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