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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, 22 May 15
U.S WEEKLY COAL PRODUCTION STAYS FLAT AT 16 MMST
COALspot.com – United States the second largest coal producer in the world has produced approximately totaled an estimated 16.0 million short ...
Thursday, 21 May 15
PORT OF NEWCASTLE ACHIEVED ITS BEST EVER TOTAL COAL EXPORT TURNOVER OF 159 MILLION TONS IN 2014
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port, has shipped $900 million ...
Thursday, 21 May 15
ATLANTIC PANAMAX MARKET STARTED TO IMPROVE SLOWLY - INTERMODAL
COALspot.com: The Dry Bulk market closed off the week on the green last week, purely on the back of improved Capesize performance, while the rest o ...
Wednesday, 20 May 15
LOWER PRICES SEEN IN NEWBUILDING MARKET ON LOW DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Cash-rich ship owners, or at least, owners with substantial access to financing will be among the prime candidates, who will reap the benefits of t ...
Wednesday, 20 May 15
TANKER MARKET INSIGHT - JOHN N. COTZIAS
Since Early October 2014 the tanker market has been experiencing a very positive momentum and has continued its strong performance so far in 2015. ...
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- Karbindo Abesyapradhi - Indoneisa
- Borneo Indobara - Indonesia
- Commonwealth Bank - Australia
- Kaltim Prima Coal - Indonesia
- Bangladesh Power Developement Board
- CNBM International Corporation - China
- Coal and Oil Company - UAE
- Timah Investasi Mineral - Indoneisa
- Iligan Light & Power Inc, Philippines
- VISA Power Limited - India
- Indonesian Coal Mining Association
- Orica Mining Services - Indonesia
- Sree Jayajothi Cements Limited - India
- Dalmia Cement Bharat India
- SMG Consultants - Indonesia
- Toyota Tsusho Corporation, Japan
- Ind-Barath Power Infra Limited - India
- Medco Energi Mining Internasional
- Rashtriya Ispat Nigam Limited - India
- SN Aboitiz Power Inc, Philippines
- Bulk Trading Sa - Switzerland
- GMR Energy Limited - India
- Ministry of Transport, Egypt
- Uttam Galva Steels Limited - India
- Kapuas Tunggal Persada - Indonesia
- Wood Mackenzie - Singapore
- Indian Energy Exchange, India
- Mjunction Services Limited - India
- India Bulls Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Thai Mozambique Logistica
- Binh Thuan Hamico - Vietnam
- Posco Energy - South Korea
- Power Finance Corporation Ltd., India
- Edison Trading Spa - Italy
- Global Business Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Kumho Petrochemical, South Korea
- Parry Sugars Refinery, India
- Bhoruka Overseas - Indonesia
- Ministry of Mines - Canada
- Bukit Asam (Persero) Tbk - Indonesia
- Aboitiz Power Corporation - Philippines
- Makarim & Taira - Indonesia
- GAC Shipping (India) Pvt Ltd
- Sojitz Corporation - Japan
- Bahari Cakrawala Sebuku - Indonesia
- The State Trading Corporation of India Ltd
- Bhatia International Limited - India
- Meenaskhi Energy Private Limited - India
- Energy Link Ltd, New Zealand
- Samtan Co., Ltd - South Korea
- Marubeni Corporation - India
- Bhushan Steel Limited - India
- Indogreen Group - Indonesia
- Agrawal Coal Company - India
- Rio Tinto Coal - Australia
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Finance - Indonesia
- Trasteel International SA, Italy
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Gujarat Mineral Development Corp Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Australian Coal Association
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- European Bulk Services B.V. - Netherlands
- Semirara Mining Corp, Philippines
- Jaiprakash Power Ventures ltd
- Bukit Baiduri Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Economic Council, Georgia
- Pendopo Energi Batubara - Indonesia
- Deloitte Consulting - India
- Kalimantan Lumbung Energi - Indonesia
- Australian Commodity Traders Exchange
- Kobexindo Tractors - Indoneisa
- Orica Australia Pty. Ltd.
