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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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Friday, 26 June 15
INDONESIA COAL PRODUCTION FALLS BETWEEN JAN-MAY : JG
The Ministry of Energy and Mineral Resources announced that coal production declined to 166 million tons between January and May, a 19 percent drop ...
Friday, 26 June 15
COAL PRODUCTION IN THE U.S ROSE 6.0% WEEK OVER WEEK, SAYS EIA
COALspot.com – United States the second largest coal producer in the world has produced approximately totaled an estimated 16.3 million short ...
Thursday, 25 June 15
THE PORT OF NEWCASTLE SHIPPED 13.31% MORE COAL IN MAY 2015 COMPARED TO APRIL 2015
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port, has shipped $1.18 billio ...
Thursday, 25 June 15
CAPESIZE: PERIOD INTEREST REMAINED STRONG FOR A SECOND WEEK - INTERMODAL
COALspot.com: Following those depressive last six months, the BDI closed off on last Friday noting a substantial weekly increase, which pushed the ...
Wednesday, 24 June 15
PANAMAXES: THE OUTLOOK REMAINS NEGATIVE AS DEMAND FOR COAL IS DIMINISHING - YANNIS OLZIERSKY
As we get closer to the end of June, we can safely say that the 1st half of the year is leaving the dry bulk market with a bitter taste that we all ...
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- Wilmar Investment Holdings
- Aditya Birla Group - India
- Sakthi Sugars Limited - India
- Mintek Dendrill Indonesia
- Aboitiz Power Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Ministry of Mines - Canada
- Ministry of Transport, Egypt
- GMR Energy Limited - India
- Jindal Steel & Power Ltd - India
- Parliament of New Zealand
- Larsen & Toubro Limited - India
- Port Waratah Coal Services - Australia
- Borneo Indobara - Indonesia
- Bhushan Steel Limited - India
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- Semirara Mining Corp, Philippines
- Deloitte Consulting - India
- Riau Bara Harum - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Agrawal Coal Company - India
- CIMB Investment Bank - Malaysia
- Directorate General of MIneral and Coal - Indonesia
- Straits Asia Resources Limited - Singapore
- Banpu Public Company Limited - Thailand
- Vizag Seaport Private Limited - India
- Minerals Council of Australia
- Thai Mozambique Logistica
- Uttam Galva Steels Limited - India
- Binh Thuan Hamico - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Rio Tinto Coal - Australia
- Mjunction Services Limited - India
- Ambuja Cements Ltd - India
- Pendopo Energi Batubara - Indonesia
- Bhoruka Overseas - Indonesia
- Global Green Power PLC Corporation, Philippines
- SMG Consultants - Indonesia
- Posco Energy - South Korea
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- IHS Mccloskey Coal Group - USA
- Alfred C Toepfer International GmbH - Germany
- The University of Queensland
- Formosa Plastics Group - Taiwan
- Global Business Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Chamber of Mines of South Africa
- PNOC Exploration Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Coalindo Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- New Zealand Coal & Carbon
- Cigading International Bulk Terminal - Indonesia
- Standard Chartered Bank - UAE
- Oldendorff Carriers - Singapore
- Manunggal Multi Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- Madhucon Powers Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Siam City Cement - Thailand
- Indogreen Group - Indonesia
- Gujarat Sidhee Cement - India
- Ministry of Finance - Indonesia
- Savvy Resources Ltd - HongKong
- Electricity Generating Authority of Thailand
- MS Steel International - UAE
- Orica Mining Services - Indonesia
- Barasentosa Lestari - Indonesia
- Altura Mining Limited, Indonesia
- McConnell Dowell - Australia
- Orica Australia Pty. Ltd.
