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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, 10 April 15
DRY BULK MARKET'S DOWNFALL ALSO OFFER INVESTMENT BARGAINS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Dry bulk market rates have fallen to historical lows over the past few weeks, with no clear path of recovery, at least in the near term. As such, m ...
Thursday, 09 April 15
CAPESIZE: RATES ARE STILL DISAPPOINTING - FEARNLEYS
Handy
The handy market had a stronger sentiment before the Easter holidays, but have as the bigger panamaxes seen a softening tendency this week. ...
Wednesday, 08 April 15
DRY BULK MARKET SEEMS UNABLE TO CATCH A BREAK - INTERMODAL
COALspot.com: The Dry Bulk market seems unable to catch a break these days.
According to Intermodal, following the market stabilization that p ...
Wednesday, 08 April 15
CHINA BURNS HALF OF THE WORLD'S COAL - CHRISTOPHER T. WHITTY
Intermodal Weekly Market Update
China is the world's largest consumer of coal, using more coal each year than the United States, the Europ ...
Tuesday, 07 April 15
SUB-BIT FOB INDONESIA COAL SWAP KEEPS DROPPING; DROPPED 2% W-W
COALspot.com: Indonesian coal swap for delivery Q2 2015 declined month on month and week over week.
The Q2 swap was declined US$ 2.44 (5.14%) ...
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- Indika Energy - Indonesia
- Minerals Council of Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Attock Cement Pakistan Limited
- Global Coal Blending Company Limited - Australia
- Planning Commission, India
- Ind-Barath Power Infra Limited - India
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- Kumho Petrochemical, South Korea
- Carbofer General Trading SA - India
- GN Power Mariveles Coal Plant, Philippines
- Energy Development Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- Chettinad Cement Corporation Ltd - India
- Ambuja Cements Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Finance - Indonesia
- South Luzon Thermal Energy Corporation
- Kartika Selabumi Mining - Indonesia
- San Jose City I Power Corp, Philippines
- Renaissance Capital - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Borneo Indobara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Mercuria Energy - Indonesia
- Electricity Generating Authority of Thailand
- Riau Bara Harum - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Electricity Authority, New Zealand
- IEA Clean Coal Centre - UK
- Videocon Industries ltd - India
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- Timah Investasi Mineral - Indoneisa
- Economic Council, Georgia
- Cement Manufacturers Association - India
- PTC India Limited - India
- Wood Mackenzie - Singapore
- Goldman Sachs - Singapore
- Petron Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Kohat Cement Company Ltd. - Pakistan
- TNB Fuel Sdn Bhd - Malaysia
- Georgia Ports Authority, United States
- Mjunction Services Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Mintek Dendrill Indonesia
- Barasentosa Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Indonesian Coal Mining Association
- Meenaskhi Energy Private Limited - India
- Central Java Power - Indonesia
- Baramulti Group, Indonesia
- Tamil Nadu electricity Board
- Marubeni Corporation - India
- GAC Shipping (India) Pvt Ltd
- Alfred C Toepfer International GmbH - Germany
- Power Finance Corporation Ltd., India
- Sakthi Sugars Limited - India
- Bayan Resources Tbk. - Indonesia
- Uttam Galva Steels Limited - India
- SMG Consultants - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- McConnell Dowell - Australia
- Gujarat Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Therma Luzon, Inc, Philippines
- Bhoruka Overseas - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Ministry of Transport, Egypt
- Banpu Public Company Limited - Thailand
- Manunggal Multi Energi - Indonesia
- Interocean Group of Companies - India
- CIMB Investment Bank - Malaysia
- Star Paper Mills Limited - India
- White Energy Company Limited
- Lanco Infratech Ltd - India
- Agrawal Coal Company - India
- ASAPP Information Group - India
- Sinarmas Energy and Mining - Indonesia
- Antam Resourcindo - Indonesia
- Miang Besar Coal Terminal - Indonesia
- New Zealand Coal & Carbon
- Vedanta Resources Plc - India
- Indogreen Group - Indonesia
- Xindia Steels Limited - India
- The State Trading Corporation of India Ltd
- Coalindo Energy - Indonesia
- Gujarat Sidhee Cement - India
- Eastern Coal Council - USA
- Aditya Birla Group - India
- Petrochimia International Co. Ltd.- Taiwan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Australian Commodity Traders Exchange
- ICICI Bank Limited - India
- Orica Australia Pty. Ltd.
