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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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Sunday, 25 January 15
PANAMAX FREIGHT RATES STILL FALLING
COALspot.com: The BDI was slightly down this week to 720 points. The BDI lost 2.83 pct week on week.
The cape index continued its upward trend ...
Friday, 23 January 15
U.S. WEEKLY COAL PRODUCTION FOR WEEK ENDING JAN. 17 UP 2.5%
COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.4 million short tons (mmst) of coal ...
Thursday, 22 January 15
PANAMAX: A SOFTER TONE AND OVERALL A SLUGGISH MARKET - FEARNLEYS
Handy
The handy and supra market has experienced yet another week with slow activity and softening rates in both hemispheres, broker Fearnleys AS ...
Thursday, 22 January 15
BUMI RESOURCES POSTS NET INCOME OF $13.3 MILLION 9M-2014
COALspot.com: Bumi Resources, Indonesia’s largest coal miner, reported today that, the company has recorded a net income of $13.3 million for ...
Wednesday, 21 January 15
PANAMAX MARKET MOVED SIDEWAYS OVERALL LAST WEEK - INTERMODAL
COALspot.com: The positive sentiment in which the week prior ended carried on through-out last week as well, the end of which marked the first posi ...
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- Power Finance Corporation Ltd., India
- Wilmar Investment Holdings
- Global Business Power Corporation, Philippines
- Edison Trading Spa - Italy
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indo Tambangraya Megah - Indonesia
- Baramulti Group, Indonesia
- Merrill Lynch Commodities Europe
- PTC India Limited - India
- Bhoruka Overseas - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Coalindo Energy - Indonesia
- Electricity Authority, New Zealand
- Anglo American - United Kingdom
- Alfred C Toepfer International GmbH - Germany
- The State Trading Corporation of India Ltd
- TeaM Sual Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Commodity Traders Exchange
- PetroVietnam Power Coal Import and Supply Company
- Commonwealth Bank - Australia
- India Bulls Power Limited - India
- Aditya Birla Group - India
- PNOC Exploration Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- Thai Mozambique Logistica
- Rashtriya Ispat Nigam Limited - India
- Lanco Infratech Ltd - India
- Thiess Contractors Indonesia
- Orica Australia Pty. Ltd.
- Coastal Gujarat Power Limited - India
- Ind-Barath Power Infra Limited - India
- Borneo Indobara - Indonesia
- Energy Development Corp, Philippines
- Vizag Seaport Private Limited - India
- Renaissance Capital - South Africa
- Central Electricity Authority - India
- McConnell Dowell - Australia
- GAC Shipping (India) Pvt Ltd
- Meenaskhi Energy Private Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Planning Commission, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jaiprakash Power Ventures ltd
- Madhucon Powers Ltd - India
- Makarim & Taira - Indonesia
- Karaikal Port Pvt Ltd - India
- Bhatia International Limited - India
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- Energy Link Ltd, New Zealand
- Coal and Oil Company - UAE
- Siam City Cement PLC, Thailand
- Kohat Cement Company Ltd. - Pakistan
- Banpu Public Company Limited - Thailand
- Georgia Ports Authority, United States
- Videocon Industries ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Bukit Baiduri Energy - Indonesia
- Independent Power Producers Association of India
- MS Steel International - UAE
- Cigading International Bulk Terminal - Indonesia
- Mercator Lines Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Oldendorff Carriers - Singapore
- Eastern Energy - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- South Luzon Thermal Energy Corporation
- San Jose City I Power Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Trasteel International SA, Italy
- Krishnapatnam Port Company Ltd. - India
- Gujarat Electricity Regulatory Commission - India
- Metalloyd Limited - United Kingdom
- Barasentosa Lestari - Indonesia
- Salva Resources Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Semirara Mining Corp, Philippines
- Jindal Steel & Power Ltd - India
- SN Aboitiz Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Kartika Selabumi Mining - Indonesia
- Attock Cement Pakistan Limited
