ...
Monday, 01 June 15
35,000 MW POWER PLANTS TO BOOST COAL CONSUMPTION - JP
The government’s program to develop 35,000 megawatt (MW) power plants will increase domestic coal consumption, which currently stands at arou ...
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- Ind-Barath Power Infra Limited - India
- Price Waterhouse Coopers - Russia
- Edison Trading Spa - Italy
- Electricity Generating Authority of Thailand
- Grasim Industreis Ltd - India
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- CNBM International Corporation - China
- CIMB Investment Bank - Malaysia
- Trasteel International SA, Italy
- GAC Shipping (India) Pvt Ltd
- Samtan Co., Ltd - South Korea
- Anglo American - United Kingdom
- London Commodity Brokers - England
- Port Waratah Coal Services - Australia
- Tamil Nadu electricity Board
- Mercuria Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Marubeni Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Parry Sugars Refinery, India
- Energy Link Ltd, New Zealand
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Carbofer General Trading SA - India
- Singapore Mercantile Exchange
- Cement Manufacturers Association - India
- Sree Jayajothi Cements Limited - India
- Indian Oil Corporation Limited
- Timah Investasi Mineral - Indoneisa
- Videocon Industries ltd - India
- Antam Resourcindo - Indonesia
- PNOC Exploration Corporation - Philippines
- Rio Tinto Coal - Australia
- Bhoruka Overseas - Indonesia
- Energy Development Corp, Philippines
- Indika Energy - Indonesia
- Madhucon Powers Ltd - India
- Karaikal Port Pvt Ltd - India
- Interocean Group of Companies - India
- Neyveli Lignite Corporation Ltd, - India
- Commonwealth Bank - Australia
- Semirara Mining Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Bukit Makmur.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Barasentosa Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Attock Cement Pakistan Limited
- SN Aboitiz Power Inc, Philippines
- Xindia Steels Limited - India
- Medco Energi Mining Internasional
- Binh Thuan Hamico - Vietnam
- Manunggal Multi Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ministry of Transport, Egypt
- Dalmia Cement Bharat India
- Meenaskhi Energy Private Limited - India
- Bhatia International Limited - India
- Coalindo Energy - Indonesia
- Agrawal Coal Company - India
- Latin American Coal - Colombia
- Global Green Power PLC Corporation, Philippines
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- Kepco SPC Power Corporation, Philippines
- Heidelberg Cement - Germany
- Chettinad Cement Corporation Ltd - India
- Bangladesh Power Developement Board
- Economic Council, Georgia
- Directorate General of MIneral and Coal - Indonesia
- Posco Energy - South Korea
- Orica Mining Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chamber of Mines of South Africa
- Altura Mining Limited, Indonesia
- LBH Netherlands Bv - Netherlands
- Bukit Baiduri Energy - Indonesia
- Vedanta Resources Plc - India
- Ministry of Finance - Indonesia
- Larsen & Toubro Limited - India
- Parliament of New Zealand
- Formosa Plastics Group - Taiwan
- Orica Australia Pty. Ltd.
- Kartika Selabumi Mining - Indonesia
- Sojitz Corporation - Japan
- GVK Power & Infra Limited - India
- Thiess Contractors Indonesia
- Salva Resources Pvt Ltd - India
- Standard Chartered Bank - UAE
- Planning Commission, India
- Tata Chemicals Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- South Luzon Thermal Energy Corporation
- McConnell Dowell - Australia
- Sakthi Sugars Limited - India
- Ambuja Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Mines - Canada
- OPG Power Generation Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Meralco Power Generation, Philippines
- Makarim & Taira - Indonesia
- Toyota Tsusho Corporation, Japan
- Baramulti Group, Indonesia
- Globalindo Alam Lestari - Indonesia
- Aditya Birla Group - India
- The Treasury - Australian Government
- SMG Consultants - Indonesia
- ICICI Bank Limited - India
- Essar Steel Hazira Ltd - India
- Petron Corporation, Philippines
- Borneo Indobara - Indonesia
- IEA Clean Coal Centre - UK
- Sindya Power Generating Company Private Ltd
- Minerals Council of Australia
- Indogreen Group - Indonesia
- Central Electricity Authority - India
- Central Java Power - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Coastal Gujarat Power Limited - India
- Mintek Dendrill Indonesia
- PowerSource Philippines DevCo
- Georgia Ports Authority, United States
- Bank of Tokyo Mitsubishi UFJ Ltd
- MS Steel International - UAE
- Australian Coal Association
- Cigading International Bulk Terminal - Indonesia
- Vizag Seaport Private Limited - India
- VISA Power Limited - India
- Renaissance Capital - South Africa
- Merrill Lynch Commodities Europe
- Semirara Mining and Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Kapuas Tunggal Persada - Indonesia
- Kumho Petrochemical, South Korea
- San Jose City I Power Corp, Philippines
- Leighton Contractors Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Kaltim Prima Coal - Indonesia
- Mjunction Services Limited - India
- Global Coal Blending Company Limited - Australia
- Aboitiz Power Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Bayan Resources Tbk. - Indonesia
- White Energy Company Limited
- Kideco Jaya Agung - Indonesia
- International Coal Ventures Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Bharathi Cement Corporation - India
- Jorong Barutama Greston.PT - Indonesia
- Simpson Spence & Young - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- IHS Mccloskey Coal Group - USA
- ASAPP Information Group - India
- Independent Power Producers Association of India
- Sarangani Energy Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Eastern Energy - Thailand
- Gujarat Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Miang Besar Coal Terminal - Indonesia
- European Bulk Services B.V. - Netherlands
- Wood Mackenzie - Singapore
- Krishnapatnam Port Company Ltd. - India
- PTC India Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Lanco Infratech Ltd - India
- Star Paper Mills Limited - India
- Malabar Cements Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Uttam Galva Steels Limited - India
- Intertek Mineral Services - Indonesia
- Eastern Coal Council - USA
- Sinarmas Energy and Mining - Indonesia
- The University of Queensland
- India Bulls Power Limited - India
- Coal and Oil Company - UAE
- Wilmar Investment Holdings
- Indonesian Coal Mining Association
- The State Trading Corporation of India Ltd
- Gujarat Sidhee Cement - India
- Indian Energy Exchange, India
- Kobexindo Tractors - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- Maharashtra Electricity Regulatory Commission - India
- Mercator Lines Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Africa Commodities Group - South Africa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Deloitte Consulting - India
- Iligan Light & Power Inc, Philippines
- SMC Global Power, Philippines
- Romanian Commodities Exchange
- Savvy Resources Ltd - HongKong
- GMR Energy Limited - India
- Straits Asia Resources Limited - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- New Zealand Coal & Carbon
- Power Finance Corporation Ltd., India
- Bhushan Steel Limited - India
- Riau Bara Harum - Indonesia
- Sical Logistics Limited - India
- Oldendorff Carriers - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Australian Commodity Traders Exchange
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