- Billiton Holdings Pty Ltd - Australia
- Chettinad Cement Corporation Ltd - India
- Therma Luzon, Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- MS Steel International - UAE
- ASAPP Information Group - India
- Petron Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- PTC India Limited - India
- Krishnapatnam Port Company Ltd. - India
- Merrill Lynch Commodities Europe
- Latin American Coal - Colombia
- Intertek Mineral Services - Indonesia
- Metalloyd Limited - United Kingdom
- Oldendorff Carriers - Singapore
- Mercuria Energy - Indonesia
- Coalindo Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Indo Tambangraya Megah - Indonesia
- Aditya Birla Group - India
- Manunggal Multi Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- TNB Fuel Sdn Bhd - Malaysia
- Price Waterhouse Coopers - Russia
- Globalindo Alam Lestari - Indonesia
- Tata Chemicals Ltd - India
- Carbofer General Trading SA - India
- Siam City Cement PLC, Thailand
- Gujarat Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- Electricity Generating Authority of Thailand
- OPG Power Generation Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Georgia Ports Authority, United States
- AsiaOL BioFuels Corp., Philippines
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- Salva Resources Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Energy Development Corp, Philippines
- Romanian Commodities Exchange
- International Coal Ventures Pvt Ltd - India
- SMC Global Power, Philippines
- Bharathi Cement Corporation - India
- Semirara Mining and Power Corporation, Philippines
- Wilmar Investment Holdings
- New Zealand Coal & Carbon
- Vedanta Resources Plc - India
- Kideco Jaya Agung - Indonesia
- Mintek Dendrill Indonesia
- Gujarat Sidhee Cement - India
- South Luzon Thermal Energy Corporation
- Eastern Energy - Thailand
- Xindia Steels Limited - India
- Standard Chartered Bank - UAE
- GVK Power & Infra Limited - India
- Planning Commission, India
- TeaM Sual Corporation - Philippines
- Parliament of New Zealand
- Port Waratah Coal Services - Australia
- Kartika Selabumi Mining - Indonesia
- Directorate Of Revenue Intelligence - India
- Central Java Power - Indonesia
- The University of Queensland
- Bukit Makmur.PT - Indonesia
- Ambuja Cements Ltd - India
- Eastern Coal Council - USA
- Minerals Council of Australia
- McConnell Dowell - Australia
- Interocean Group of Companies - India
- Directorate General of MIneral and Coal - Indonesia
- Global Coal Blending Company Limited - Australia
- Kohat Cement Company Ltd. - Pakistan
- Bayan Resources Tbk. - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The Treasury - Australian Government
- Simpson Spence & Young - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- IHS Mccloskey Coal Group - USA
- Sindya Power Generating Company Private Ltd
- GN Power Mariveles Coal Plant, Philippines
- Star Paper Mills Limited - India
- Videocon Industries ltd - India
- Heidelberg Cement - Germany
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- Cement Manufacturers Association - India
- London Commodity Brokers - England
- Chamber of Mines of South Africa
- Cigading International Bulk Terminal - Indonesia
- Central Electricity Authority - India
- Riau Bara Harum - Indonesia
- Larsen & Toubro Limited - India
- Indian Oil Corporation Limited
- ICICI Bank Limited - India
- Attock Cement Pakistan Limited
- Lanco Infratech Ltd - India
- Indika Energy - Indonesia
- Altura Mining Limited, Indonesia
- Tamil Nadu electricity Board
- Savvy Resources Ltd - HongKong
- Barasentosa Lestari - Indonesia
- Sical Logistics Limited - India
- Banpu Public Company Limited - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement - Thailand
- Jindal Steel & Power Ltd - India
- Anglo American - United Kingdom
- Malabar Cements Ltd - India
- Thiess Contractors Indonesia
- Singapore Mercantile Exchange
- Straits Asia Resources Limited - Singapore
- Alfred C Toepfer International GmbH - Germany
- Grasim Industreis Ltd - India
- Meralco Power Generation, Philippines
- Mercator Lines Limited - India
- PowerSource Philippines DevCo
- Renaissance Capital - South Africa
- Sakthi Sugars Limited - India
- Electricity Authority, New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sarangani Energy Corporation, Philippines
- IEA Clean Coal Centre - UK
- PNOC Exploration Corporation - Philippines
- CIMB Investment Bank - Malaysia
- White Energy Company Limited
- Vizag Seaport Private Limited - India
- Baramulti Group, Indonesia
- Madhucon Powers Ltd - India
- Neyveli Lignite Corporation Ltd, - India
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