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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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Saturday, 14 February 15
SHALE GAS AND TIGHT OIL ARE COMMERCIALLY PRODUCED IN JUST FOUR COUNTRIES - EIA
KNOWLEDGE TO ELEVATE
The United States, Canada, China, and Argentina are currently the only four countries in the world that are producing com ...
Friday, 13 February 15
U.S. WEEKLY COAL PRODUCTION SHOWS 10% DECLINE
COALspot.com – United States the world's one of the largest coal producers, produced approximately 18.1 million short tons (mmst) of coal ...
Friday, 13 February 15
SMALL AND MEDIUM-SIZED SHIP OWNERS SQUEEZED OUT OF THE MARKET ON CRASHING DRY BULK MARKET AND EUROZONE CRISIS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Financing issues have started to tighten the noose in the throats of small and medium-size ship owners, who were already facing problems over the p ...
Thursday, 12 February 15
CAPESIZE: THE BEST DESCRIPTION FOR THE MARKET IS, FLAT - FEARNRESEARCH
Handy
The handy and supra market is also being affected by the marginal volume of activity in the commodity sales. We see a small upturn in the T ...
Thursday, 12 February 15
DRY BULK OWNERS SCRAP MORE VESSELS, AS MARKET REACHES HISTORICAL LOWS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has reached historical lows this week, with the Baltic Dry Index (BDI) now trading at levels below operating expense levels for ...
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- Economic Council, Georgia
- Planning Commission, India
- Tata Chemicals Ltd - India
- IEA Clean Coal Centre - UK
- TeaM Sual Corporation - Philippines
- Bhoruka Overseas - Indonesia
- PTC India Limited - India
- Sical Logistics Limited - India
- Globalindo Alam Lestari - Indonesia
- Bukit Baiduri Energy - Indonesia
- Minerals Council of Australia
- Barasentosa Lestari - Indonesia
- Antam Resourcindo - Indonesia
- Posco Energy - South Korea
- Parry Sugars Refinery, India
- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- Xindia Steels Limited - India
- ASAPP Information Group - India
- Georgia Ports Authority, United States
- Jaiprakash Power Ventures ltd
- Coalindo Energy - Indonesia
- Romanian Commodities Exchange
- Kartika Selabumi Mining - Indonesia
- Price Waterhouse Coopers - Russia
- The University of Queensland
- Jindal Steel & Power Ltd - India
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- Borneo Indobara - Indonesia
- Gujarat Sidhee Cement - India
- Alfred C Toepfer International GmbH - Germany
- Sarangani Energy Corporation, Philippines
- Trasteel International SA, Italy
- Thai Mozambique Logistica
- Ind-Barath Power Infra Limited - India
- Holcim Trading Pte Ltd - Singapore
- Kobexindo Tractors - Indoneisa
- PNOC Exploration Corporation - Philippines
- McConnell Dowell - Australia
- Salva Resources Pvt Ltd - India
- Coal and Oil Company - UAE
- Intertek Mineral Services - Indonesia
- Indian Oil Corporation Limited
- Vijayanagar Sugar Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Independent Power Producers Association of India
- Sakthi Sugars Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Edison Trading Spa - Italy
- Mintek Dendrill Indonesia
- PetroVietnam Power Coal Import and Supply Company
- LBH Netherlands Bv - Netherlands
- Coastal Gujarat Power Limited - India
- SMC Global Power, Philippines
- Indogreen Group - Indonesia
- Semirara Mining and Power Corporation, Philippines
- ICICI Bank Limited - India
- Aditya Birla Group - India
- Asmin Koalindo Tuhup - Indonesia
- Attock Cement Pakistan Limited
- GN Power Mariveles Coal Plant, Philippines
- Baramulti Group, Indonesia
- Malabar Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Leighton Contractors Pty Ltd - Australia
- Ceylon Electricity Board - Sri Lanka
- Altura Mining Limited, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Essar Steel Hazira Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Metalloyd Limited - United Kingdom
- Merrill Lynch Commodities Europe
- Maheswari Brothers Coal Limited - India
- European Bulk Services B.V. - Netherlands
- New Zealand Coal & Carbon
- Electricity Authority, New Zealand
- Interocean Group of Companies - India
- Toyota Tsusho Corporation, Japan
- Cement Manufacturers Association - India
- Mercator Lines Limited - India
- Kapuas Tunggal Persada - Indonesia
- Pendopo Energi Batubara - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Aboitiz Power Corporation - Philippines
- Rio Tinto Coal - Australia
- Timah Investasi Mineral - Indoneisa
- Singapore Mercantile Exchange
- Africa Commodities Group - South Africa
- Siam City Cement - Thailand
- Indo Tambangraya Megah - Indonesia
- Orica Mining Services - Indonesia
- Vizag Seaport Private Limited - India
- Miang Besar Coal Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- International Coal Ventures Pvt Ltd - India
- Bhatia International Limited - India
- Ambuja Cements Ltd - India
- Power Finance Corporation Ltd., India
- Manunggal Multi Energi - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Chamber of Mines of South Africa
- Wood Mackenzie - Singapore
- Star Paper Mills Limited - India
- Sindya Power Generating Company Private Ltd
- Meralco Power Generation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Mines - Canada
- Kepco SPC Power Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Deloitte Consulting - India
- Orica Australia Pty. Ltd.