- Directorate Of Revenue Intelligence - India
- GVK Power & Infra Limited - India
- Larsen & Toubro Limited - India
- Billiton Holdings Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- London Commodity Brokers - England
- Africa Commodities Group - South Africa
- Manunggal Multi Energi - Indonesia
- Samtan Co., Ltd - South Korea
- Sree Jayajothi Cements Limited - India
- Sakthi Sugars Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Australian Coal Association
- Global Coal Blending Company Limited - Australia
- Iligan Light & Power Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Orica Mining Services - Indonesia
- Port Waratah Coal Services - Australia
- Parry Sugars Refinery, India
- SMC Global Power, Philippines
- Romanian Commodities Exchange
- Indika Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- CNBM International Corporation - China
- Electricity Generating Authority of Thailand
- Bangladesh Power Developement Board
- Ambuja Cements Ltd - India
- Chamber of Mines of South Africa
- Toyota Tsusho Corporation, Japan
- Ministry of Mines - Canada
- Kideco Jaya Agung - Indonesia
- Indogreen Group - Indonesia
- Therma Luzon, Inc, Philippines
- Intertek Mineral Services - Indonesia
- Rio Tinto Coal - Australia
- Mintek Dendrill Indonesia
- Economic Council, Georgia
- IHS Mccloskey Coal Group - USA
- Medco Energi Mining Internasional
- Indonesian Coal Mining Association
- LBH Netherlands Bv - Netherlands
- IEA Clean Coal Centre - UK
- Savvy Resources Ltd - HongKong
- Dalmia Cement Bharat India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sojitz Corporation - Japan
- Ministry of Finance - Indonesia
- VISA Power Limited - India
- Marubeni Corporation - India
- Posco Energy - South Korea
- Pendopo Energi Batubara - Indonesia
- OPG Power Generation Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- GMR Energy Limited - India
- Leighton Contractors Pty Ltd - Australia
- Indian Energy Exchange, India
- Minerals Council of Australia
- Goldman Sachs - Singapore
- Kumho Petrochemical, South Korea
- Bharathi Cement Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- ASAPP Information Group - India
- Indian Oil Corporation Limited
- Sical Logistics Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kobexindo Tractors - Indoneisa
- Bhushan Steel Limited - India
- Holcim Trading Pte Ltd - Singapore
- Xindia Steels Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Aboitiz Power Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- CIMB Investment Bank - Malaysia
- Kepco SPC Power Corporation, Philippines
- Latin American Coal - Colombia
- European Bulk Services B.V. - Netherlands
- Binh Thuan Hamico - Vietnam
- Interocean Group of Companies - India
- Petrochimia International Co. Ltd.- Taiwan
- Agrawal Coal Company - India
- Malabar Cements Ltd - India
- Uttam Galva Steels Limited - India
- Maheswari Brothers Coal Limited - India
- Bukit Makmur.PT - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- Mercuria Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Riau Bara Harum - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Tamil Nadu electricity Board
- Eastern Coal Council - USA
- Star Paper Mills Limited - India
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Sarangani Energy Corporation, Philippines
- Siam City Cement - Thailand
- Vijayanagar Sugar Pvt Ltd - India
- The Treasury - Australian Government
- Meralco Power Generation, Philippines
- Petron Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Price Waterhouse Coopers - Russia
- Jorong Barutama Greston.PT - Indonesia
- Ministry of Transport, Egypt
- Antam Resourcindo - Indonesia
- Vedanta Resources Plc - India
- New Zealand Coal & Carbon
- Heidelberg Cement - Germany
- International Coal Ventures Pvt Ltd - India
- Standard Chartered Bank - UAE
- ICICI Bank Limited - India
- Miang Besar Coal Terminal - Indonesia
- Grasim Industreis Ltd - India
- Carbofer General Trading SA - India
- Bayan Resources Tbk. - Indonesia
- Deloitte Consulting - India
- Singapore Mercantile Exchange
- Tata Chemicals Ltd - India
- White Energy Company Limited
- Wood Mackenzie - Singapore
- Parliament of New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- The University of Queensland
- SMG Consultants - Indonesia
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