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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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Tuesday, 17 March 15
GAS TO CHALLENGE COAL IN THE ASIAN POWER GENERATION MIX - WOOD MACKENZIE
KNOWLEDGE TO ELEVATE
Wood Mackenzie says that coal is facing increasing competition from gas in the power sector. Coal has dominated as the fu ...
Tuesday, 17 March 15
RIO TINTO PAID US$ 7.1 BILLION IN TAXES IN 2014
COALspot.com: Rio Tinto has published its latest Taxes paid report, detailing the US$7.1 billion in taxes paid by the company around the world in 2 ...
Tuesday, 17 March 15
NEARLY 17% OF US COAL PRODUCTION UNECONOMIC AT CURRENT MARKET PRICING - WOOD MACKENZIE
COALspot.com: Close to 17% of forecast 2015 US coal production is at risk of idling or closure, totalling 162 million short tons (Mst), as these mi ...
Tuesday, 17 March 15
Q3' SA COAL SWAP CLOSED $57.30 PMT W/E 13 MARCH
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 declined month over month and gained week on week.
The Q2 swap has fe ...
Monday, 16 March 15
MAKING THE WORLD GO ROUND - SEABORNE TRADE! - CLARKSONS
Money, or even love if you prefer, are claimed to make the world go round. For the shipping world, however, it’s trade that sets things spinn ...
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- Sindya Power Generating Company Private Ltd
- London Commodity Brokers - England
- Siam City Cement - Thailand
- Kepco SPC Power Corporation, Philippines
- Heidelberg Cement - Germany
- Parliament of New Zealand
- Australian Coal Association
- Ministry of Finance - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- GVK Power & Infra Limited - India
- Meralco Power Generation, Philippines
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- Uttam Galva Steels Limited - India
- International Coal Ventures Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Anglo American - United Kingdom
- Grasim Industreis Ltd - India
- Sical Logistics Limited - India
- Intertek Mineral Services - Indonesia
- Sakthi Sugars Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Energy Link Ltd, New Zealand
- Economic Council, Georgia
- Indonesian Coal Mining Association
- Trasteel International SA, Italy
- CNBM International Corporation - China
- PNOC Exploration Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Therma Luzon, Inc, Philippines
- Edison Trading Spa - Italy
- Semirara Mining and Power Corporation, Philippines
- PTC India Limited - India
- Petron Corporation, Philippines
- Siam City Cement PLC, Thailand
- Sinarmas Energy and Mining - Indonesia
- Madhucon Powers Ltd - India
- Vedanta Resources Plc - India
- Globalindo Alam Lestari - Indonesia
- Malabar Cements Ltd - India
- Cigading International Bulk Terminal - Indonesia
- PowerSource Philippines DevCo
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kartika Selabumi Mining - Indonesia
- White Energy Company Limited
- Coastal Gujarat Power Limited - India
- The Treasury - Australian Government
- TeaM Sual Corporation - Philippines
- Orica Australia Pty. Ltd.
