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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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Wednesday, 25 March 15
MARKET INSIGHT: TANKER CHARTERING - KATERINA RESTIS
The 1st of January 2015, as broadly reported, denoted the beginning date of new and progressive emission regulations for vessels operating within t ...
Wednesday, 25 March 15
AUSTRALIA SET TO ONCE AGAIN BE THE WORLD'S LARGEST COAL EXPORTER - COAL, MINERALS COUNCIL OF AUSTRALIA
Greg Evans, Executive Director - Coal, Minerals Council of Australia
Media Release: The latest Resources and Energy Quarterly published by the ...
Wednesday, 25 March 15
AUSTRALIA UPSTREAM ENERGY FIRMS FACE RISING OIL PRICE EXPOSURE - FITCH
Fitch Ratings says the Australian oil and gas companies involved in exploration and production face higher exposure to oil price-linked revenues, w ...
Wednesday, 25 March 15
2014 : UK COAL IMPORTS DECLINED 17%; GERMANY COAL IMPORTS UP 6%
Hard Coal Market 2014: Despite The Energy Turnaround, Hard Coal Imports To Germany Rise By More Than 6%, Although Hard Coal-Fired Power Generation ...
Tuesday, 24 March 15
A WEAK WEEK FOR FOB INDONESIA COAL SWAP
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 drop month on month and week over week.
The Q2 swap fell US$ 2.48 (5.12%) month ...
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- Kohat Cement Company Ltd. - Pakistan
- Chettinad Cement Corporation Ltd - India
- Madhucon Powers Ltd - India
- CNBM International Corporation - China
- Ministry of Finance - Indonesia
- Bhushan Steel Limited - India
- Gujarat Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- Minerals Council of Australia
- Sarangani Energy Corporation, Philippines
- Coalindo Energy - Indonesia
- London Commodity Brokers - England
- Krishnapatnam Port Company Ltd. - India
- Ambuja Cements Ltd - India
- Australian Commodity Traders Exchange
- Thiess Contractors Indonesia
- Indika Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Larsen & Toubro Limited - India
- Standard Chartered Bank - UAE
- Sindya Power Generating Company Private Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Maharashtra Electricity Regulatory Commission - India
- Therma Luzon, Inc, Philippines
- CIMB Investment Bank - Malaysia
- Grasim Industreis Ltd - India
- Kaltim Prima Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Lanco Infratech Ltd - India
- Salva Resources Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Posco Energy - South Korea
- White Energy Company Limited
- Mjunction Services Limited - India
- Essar Steel Hazira Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Sojitz Corporation - Japan
- Singapore Mercantile Exchange
- Ceylon Electricity Board - Sri Lanka
- Mercator Lines Limited - India
- Rio Tinto Coal - Australia
- Commonwealth Bank - Australia
- International Coal Ventures Pvt Ltd - India
- Central Java Power - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Latin American Coal - Colombia
- Attock Cement Pakistan Limited
- Bhoruka Overseas - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Malabar Cements Ltd - India
- Global Business Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Kapuas Tunggal Persada - Indonesia
- Sical Logistics Limited - India
- New Zealand Coal & Carbon
- PNOC Exploration Corporation - Philippines
- Vedanta Resources Plc - India
- Directorate Of Revenue Intelligence - India
- Pipit Mutiara Jaya. PT, Indonesia
- India Bulls Power Limited - India
- Coastal Gujarat Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Planning Commission, India
- Uttam Galva Steels Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Port Waratah Coal Services - Australia
- Bayan Resources Tbk. - Indonesia
- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- The Treasury - Australian Government
- GMR Energy Limited - India
- Wilmar Investment Holdings
- Metalloyd Limited - United Kingdom
- Thai Mozambique Logistica
- Banpu Public Company Limited - Thailand
- PTC India Limited - India
- Ministry of Transport, Egypt
- Formosa Plastics Group - Taiwan
- PetroVietnam Power Coal Import and Supply Company
- Cigading International Bulk Terminal - Indonesia
- SMC Global Power, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Indian Oil Corporation Limited
- Petrochimia International Co. Ltd.- Taiwan
- Medco Energi Mining Internasional
- Timah Investasi Mineral - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Agrawal Coal Company - India
- GVK Power & Infra Limited - India
- Bangladesh Power Developement Board
- Videocon Industries ltd - India
- The University of Queensland
- Mintek Dendrill Indonesia
- Orica Australia Pty. Ltd.