- Singapore Mercantile Exchange
- Romanian Commodities Exchange
- Grasim Industreis Ltd - India
- Georgia Ports Authority, United States
- CNBM International Corporation - China
- Merrill Lynch Commodities Europe
- Tamil Nadu electricity Board
- Kobexindo Tractors - Indoneisa
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Therma Luzon, Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Economic Council, Georgia
- PTC India Limited - India
- Attock Cement Pakistan Limited
- Leighton Contractors Pty Ltd - Australia
- Thiess Contractors Indonesia
- Simpson Spence & Young - Indonesia
- Bukit Makmur.PT - Indonesia
- Indian Energy Exchange, India
- Heidelberg Cement - Germany
- Baramulti Group, Indonesia
- Dalmia Cement Bharat India
- Indika Energy - Indonesia
- Australian Commodity Traders Exchange
- Gujarat Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Directorate Of Revenue Intelligence - India
- Trasteel International SA, Italy
- Mercator Lines Limited - India
- Kideco Jaya Agung - Indonesia
- Semirara Mining and Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- San Jose City I Power Corp, Philippines
- Toyota Tsusho Corporation, Japan
- Kapuas Tunggal Persada - Indonesia
- LBH Netherlands Bv - Netherlands
- Price Waterhouse Coopers - Russia
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Kumho Petrochemical, South Korea
- Antam Resourcindo - Indonesia
- Sinarmas Energy and Mining - Indonesia
- The Treasury - Australian Government
- Sojitz Corporation - Japan
- IEA Clean Coal Centre - UK
- Mercuria Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meralco Power Generation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Lanco Infratech Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Bhatia International Limited - India
- Siam City Cement PLC, Thailand
- Rashtriya Ispat Nigam Limited - India
- Eastern Energy - Thailand
- Jorong Barutama Greston.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Ind-Barath Power Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Medco Energi Mining Internasional
- London Commodity Brokers - England
- PowerSource Philippines DevCo
- Global Coal Blending Company Limited - Australia
- Bukit Baiduri Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Videocon Industries ltd - India
- GAC Shipping (India) Pvt Ltd
- PetroVietnam Power Coal Import and Supply Company
- Independent Power Producers Association of India
- Samtan Co., Ltd - South Korea
- The State Trading Corporation of India Ltd
- Kepco SPC Power Corporation, Philippines
- Sical Logistics Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Coastal Gujarat Power Limited - India
- Goldman Sachs - Singapore
- Tata Chemicals Ltd - India
- White Energy Company Limited
- Kartika Selabumi Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMC Global Power, Philippines
- Coal and Oil Company - UAE
- Karbindo Abesyapradhi - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Sree Jayajothi Cements Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Latin American Coal - Colombia
- Eastern Coal Council - USA
- Commonwealth Bank - Australia
- Edison Trading Spa - Italy
- Sindya Power Generating Company Private Ltd
- Marubeni Corporation - India
- Bangladesh Power Developement Board
- Chettinad Cement Corporation Ltd - India
- Renaissance Capital - South Africa
- Bulk Trading Sa - Switzerland
- Interocean Group of Companies - India
- Jaiprakash Power Ventures ltd
- Star Paper Mills Limited - India
- Essar Steel Hazira Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- International Coal Ventures Pvt Ltd - India
- Africa Commodities Group - South Africa
- VISA Power Limited - India
- Vedanta Resources Plc - India
- Energy Development Corp, Philippines
- Electricity Authority, New Zealand
- Meenaskhi Energy Private Limited - India
- Billiton Holdings Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Petron Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Makarim & Taira - Indonesia
- Cement Manufacturers Association - India
- Parry Sugars Refinery, India
- Asmin Koalindo Tuhup - Indonesia
- Anglo American - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- ICICI Bank Limited - India
- Malabar Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Bharathi Cement Corporation - India
- Globalindo Alam Lestari - Indonesia
- Planning Commission, India
- Australian Coal Association
- Holcim Trading Pte Ltd - Singapore
- European Bulk Services B.V. - Netherlands
- ASAPP Information Group - India
- Energy Link Ltd, New Zealand
- Indonesian Coal Mining Association
- Central Electricity Authority - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Java Power - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
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