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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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Thursday, 01 January 15
FOB RICHARDS BAY COAL SWAPS CLOSED AT $63.47 PMT ON 26 DEC, SGX DATA SHOWS
COALspot.com: API 4 FOB Richards Bay Coal for delivery Q1' 2015 lost month on month and week over week.
The Q1 swap has lost US$ 3.37 (-4. ...
Wednesday, 31 December 14
COASTAL ENERGEN (C&O) COMMENCES 1ST UNIT OF 1200 MW POWER PLANT IN INDIA
COALspot.com: Coastal Energen, part of the Coal & Oil Group, announced last week the commissioning and commencement of power production at the ...
Wednesday, 31 December 14
SUB-BIT INDONESIA COAL Q2' 15 DELIVERY SWAP CLOSED 1.03% LOWER COMPARED TO AVERAGE Q1' 15 DELIVERY PRICE - SGX
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 lost month on month and gained week over week.
The Q1 swap has lost US$ 1.35 (-2 ...
Tuesday, 30 December 14
SHIP PRICES KEEP ON FALLING, SALES COME EARLY FOR SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship prices keep on falling on the back of low freight rates. According to the latest report from shipbroker Allied Shipbroking, January sales seem ...
Tuesday, 30 December 14
INDIA INC TO BENEFIT AS IMPORTED COAL PRICES SET TO FALL - RAHUL PRITHIANI
The Hindu: India‘s coal import volumes are set to rise by over 30 per cent over the next two years to 214 million tonnes in 2015-16, as domes ...
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- Grasim Industreis Ltd - India
- Indian Energy Exchange, India
- Singapore Mercantile Exchange
- Gujarat Mineral Development Corp Ltd - India
- Medco Energi Mining Internasional
- Chettinad Cement Corporation Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Iligan Light & Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- The Treasury - Australian Government
- Ind-Barath Power Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Petrochimia International Co. Ltd.- Taiwan
- International Coal Ventures Pvt Ltd - India
- Bharathi Cement Corporation - India
- Anglo American - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Intertek Mineral Services - Indonesia
- European Bulk Services B.V. - Netherlands
- Meenaskhi Energy Private Limited - India
- Indian Oil Corporation Limited
- PetroVietnam Power Coal Import and Supply Company
- Africa Commodities Group - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bangladesh Power Developement Board
- Kobexindo Tractors - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- Cement Manufacturers Association - India
- SMG Consultants - Indonesia
- GAC Shipping (India) Pvt Ltd
- Oldendorff Carriers - Singapore
- Electricity Generating Authority of Thailand
- AsiaOL BioFuels Corp., Philippines
- Independent Power Producers Association of India
- Energy Development Corp, Philippines
- Therma Luzon, Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Ministry of Finance - Indonesia
- Maheswari Brothers Coal Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Malabar Cements Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Sojitz Corporation - Japan
- Bhushan Steel Limited - India
- Pendopo Energi Batubara - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Attock Cement Pakistan Limited
- Kapuas Tunggal Persada - Indonesia
- Price Waterhouse Coopers - Russia
- Vedanta Resources Plc - India
- Power Finance Corporation Ltd., India
- Jorong Barutama Greston.PT - Indonesia
- LBH Netherlands Bv - Netherlands
- London Commodity Brokers - England
- Ministry of Mines - Canada
- White Energy Company Limited
- Semirara Mining and Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Altura Mining Limited, Indonesia
- Georgia Ports Authority, United States
- SMC Global Power, Philippines
- Bukit Baiduri Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Mercuria Energy - Indonesia
- Latin American Coal - Colombia
- Riau Bara Harum - Indonesia
- Edison Trading Spa - Italy
- India Bulls Power Limited - India
- Merrill Lynch Commodities Europe
- IEA Clean Coal Centre - UK
- Carbofer General Trading SA - India
- Global Business Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Metalloyd Limited - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Marubeni Corporation - India
- Jindal Steel & Power Ltd - India
- Energy Link Ltd, New Zealand
- Coastal Gujarat Power Limited - India
- Essar Steel Hazira Ltd - India
- Orica Australia Pty. Ltd.