- GAC Shipping (India) Pvt Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Jaiprakash Power Ventures ltd
- Barasentosa Lestari - Indonesia
- Meralco Power Generation, Philippines
- Bukit Makmur.PT - Indonesia
- South Luzon Thermal Energy Corporation
- Energy Development Corp, Philippines
- Binh Thuan Hamico - Vietnam
- IHS Mccloskey Coal Group - USA
- Electricity Authority, New Zealand
- Bharathi Cement Corporation - India
- Vizag Seaport Private Limited - India
- Heidelberg Cement - Germany
- Pendopo Energi Batubara - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Sidhee Cement - India
- Ind-Barath Power Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Jindal Steel & Power Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Indonesian Coal Mining Association
- Bulk Trading Sa - Switzerland
- Indogreen Group - Indonesia
- Deloitte Consulting - India
- VISA Power Limited - India
- Interocean Group of Companies - India
- The State Trading Corporation of India Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Tata Chemicals Ltd - India
- Edison Trading Spa - Italy
- SN Aboitiz Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Coal and Oil Company - UAE
- SMG Consultants - Indonesia
- PowerSource Philippines DevCo
- Dalmia Cement Bharat India
- Global Coal Blending Company Limited - Australia
- Billiton Holdings Pty Ltd - Australia
- Semirara Mining Corp, Philippines
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Alfred C Toepfer International GmbH - Germany
- Carbofer General Trading SA - India
- Rashtriya Ispat Nigam Limited - India
- Meenaskhi Energy Private Limited - India
- Anglo American - United Kingdom
- Parliament of New Zealand
- Oldendorff Carriers - Singapore
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Riau Bara Harum - Indonesia
- Orica Mining Services - Indonesia
- Petron Corporation, Philippines
- Australian Coal Association
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- Mercuria Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- IEA Clean Coal Centre - UK
- Power Finance Corporation Ltd., India
- Romanian Commodities Exchange
- European Bulk Services B.V. - Netherlands
- Kobexindo Tractors - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Aboitiz Power Corporation - Philippines
- ICICI Bank Limited - India
- Toyota Tsusho Corporation, Japan
- Savvy Resources Ltd - HongKong
- Bukit Baiduri Energy - Indonesia
- Electricity Generating Authority of Thailand
- Renaissance Capital - South Africa
- Bhatia International Limited - India
- Samtan Co., Ltd - South Korea
- Sree Jayajothi Cements Limited - India
- Holcim Trading Pte Ltd - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Baramulti Group, Indonesia
- Iligan Light & Power Inc, Philippines
- ASAPP Information Group - India
- Trasteel International SA, Italy
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Aditya Birla Group - India
- Goldman Sachs - Singapore
- Star Paper Mills Limited - India
- Wood Mackenzie - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Mines - Canada
- Altura Mining Limited, Indonesia
- Price Waterhouse Coopers - Russia
- Antam Resourcindo - Indonesia
- Georgia Ports Authority, United States
- Central Electricity Authority - India
- Kartika Selabumi Mining - Indonesia
- Independent Power Producers Association of India
- Chamber of Mines of South Africa
- Siam City Cement - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Eastern Energy - Thailand
- McConnell Dowell - Australia
- Xindia Steels Limited - India
- Parry Sugars Refinery, India
- Energy Link Ltd, New Zealand
- Cement Manufacturers Association - India
- Karbindo Abesyapradhi - Indoneisa
- Karaikal Port Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Economic Council, Georgia
- Intertek Mineral Services - Indonesia
- MS Steel International - UAE
- Merrill Lynch Commodities Europe
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