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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, 29 May 15
SOUTH KOREAN STATE-OWNED UTILITY KOREA MIDLAND POWER INVITES BIDS FOR 780K MT OF COAL FOR H2' 15
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) issued an new tender to buy total 780K Metric Tons (MT) of HCV and LCV ...
Thursday, 28 May 15
TIMEBAR FOR DEMURRAGE CLAIMS - SKULD
KNOWLEDGE TO ELEVATE
English law has traditionally had a strict approach to contractually agreed time bars between commercial parties as well ...
Wednesday, 27 May 15
MARKET INSIGHT - TIMOS PAPADIMITRIOU
Earlier in the year I looked at how the market was reacting to the prolonged fall of the price of oil. Back then it was still unclear if the fallin ...
Tuesday, 26 May 15
HOW HAS THE DROP IN OIL PRICES AFFECTED OTHER COMMODITIES? - CLYDE & CO
KNOWLEDGE TO ELEVATE
The effects of the dramatic drop in the price of both Ice March Brent, the international oil marker, and its US counterpa ...
Tuesday, 26 May 15
MINING ASSOCIATION PERHAPI PUSHES FOR 35,000 MEGAWATT ELECTRICITY PROGRAM - JG
The Indonesian Mining Professionals Association, or Perhapi, has announced its support for a 35,000-megawatt national electricity program, saying i ...
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- Karaikal Port Pvt Ltd - India
- Xindia Steels Limited - India
- Thai Mozambique Logistica
- Formosa Plastics Group - Taiwan
- Altura Mining Limited, Indonesia
- Bhatia International Limited - India
- Sakthi Sugars Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Parry Sugars Refinery, India
- International Coal Ventures Pvt Ltd - India
- Meralco Power Generation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Central Electricity Authority - India
- Miang Besar Coal Terminal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Borneo Indobara - Indonesia
- Barasentosa Lestari - Indonesia
- Posco Energy - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- Heidelberg Cement - Germany
- Timah Investasi Mineral - Indoneisa
- Meenaskhi Energy Private Limited - India
- PTC India Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Sidhee Cement - India
- Parliament of New Zealand
- VISA Power Limited - India
- Mjunction Services Limited - India
- Romanian Commodities Exchange
- Renaissance Capital - South Africa
- Maharashtra Electricity Regulatory Commission - India
- GAC Shipping (India) Pvt Ltd
- Siam City Cement PLC, Thailand
- Interocean Group of Companies - India
- Binh Thuan Hamico - Vietnam
- Orica Mining Services - Indonesia
- Therma Luzon, Inc, Philippines
- Petron Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Mercuria Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Uttam Galva Steels Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Aditya Birla Group - India
- PNOC Exploration Corporation - Philippines
- SMC Global Power, Philippines
- Simpson Spence & Young - Indonesia
- New Zealand Coal & Carbon
- Orica Australia Pty. Ltd.
- Minerals Council of Australia
- Indo Tambangraya Megah - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bhushan Steel Limited - India
- Iligan Light & Power Inc, Philippines
- India Bulls Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Indika Energy - Indonesia
- Global Business Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Africa Commodities Group - South Africa
- Electricity Authority, New Zealand
- The University of Queensland
- Leighton Contractors Pty Ltd - Australia
- Price Waterhouse Coopers - Russia
- Global Green Power PLC Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Pendopo Energi Batubara - Indonesia
- SN Aboitiz Power Inc, Philippines
- Georgia Ports Authority, United States
- Singapore Mercantile Exchange
- Tata Chemicals Ltd - India
- Latin American Coal - Colombia
- Aboitiz Power Corporation - Philippines
- Ambuja Cements Ltd - India
- Eastern Coal Council - USA
- Anglo American - United Kingdom
- Vizag Seaport Private Limited - India
- PowerSource Philippines DevCo
- Ind-Barath Power Infra Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Wood Mackenzie - Singapore
- Deloitte Consulting - India
- Rio Tinto Coal - Australia
- Chettinad Cement Corporation Ltd - India
- Kaltim Prima Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- GMR Energy Limited - India
- Chamber of Mines of South Africa
