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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, 21 June 15
SPOT RATE AVERAGES FOR FREIGHT FROM INDONESIA TO INDIA REMAIN STRONG THIS WEEK
COALspot.com: The freight market was quite firm this week compared to last week. The BDI was up 21% week on week and closed at 779 points. The cape ...
Friday, 19 June 15
U.S. WEEKLY COAL PRODUCTION UP SLIGHTLY COMPARED TO LAST WEEK; CONTINUES TO BE DOWN FROM LAST YEAR
COALspot.com – United States the second largest coal producer in the world has produced approximately totaled an estimated 15.4 million short ...
Friday, 19 June 15
INDONESIA'S COAL-TRAFFICKING PROBLEM REQUIRES IMPARTIAL INQUIRY - JAKARTA GLOBE
Indonesia, the leading supplier to the seaborne thermal coal market, produces 420 million tons of coal per year, according to its official tally.
...
Thursday, 18 June 15
DRY BULK SHIPPING: LOWEST FLEET GROWTH IN 10 YEARS MAY NOT PROVE ENOUGH AS DEMAND IS NOT KEEPING PACE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The demand side of things in the dry bulk market seems unable to keep pace with even the slightest fleet growth, a sign of the demise that the indu ...
Thursday, 18 June 15
THE FAR EAST HANDYSIZE, HANDYMAX, SUPRAMAX MARKET REMAINED STEADY LAST WEEK - INTERMODAL
COALspot.com: The Dry Bulk market closed off on Friday (last week) noting small gains on the back of stronger performance in the Panamax segment, w ...
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- Manunggal Multi Energi - Indonesia
- Bhatia International Limited - India
- Bangladesh Power Developement Board
- Antam Resourcindo - Indonesia
- Edison Trading Spa - Italy
- GN Power Mariveles Coal Plant, Philippines
- Romanian Commodities Exchange
- Kaltim Prima Coal - Indonesia
- Trasteel International SA, Italy
- Pipit Mutiara Jaya. PT, Indonesia
- MS Steel International - UAE
- TNB Fuel Sdn Bhd - Malaysia
- OPG Power Generation Pvt Ltd - India
- Ministry of Mines - Canada
- Straits Asia Resources Limited - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Bukit Makmur.PT - Indonesia
- Lanco Infratech Ltd - India
- Sical Logistics Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Tata Chemicals Ltd - India
- India Bulls Power Limited - India
- Energy Development Corp, Philippines
- London Commodity Brokers - England
- Marubeni Corporation - India
- Indo Tambangraya Megah - Indonesia
- Larsen & Toubro Limited - India
- Globalindo Alam Lestari - Indonesia
- South Luzon Thermal Energy Corporation
- Electricity Authority, New Zealand
- McConnell Dowell - Australia
- Indian Energy Exchange, India
- Agrawal Coal Company - India
- IEA Clean Coal Centre - UK
- ICICI Bank Limited - India
- Banpu Public Company Limited - Thailand
- Rashtriya Ispat Nigam Limited - India
- Wood Mackenzie - Singapore
- White Energy Company Limited
- Kartika Selabumi Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meralco Power Generation, Philippines
- Kumho Petrochemical, South Korea
- Gujarat Sidhee Cement - India
- Central Electricity Authority - India
- Bhushan Steel Limited - India
- Aditya Birla Group - India
- Karbindo Abesyapradhi - Indoneisa
- Bhoruka Overseas - Indonesia
- Chamber of Mines of South Africa
- Eastern Energy - Thailand
- Billiton Holdings Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- Bharathi Cement Corporation - India
- Tamil Nadu electricity Board
- Wilmar Investment Holdings
- Riau Bara Harum - Indonesia
- Indika Energy - Indonesia
- Global Business Power Corporation, Philippines
- Sojitz Corporation - Japan
- Posco Energy - South Korea
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- PNOC Exploration Corporation - Philippines
- Makarim & Taira - Indonesia
- Electricity Generating Authority of Thailand
- Heidelberg Cement - Germany
- Therma Luzon, Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Petron Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Energy Link Ltd, New Zealand
- Jorong Barutama Greston.PT - Indonesia
- Parliament of New Zealand
- Vizag Seaport Private Limited - India
- Commonwealth Bank - Australia
- Ministry of Transport, Egypt
- Kideco Jaya Agung - Indonesia
- Carbofer General Trading SA - India
- New Zealand Coal & Carbon
- Sakthi Sugars Limited - India
- Semirara Mining and Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Ceylon Electricity Board - Sri Lanka