- Port Waratah Coal Services - Australia
- Lanco Infratech Ltd - India
- Ministry of Transport, Egypt
- SMG Consultants - Indonesia
- Dalmia Cement Bharat India
- VISA Power Limited - India
- Australian Commodity Traders Exchange
- Formosa Plastics Group - Taiwan
- San Jose City I Power Corp, Philippines
- Savvy Resources Ltd - HongKong
- Kaltim Prima Coal - Indonesia
- Indonesian Coal Mining Association
- Binh Thuan Hamico - Vietnam
- Renaissance Capital - South Africa
- CIMB Investment Bank - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Chettinad Cement Corporation Ltd - India
- Iligan Light & Power Inc, Philippines
- The Treasury - Australian Government
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kumho Petrochemical, South Korea
- IHS Mccloskey Coal Group - USA
- Petrochimia International Co. Ltd.- Taiwan
- Australian Coal Association
- Latin American Coal - Colombia
- Parliament of New Zealand
- Bangladesh Power Developement Board
- GVK Power & Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Uttam Galva Steels Limited - India
- Indian Energy Exchange, India
- Directorate General of MIneral and Coal - Indonesia
- Anglo American - United Kingdom
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mjunction Services Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Coal Blending Company Limited - Australia
- Commonwealth Bank - Australia
- Thiess Contractors Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bhushan Steel Limited - India
- Semirara Mining Corp, Philippines
- The State Trading Corporation of India Ltd
- OPG Power Generation Pvt Ltd - India
- London Commodity Brokers - England
- White Energy Company Limited
- Central Electricity Authority - India
- GAC Shipping (India) Pvt Ltd
- Oldendorff Carriers - Singapore
- AsiaOL BioFuels Corp., Philippines
- Meenaskhi Energy Private Limited - India
- Videocon Industries ltd - India
- Vedanta Resources Plc - India
- Eastern Coal Council - USA
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Link Ltd, New Zealand
- Global Business Power Corporation, Philippines
- Central Java Power - Indonesia
- India Bulls Power Limited - India
- Bulk Trading Sa - Switzerland
- Karbindo Abesyapradhi - Indoneisa
- Standard Chartered Bank - UAE
- GMR Energy Limited - India
- Goldman Sachs - Singapore
- Riau Bara Harum - Indonesia
- Makarim & Taira - Indonesia
- Global Green Power PLC Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Medco Energi Mining Internasional
- Energy Development Corp, Philippines
- Sojitz Corporation - Japan
- MS Steel International - UAE
- Ministry of Finance - Indonesia
- Carbofer General Trading SA - India
- Straits Asia Resources Limited - Singapore
- Samtan Co., Ltd - South Korea
- Gujarat Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- Madhucon Powers Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Generating Authority of Thailand
- Siam City Cement PLC, Thailand
- Eastern Energy - Thailand
- Simpson Spence & Young - Indonesia
- Marubeni Corporation - India
- Bahari Cakrawala Sebuku - Indonesia
- Heidelberg Cement - Germany
- South Luzon Thermal Energy Corporation
- Sree Jayajothi Cements Limited - India
- Indika Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Larsen & Toubro Limited - India
- Banpu Public Company Limited - Thailand
- Karaikal Port Pvt Ltd - India
- CNBM International Corporation - China
- Rashtriya Ispat Nigam Limited - India
- Directorate Of Revenue Intelligence - India
- PowerSource Philippines DevCo
- Wilmar Investment Holdings
- Grasim Industreis Ltd - India
- Tamil Nadu electricity Board
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