- Thiess Contractors Indonesia
- Videocon Industries ltd - India
- Directorate Of Revenue Intelligence - India
- Sarangani Energy Corporation, Philippines
- Baramulti Group, Indonesia
- Power Finance Corporation Ltd., India
- Planning Commission, India
- Tamil Nadu electricity Board
- ASAPP Information Group - India
- Malabar Cements Ltd - India
- Independent Power Producers Association of India
- Mintek Dendrill Indonesia
- Siam City Cement - Thailand
- Oldendorff Carriers - Singapore
- Bhoruka Overseas - Indonesia
- Jindal Steel & Power Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kepco SPC Power Corporation, Philippines
- Indian Oil Corporation Limited
- Rashtriya Ispat Nigam Limited - India
- South Luzon Thermal Energy Corporation
- Eastern Energy - Thailand
- Sindya Power Generating Company Private Ltd
- PetroVietnam Power Coal Import and Supply Company
- Bayan Resources Tbk. - Indonesia
- Riau Bara Harum - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Semirara Mining Corp, Philippines
- Larsen & Toubro Limited - India
- Toyota Tsusho Corporation, Japan
- Asmin Koalindo Tuhup - Indonesia
- Jaiprakash Power Ventures ltd
- Salva Resources Pvt Ltd - India
- Energy Development Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Makarim & Taira - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Intertek Mineral Services - Indonesia
- Madhucon Powers Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- European Bulk Services B.V. - Netherlands
- Petrochimia International Co. Ltd.- Taiwan
- Kohat Cement Company Ltd. - Pakistan
- Ceylon Electricity Board - Sri Lanka
- Metalloyd Limited - United Kingdom
- Ministry of Transport, Egypt
- Dalmia Cement Bharat India
- The State Trading Corporation of India Ltd
- Electricity Generating Authority of Thailand
- London Commodity Brokers - England
- Australian Coal Association
- Bukit Baiduri Energy - Indonesia
- Standard Chartered Bank - UAE
- Bukit Makmur.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Straits Asia Resources Limited - Singapore
- Kumho Petrochemical, South Korea
- Essar Steel Hazira Ltd - India
- Antam Resourcindo - Indonesia
- Edison Trading Spa - Italy
- Merrill Lynch Commodities Europe
- Energy Link Ltd, New Zealand
- Wilmar Investment Holdings
- Sical Logistics Limited - India
- Ministry of Mines - Canada
- Mercator Lines Limited - India
- OPG Power Generation Pvt Ltd - India
- The Treasury - Australian Government
- Lanco Infratech Ltd - India
- Samtan Co., Ltd - South Korea
- Star Paper Mills Limited - India
- ICICI Bank Limited - India
- Australian Commodity Traders Exchange
- San Jose City I Power Corp, Philippines
- Bulk Trading Sa - Switzerland
- Port Waratah Coal Services - Australia
- CNBM International Corporation - China
- GVK Power & Infra Limited - India
- Bangladesh Power Developement Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Central Java Power - Indonesia
- McConnell Dowell - Australia
- Medco Energi Mining Internasional
- Coastal Gujarat Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- Cigading International Bulk Terminal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Goldman Sachs - Singapore
- Indonesian Coal Mining Association
- Manunggal Multi Energi - Indonesia
- Agrawal Coal Company - India
- Carbofer General Trading SA - India
- Marubeni Corporation - India
- Sree Jayajothi Cements Limited - India
- Kapuas Tunggal Persada - Indonesia
- IHS Mccloskey Coal Group - USA
- Indian Energy Exchange, India
- Ministry of Finance - Indonesia
- Sojitz Corporation - Japan
- Semirara Mining and Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Coal and Oil Company - UAE
- Attock Cement Pakistan Limited
- SMG Consultants - Indonesia
- Global Coal Blending Company Limited - Australia
- Cement Manufacturers Association - India
- MS Steel International - UAE
- Bharathi Cement Corporation - India
- White Energy Company Limited
- Grasim Industreis Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Coalindo Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Indogreen Group - Indonesia
- CIMB Investment Bank - Malaysia
- Alfred C Toepfer International GmbH - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Trasteel International SA, Italy
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- Economic Council, Georgia
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