- Neyveli Lignite Corporation Ltd, - India
- Indian Energy Exchange, India
- Iligan Light & Power Inc, Philippines
- Latin American Coal - Colombia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Transport, Egypt
- Gujarat Sidhee Cement - India
- Romanian Commodities Exchange
- Agrawal Coal Company - India
- Deloitte Consulting - India
- Global Business Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Jindal Steel & Power Ltd - India
- Thai Mozambique Logistica
- Indo Tambangraya Megah - Indonesia
- Borneo Indobara - Indonesia
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Makarim & Taira - Indonesia
- Chamber of Mines of South Africa
- Billiton Holdings Pty Ltd - Australia
- Star Paper Mills Limited - India
- South Luzon Thermal Energy Corporation
- Simpson Spence & Young - Indonesia
- Price Waterhouse Coopers - Russia
- Kideco Jaya Agung - Indonesia
- Salva Resources Pvt Ltd - India
- Ambuja Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Baiduri Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- GMR Energy Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- San Jose City I Power Corp, Philippines
- Australian Commodity Traders Exchange
- Mercator Lines Limited - India
- Minerals Council of Australia
- Commonwealth Bank - Australia
- Electricity Authority, New Zealand
- Cement Manufacturers Association - India
- Central Electricity Authority - India
- Binh Thuan Hamico - Vietnam
- European Bulk Services B.V. - Netherlands
- LBH Netherlands Bv - Netherlands
- Baramulti Group, Indonesia
- Oldendorff Carriers - Singapore
- Indian Oil Corporation Limited
- Maharashtra Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- SMC Global Power, Philippines
- Ind-Barath Power Infra Limited - India
- Sojitz Corporation - Japan
- Gujarat Electricity Regulatory Commission - India
- Leighton Contractors Pty Ltd - Australia
- McConnell Dowell - Australia
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- Georgia Ports Authority, United States
- Wood Mackenzie - Singapore
- Bhoruka Overseas - Indonesia
- Maheswari Brothers Coal Limited - India
- Carbofer General Trading SA - India
- Gujarat Mineral Development Corp Ltd - India
- Tamil Nadu electricity Board
- The State Trading Corporation of India Ltd
- Kobexindo Tractors - Indoneisa
- Directorate Of Revenue Intelligence - India
- Pipit Mutiara Jaya. PT, Indonesia
- SMG Consultants - Indonesia
- Renaissance Capital - South Africa
- Rio Tinto Coal - Australia
- Samtan Co., Ltd - South Korea
- Port Waratah Coal Services - Australia
- Meenaskhi Energy Private Limited - India
- Sarangani Energy Corporation, Philippines
- India Bulls Power Limited - India
- Kumho Petrochemical, South Korea
- Essar Steel Hazira Ltd - India
- Independent Power Producers Association of India
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Dalmia Cement Bharat India
- Bharathi Cement Corporation - India
- Bayan Resources Tbk. - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- IEA Clean Coal Centre - UK
- Xindia Steels Limited - India
- Formosa Plastics Group - Taiwan
- Eastern Energy - Thailand
- Merrill Lynch Commodities Europe
- Sree Jayajothi Cements Limited - India
- Goldman Sachs - Singapore
- Manunggal Multi Energi - Indonesia
- Videocon Industries ltd - India
- Attock Cement Pakistan Limited
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Makmur.PT - Indonesia
- Planning Commission, India
- The University of Queensland
- Kapuas Tunggal Persada - Indonesia
- Africa Commodities Group - South Africa
- Power Finance Corporation Ltd., India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aditya Birla Group - India
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining Corp, Philippines
- Orica Mining Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Aboitiz Power Corporation - Philippines
- VISA Power Limited - India
- MS Steel International - UAE
- Coal and Oil Company - UAE
- Coalindo Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Energy Development Corp, Philippines
- Tata Chemicals Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Standard Chartered Bank - UAE
- Banpu Public Company Limited - Thailand
- Global Coal Blending Company Limited - Australia
- Kalimantan Lumbung Energi - Indonesia
- Savvy Resources Ltd - HongKong
- Electricity Generating Authority of Thailand
- Mercuria Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Kaltim Prima Coal - Indonesia
- Parry Sugars Refinery, India
- Jaiprakash Power Ventures ltd
- New Zealand Coal & Carbon
- Mintek Dendrill Indonesia
- Riau Bara Harum - Indonesia
- SN Aboitiz Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Indogreen Group - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Bhatia International Limited - India
- Posco Energy - South Korea
- Timah Investasi Mineral - Indoneisa
- Thiess Contractors Indonesia
- GAC Shipping (India) Pvt Ltd
- Larsen & Toubro Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- ASAPP Information Group - India
- CIMB Investment Bank - Malaysia
- Bhushan Steel Limited - India
- Bangladesh Power Developement Board
- IHS Mccloskey Coal Group - USA
- OPG Power Generation Pvt Ltd - India
- Mjunction Services Limited - India
- Interocean Group of Companies - India
- Holcim Trading Pte Ltd - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Marubeni Corporation - India
- Jorong Barutama Greston.PT - Indonesia
- Ministry of Mines - Canada
- Rashtriya Ispat Nigam Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Karaikal Port Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Toyota Tsusho Corporation, Japan
- Altura Mining Limited, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Coal Council - USA
- Lanco Infratech Ltd - India
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