- ASAPP Information Group - India
- Samtan Co., Ltd - South Korea
- Gujarat Mineral Development Corp Ltd - India
- LBH Netherlands Bv - Netherlands
- Borneo Indobara - Indonesia
- Cement Manufacturers Association - India
- Bayan Resources Tbk. - Indonesia
- Iligan Light & Power Inc, Philippines
- VISA Power Limited - India
- Central Java Power - Indonesia
- TeaM Sual Corporation - Philippines
- GMR Energy Limited - India
- Intertek Mineral Services - Indonesia
- Goldman Sachs - Singapore
- Mintek Dendrill Indonesia
- Bukit Baiduri Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Port Waratah Coal Services - Australia
- International Coal Ventures Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Indian Oil Corporation Limited
- Kapuas Tunggal Persada - Indonesia
- Merrill Lynch Commodities Europe
- SMG Consultants - Indonesia
- Anglo American - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- SN Aboitiz Power Inc, Philippines
- Altura Mining Limited, Indonesia
- Star Paper Mills Limited - India
- PowerSource Philippines DevCo
- AsiaOL BioFuels Corp., Philippines
- Asmin Koalindo Tuhup - Indonesia
- Coalindo Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Georgia Ports Authority, United States
- Xindia Steels Limited - India
- San Jose City I Power Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Thiess Contractors Indonesia
- PTC India Limited - India
- Essar Steel Hazira Ltd - India
- Deloitte Consulting - India
- Aboitiz Power Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Formosa Plastics Group - Taiwan
- Planning Commission, India
- Salva Resources Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Indogreen Group - Indonesia
- Malabar Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- GAC Shipping (India) Pvt Ltd
- Rio Tinto Coal - Australia
- Kohat Cement Company Ltd. - Pakistan
- Power Finance Corporation Ltd., India
- GVK Power & Infra Limited - India
- Australian Coal Association
- Minerals Council of Australia
- Vedanta Resources Plc - India
- CIMB Investment Bank - Malaysia
- Simpson Spence & Young - Indonesia
- Eastern Coal Council - USA
- Baramulti Group, Indonesia
- Directorate Of Revenue Intelligence - India
- Kepco SPC Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Binh Thuan Hamico - Vietnam
- Global Coal Blending Company Limited - Australia
- SMC Global Power, Philippines
- Australian Commodity Traders Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jindal Steel & Power Ltd - India
- Sree Jayajothi Cements Limited - India
- Chettinad Cement Corporation Ltd - India
- Parry Sugars Refinery, India
- Dalmia Cement Bharat India
- Ministry of Finance - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- The Treasury - Australian Government
- Orica Australia Pty. Ltd.
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- Economic Council, Georgia
- Standard Chartered Bank - UAE
- Interocean Group of Companies - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IHS Mccloskey Coal Group - USA
- CNBM International Corporation - China
- Attock Cement Pakistan Limited
- Renaissance Capital - South Africa
- Siam City Cement - Thailand
- Savvy Resources Ltd - HongKong
- Siam City Cement PLC, Thailand
- Kalimantan Lumbung Energi - Indonesia
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- Meenaskhi Energy Private Limited - India
- Miang Besar Coal Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- The University of Queensland
- European Bulk Services B.V. - Netherlands
- Semirara Mining Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Uttam Galva Steels Limited - India
- Videocon Industries ltd - India
- Pendopo Energi Batubara - Indonesia
- Latin American Coal - Colombia
- Grasim Industreis Ltd - India
- Bulk Trading Sa - Switzerland
- Coal and Oil Company - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Mercator Lines Limited - India
- Orica Mining Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Medco Energi Mining Internasional
- Madhucon Powers Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Metalloyd Limited - United Kingdom
- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- Indonesian Coal Mining Association
- Singapore Mercantile Exchange
- Independent Power Producers Association of India
- Barasentosa Lestari - Indonesia
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