- Rio Tinto Coal - Australia
- Indian Energy Exchange, India
- Energy Link Ltd, New Zealand
- Bukit Makmur.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Grasim Industreis Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coal and Oil Company - UAE
- Kideco Jaya Agung - Indonesia
- SMC Global Power, Philippines
- International Coal Ventures Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- PowerSource Philippines DevCo
- Heidelberg Cement - Germany
- Posco Energy - South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Karaikal Port Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- GMR Energy Limited - India
- Directorate Of Revenue Intelligence - India
- Parry Sugars Refinery, India
- Indo Tambangraya Megah - Indonesia
- Bharathi Cement Corporation - India
- Asmin Koalindo Tuhup - Indonesia
- Singapore Mercantile Exchange
- Bangladesh Power Developement Board
- Directorate General of MIneral and Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Semirara Mining Corp, Philippines
- London Commodity Brokers - England
- Latin American Coal - Colombia
- Dalmia Cement Bharat India
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Kepco SPC Power Corporation, Philippines
- Wilmar Investment Holdings
- Standard Chartered Bank - UAE
- Sarangani Energy Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Anglo American - United Kingdom
- Independent Power Producers Association of India
- Commonwealth Bank - Australia
- Essar Steel Hazira Ltd - India
- MS Steel International - UAE
- Port Waratah Coal Services - Australia
- Sree Jayajothi Cements Limited - India
- Rashtriya Ispat Nigam Limited - India
- Formosa Plastics Group - Taiwan
- VISA Power Limited - India
- Mercator Lines Limited - India
- Sical Logistics Limited - India
- Aboitiz Power Corporation - Philippines
- Tata Chemicals Ltd - India
- Altura Mining Limited, Indonesia
- Malabar Cements Ltd - India
- European Bulk Services B.V. - Netherlands
- Bulk Trading Sa - Switzerland
- Romanian Commodities Exchange
- Chamber of Mines of South Africa
- Samtan Co., Ltd - South Korea
- Thai Mozambique Logistica
- Trasteel International SA, Italy
- Edison Trading Spa - Italy
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- Orica Mining Services - Indonesia
- Medco Energi Mining Internasional
- Maheswari Brothers Coal Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Intertek Mineral Services - Indonesia
- TeaM Sual Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Indian Oil Corporation Limited
- CNBM International Corporation - China
- Central Electricity Authority - India
- Vizag Seaport Private Limited - India
- SN Aboitiz Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Merrill Lynch Commodities Europe
- Toyota Tsusho Corporation, Japan
- Salva Resources Pvt Ltd - India
- Larsen & Toubro Limited - India
- Bukit Baiduri Energy - Indonesia
- Eastern Energy - Thailand
- Bhatia International Limited - India
- Coastal Gujarat Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- Savvy Resources Ltd - HongKong
- Siam City Cement - Thailand
- Global Green Power PLC Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- LBH Netherlands Bv - Netherlands
- PNOC Exploration Corporation - Philippines
- Australian Coal Association
- Binh Thuan Hamico - Vietnam
- Simpson Spence & Young - Indonesia
- IHS Mccloskey Coal Group - USA
- Ceylon Electricity Board - Sri Lanka
- Thiess Contractors Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sojitz Corporation - Japan
- Straits Asia Resources Limited - Singapore
- OPG Power Generation Pvt Ltd - India
- The University of Queensland
- GVK Power & Infra Limited - India
- Africa Commodities Group - South Africa
- Karbindo Abesyapradhi - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Iligan Light & Power Inc, Philippines
- Madhucon Powers Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Mines - Canada
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