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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, 11 March 15
DRY BULK MARKET CLOSED OFF ON THE GREEN FOR A SECOND WEEK IN A ROW - INTERMODAL
COALspot.com: The Dry Bulk market closed off on the green for a second week in a row, while the performance of Capesizes hindered a more substantia ...
Wednesday, 11 March 15
MARKET INSIGHT : NEWBUILDINGS - PANOS TSILINGIRIS
From a cost-based, buy-low perspective, there is currently a buying opportunity in the second-hand dry bulk market. I am an anti-cyclical (buy-low) ...
Wednesday, 11 March 15
DRY BULK MARKET: ALL IS NOT LOST FOR A RECOVERY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The low cost of commodities across the board could trigger an increase of trade among many countries, which in turn could lead to a recovery of the ...
Wednesday, 11 March 15
U.S. ELECTRIC GENERATING COMPANIES TO ADD MORE THAN 20 GW OF GENERATING CAPACITY IN 2015; 16 GW OF GENERATING CAPACITY IS EXPECTED TO RETIRE IN 2015
COALspot.com: In 2015, electric generating companies in U.S. expect to add more than 20 gigawatts (GW) of utility-scale generating capacity to the ...
Tuesday, 10 March 15
OIL PRICE FORECASTING - IGNORE THE EXPERTS: COLIN MARSHALL
KNOWLEDGE TO ELEVATE
Experts put themselves on a pedestal, making claims to have special forecasting abilities for oil price trends. They, too ...
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- Billiton Holdings Pty Ltd - Australia
- Sarangani Energy Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Eastern Coal Council - USA
- Thiess Contractors Indonesia
- Bhoruka Overseas - Indonesia
- Vedanta Resources Plc - India
- Alfred C Toepfer International GmbH - Germany
- Lanco Infratech Ltd - India
- Petron Corporation, Philippines
- Australian Commodity Traders Exchange
- Formosa Plastics Group - Taiwan
- Indian Oil Corporation Limited
- European Bulk Services B.V. - Netherlands
- Toyota Tsusho Corporation, Japan
- Meralco Power Generation, Philippines
- Bharathi Cement Corporation - India
- Sical Logistics Limited - India
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- Orica Australia Pty. Ltd.
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sakthi Sugars Limited - India
- Power Finance Corporation Ltd., India
- Antam Resourcindo - Indonesia
- IHS Mccloskey Coal Group - USA
- GN Power Mariveles Coal Plant, Philippines
- The State Trading Corporation of India Ltd
- Bhushan Steel Limited - India
- Mjunction Services Limited - India
- Tamil Nadu electricity Board
- Energy Link Ltd, New Zealand
- Edison Trading Spa - Italy
- Ambuja Cements Ltd - India
- Bukit Makmur.PT - Indonesia
- PTC India Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Kalimantan Lumbung Energi - Indonesia
- IEA Clean Coal Centre - UK
- PowerSource Philippines DevCo
- Indian Energy Exchange, India
- SN Aboitiz Power Inc, Philippines
- Planning Commission, India
- White Energy Company Limited
- The Treasury - Australian Government
- TeaM Sual Corporation - Philippines
- Jaiprakash Power Ventures ltd
- Baramulti Group, Indonesia
- Barasentosa Lestari - Indonesia
- OPG Power Generation Pvt Ltd - India
- McConnell Dowell - Australia
- Anglo American - United Kingdom
- Chamber of Mines of South Africa
- GAC Shipping (India) Pvt Ltd
- Eastern Energy - Thailand
- Electricity Generating Authority of Thailand
- Central Java Power - Indonesia
- Meenaskhi Energy Private Limited - India
- International Coal Ventures Pvt Ltd - India
- GMR Energy Limited - India
- SMC Global Power, Philippines
- Mercator Lines Limited - India
- Parliament of New Zealand
- Miang Besar Coal Terminal - Indonesia
- Sojitz Corporation - Japan
- Therma Luzon, Inc, Philippines
- Coalindo Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Renaissance Capital - South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Samtan Co., Ltd - South Korea
- Medco Energi Mining Internasional
- PNOC Exploration Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Maheswari Brothers Coal Limited - India
- Ceylon Electricity Board - Sri Lanka
- Jindal Steel & Power Ltd - India
- Salva Resources Pvt Ltd - India
- VISA Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- India Bulls Power Limited - India
- Singapore Mercantile Exchange
- Electricity Authority, New Zealand
- Kartika Selabumi Mining - Indonesia
- Indika Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- CNBM International Corporation - China