- Indika Energy - Indonesia
- Eastern Energy - Thailand
- Port Waratah Coal Services - Australia
- Interocean Group of Companies - India
- Bhatia International Limited - India
- Wilmar Investment Holdings
- Antam Resourcindo - Indonesia
- Madhucon Powers Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Baramulti Group, Indonesia
- ICICI Bank Limited - India
- Australian Commodity Traders Exchange
- McConnell Dowell - Australia
- Formosa Plastics Group - Taiwan
- Bukit Asam (Persero) Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- MS Steel International - UAE
- Kideco Jaya Agung - Indonesia
- Standard Chartered Bank - UAE
- Meralco Power Generation, Philippines
- The State Trading Corporation of India Ltd
- Ambuja Cements Ltd - India
- Siam City Cement - Thailand
- Dalmia Cement Bharat India
- Gujarat Electricity Regulatory Commission - India
- Toyota Tsusho Corporation, Japan
- Makarim & Taira - Indonesia
- Wood Mackenzie - Singapore
- Directorate Of Revenue Intelligence - India
- Global Green Power PLC Corporation, Philippines
- Eastern Coal Council - USA
- Samtan Co., Ltd - South Korea
- OPG Power Generation Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Electricity Authority, New Zealand
- Aditya Birla Group - India
- Rio Tinto Coal - Australia
- Indonesian Coal Mining Association
- San Jose City I Power Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Romanian Commodities Exchange
- Central Java Power - Indonesia
- TeaM Sual Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- IHS Mccloskey Coal Group - USA
- Jaiprakash Power Ventures ltd
- Bahari Cakrawala Sebuku - Indonesia
- Mercator Lines Limited - India
- Thiess Contractors Indonesia
- Indo Tambangraya Megah - Indonesia
- Coalindo Energy - Indonesia
- Goldman Sachs - Singapore
- Sical Logistics Limited - India
- Barasentosa Lestari - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Orica Mining Services - Indonesia
- Planning Commission, India
- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- Miang Besar Coal Terminal - Indonesia
- Central Electricity Authority - India
- Uttam Galva Steels Limited - India
- Chamber of Mines of South Africa
- Indogreen Group - Indonesia
- Australian Coal Association
- Parry Sugars Refinery, India
- Manunggal Multi Energi - Indonesia
- Kepco SPC Power Corporation, Philippines
- Posco Energy - South Korea
- Rashtriya Ispat Nigam Limited - India
- GMR Energy Limited - India
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- SN Aboitiz Power Inc, Philippines
- Larsen & Toubro Limited - India
- Leighton Contractors Pty Ltd - Australia
- Commonwealth Bank - Australia
- Thai Mozambique Logistica
- South Luzon Thermal Energy Corporation
- CIMB Investment Bank - Malaysia
- Timah Investasi Mineral - Indoneisa
- Deloitte Consulting - India
- PTC India Limited - India
- Bulk Trading Sa - Switzerland
- Petron Corporation, Philippines
- Minerals Council of Australia
- Krishnapatnam Port Company Ltd. - India
- Tamil Nadu electricity Board
- Binh Thuan Hamico - Vietnam
- Ceylon Electricity Board - Sri Lanka
- Simpson Spence & Young - Indonesia
- New Zealand Coal & Carbon
- Sree Jayajothi Cements Limited - India
- Ministry of Transport, Egypt
- Sarangani Energy Corporation, Philippines
- Xindia Steels Limited - India
- CNBM International Corporation - China
- Tata Chemicals Ltd - India
- Heidelberg Cement - Germany
- Mjunction Services Limited - India
- Savvy Resources Ltd - HongKong
- Lanco Infratech Ltd - India
- Bukit Makmur.PT - Indonesia
- The University of Queensland
- ASAPP Information Group - India
- Semirara Mining Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Bhoruka Overseas - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Videocon Industries ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Economic Council, Georgia
- Alfred C Toepfer International GmbH - Germany
- PNOC Exploration Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Banpu Public Company Limited - Thailand
- Coal and Oil Company - UAE
- Aboitiz Power Corporation - Philippines
- Parliament of New Zealand
- VISA Power Limited - India
- Sakthi Sugars Limited - India
- Renaissance Capital - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mintek Dendrill Indonesia
- Vizag Seaport Private Limited - India
- Kumho Petrochemical, South Korea
- Star Paper Mills Limited - India
- GVK Power & Infra Limited - India
- Trasteel International SA, Italy
- PowerSource Philippines DevCo
- Salva Resources Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Globalindo Alam Lestari - Indonesia
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