- Kobexindo Tractors - Indoneisa
- Thai Mozambique Logistica
- Global Business Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Indo Tambangraya Megah - Indonesia
- Intertek Mineral Services - Indonesia
- Ministry of Mines - Canada
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- Global Coal Blending Company Limited - Australia
- AsiaOL BioFuels Corp., Philippines
- Port Waratah Coal Services - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Star Paper Mills Limited - India
- Xindia Steels Limited - India
- Marubeni Corporation - India
- Mercuria Energy - Indonesia
- Wilmar Investment Holdings
- Sinarmas Energy and Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Aditya Birla Group - India
- SMG Consultants - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Karaikal Port Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Bahari Cakrawala Sebuku - Indonesia
- Makarim & Taira - Indonesia
- Goldman Sachs - Singapore
- ICICI Bank Limited - India
- Manunggal Multi Energi - Indonesia
- Carbofer General Trading SA - India
- GVK Power & Infra Limited - India
- Siam City Cement - Thailand
- Kumho Petrochemical, South Korea
- Riau Bara Harum - Indonesia
- Directorate Of Revenue Intelligence - India
- Orica Mining Services - Indonesia
- Bulk Trading Sa - Switzerland
- Banpu Public Company Limited - Thailand
- Interocean Group of Companies - India
- Economic Council, Georgia
- Vijayanagar Sugar Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Metalloyd Limited - United Kingdom
- The University of Queensland
- Krishnapatnam Port Company Ltd. - India
- Iligan Light & Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Bhatia International Limited - India
- Gujarat Electricity Regulatory Commission - India
- Central Electricity Authority - India
- Independent Power Producers Association of India
- Madhucon Powers Ltd - India
- Borneo Indobara - Indonesia
- Pendopo Energi Batubara - Indonesia
- Global Green Power PLC Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Africa Commodities Group - South Africa
- Oldendorff Carriers - Singapore
- Australian Coal Association
- Deloitte Consulting - India
- Straits Asia Resources Limited - Singapore
- Timah Investasi Mineral - Indoneisa
- Savvy Resources Ltd - HongKong
- Heidelberg Cement - Germany
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Grasim Industreis Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indonesian Coal Mining Association
- Posco Energy - South Korea
- Altura Mining Limited, Indonesia
- Simpson Spence & Young - Indonesia
- London Commodity Brokers - England
- Kepco SPC Power Corporation, Philippines
- New Zealand Coal & Carbon
- Dalmia Cement Bharat India
- Romanian Commodities Exchange
- Ministry of Finance - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Sidhee Cement - India
- Energy Development Corp, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Malabar Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Parry Sugars Refinery, India
- Agrawal Coal Company - India
- Georgia Ports Authority, United States
- Pipit Mutiara Jaya. PT, Indonesia
- MS Steel International - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Standard Chartered Bank - UAE
- Globalindo Alam Lestari - Indonesia
- Commonwealth Bank - Australia
- Tata Chemicals Ltd - India
- Semirara Mining Corp, Philippines
- Videocon Industries ltd - India
- Latin American Coal - Colombia
- Attock Cement Pakistan Limited
- San Jose City I Power Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Coal and Oil Company - UAE
- Sindya Power Generating Company Private Ltd
- Wood Mackenzie - Singapore
- ASAPP Information Group - India
- Bangladesh Power Developement Board
- Rio Tinto Coal - Australia
- Ministry of Transport, Egypt
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ind-Barath Power Infra Limited - India
- Indogreen Group - Indonesia
- CIMB Investment Bank - Malaysia
- Chettinad Cement Corporation Ltd - India
- Binh Thuan Hamico - Vietnam
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Trasteel International SA, Italy
- Mintek Dendrill Indonesia
- Minerals Council of Australia
- Siam City Cement PLC, Thailand
- Vizag Seaport Private Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Cement Manufacturers Association - India
- Larsen & Toubro Limited - India
- Sree Jayajothi Cements Limited - India
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