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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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- Directorate Of Revenue Intelligence - India
- Trasteel International SA, Italy
- Mintek Dendrill Indonesia
- Australian Coal Association
- Cigading International Bulk Terminal - Indonesia
- Salva Resources Pvt Ltd - India
- Larsen & Toubro Limited - India
- GAC Shipping (India) Pvt Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Agrawal Coal Company - India
- Interocean Group of Companies - India
- Madhucon Powers Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Electricity Regulatory Commission - India
- Leighton Contractors Pty Ltd - Australia
- Malabar Cements Ltd - India
- Tata Chemicals Ltd - India
- Semirara Mining Corp, Philippines
- Carbofer General Trading SA - India
- Bulk Trading Sa - Switzerland
- India Bulls Power Limited - India
- ICICI Bank Limited - India
- Sindya Power Generating Company Private Ltd
- Energy Development Corp, Philippines
- Australian Commodity Traders Exchange
- Krishnapatnam Port Company Ltd. - India
- Coalindo Energy - Indonesia
- Samtan Co., Ltd - South Korea
- The Treasury - Australian Government
- Jaiprakash Power Ventures ltd
- Makarim & Taira - Indonesia
- Central Electricity Authority - India
- Pendopo Energi Batubara - Indonesia
- Indika Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- PTC India Limited - India
- Chettinad Cement Corporation Ltd - India
- Economic Council, Georgia
- Bahari Cakrawala Sebuku - Indonesia
- Global Coal Blending Company Limited - Australia
- Maharashtra Electricity Regulatory Commission - India
- Kartika Selabumi Mining - Indonesia
- Aditya Birla Group - India
- Romanian Commodities Exchange
- Gujarat Mineral Development Corp Ltd - India
- Sakthi Sugars Limited - India
- Indian Energy Exchange, India
- Heidelberg Cement - Germany
- Orica Australia Pty. Ltd.
- Tamil Nadu electricity Board
- Maheswari Brothers Coal Limited - India
- Riau Bara Harum - Indonesia
- Posco Energy - South Korea
- Vizag Seaport Private Limited - India
- Grasim Industreis Ltd - India
- Petron Corporation, Philippines
- Gujarat Sidhee Cement - India
- Edison Trading Spa - Italy
- Semirara Mining and Power Corporation, Philippines
- Sojitz Corporation - Japan
- Kohat Cement Company Ltd. - Pakistan
- South Luzon Thermal Energy Corporation
- Electricity Generating Authority of Thailand
- Ind-Barath Power Infra Limited - India
- TeaM Sual Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Siam City Cement PLC, Thailand
- Alfred C Toepfer International GmbH - Germany
- Minerals Council of Australia
- Kalimantan Lumbung Energi - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Miang Besar Coal Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kapuas Tunggal Persada - Indonesia
- Power Finance Corporation Ltd., India
- Goldman Sachs - Singapore
- Sarangani Energy Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Meralco Power Generation, Philippines
- MS Steel International - UAE
- Videocon Industries ltd - India
- Planning Commission, India
- Mjunction Services Limited - India
- PNOC Exploration Corporation - Philippines
- London Commodity Brokers - England
- Savvy Resources Ltd - HongKong
- Ceylon Electricity Board - Sri Lanka
- Aboitiz Power Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Bhushan Steel Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Marubeni Corporation - India
- Global Business Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- San Jose City I Power Corp, Philippines
- IEA Clean Coal Centre - UK
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Transport, Egypt
- Bukit Baiduri Energy - Indonesia
- ASAPP Information Group - India
- Bayan Resources Tbk. - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Energy Link Ltd, New Zealand
- SMG Consultants - Indonesia
- Attock Cement Pakistan Limited
- Renaissance Capital - South Africa
- GVK Power & Infra Limited - India
- Indo Tambangraya Megah - Indonesia
- Xindia Steels Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Mining Services - Indonesia
- Banpu Public Company Limited - Thailand
- Siam City Cement - Thailand
- Holcim Trading Pte Ltd - Singapore
- The State Trading Corporation of India Ltd
- Mercuria Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Intertek Mineral Services - Indonesia
- Straits Asia Resources Limited - Singapore
- Kobexindo Tractors - Indoneisa
- GMR Energy Limited - India
- Ministry of Mines - Canada
- The University of Queensland
- Eastern Coal Council - USA
- Borneo Indobara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- White Energy Company Limited
- SMC Global Power, Philippines
- Eastern Energy - Thailand
- International Coal Ventures Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Jorong Barutama Greston.PT - Indonesia
- Metalloyd Limited - United Kingdom
- LBH Netherlands Bv - Netherlands
- Jindal Steel & Power Ltd - India
- Toyota Tsusho Corporation, Japan
- Mercator Lines Limited - India
- Kaltim Prima Coal - Indonesia
- Sical Logistics Limited - India
- VISA Power Limited - India
- New Zealand Coal & Carbon
- OPG Power Generation Pvt Ltd - India
- Rio Tinto Coal - Australia
- Chamber of Mines of South Africa
- Simpson Spence & Young - Indonesia
- Karaikal Port Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Vedanta Resources Plc - India
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- Oldendorff Carriers - Singapore
- Independent Power Producers Association of India
- Ministry of Finance - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Uttam Galva Steels Limited - India
- Africa Commodities Group - South Africa
- Parliament of New Zealand
- Baramulti Group, Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SN Aboitiz Power Inc, Philippines
- Kideco Jaya Agung - Indonesia
- PowerSource Philippines DevCo
- Wood Mackenzie - Singapore
- Thiess Contractors Indonesia
- Global Green Power PLC Corporation, Philippines
- Dalmia Cement Bharat India
- Altura Mining Limited, Indonesia
- Bangladesh Power Developement Board
- Therma Luzon, Inc, Philippines
- Formosa Plastics Group - Taiwan
- Meenaskhi Energy Private Limited - India
- Antam Resourcindo - Indonesia
- Kepco SPC Power Corporation, Philippines
- CNBM International Corporation - China
- IHS Mccloskey Coal Group - USA
- Merrill Lynch Commodities Europe
- Coastal Gujarat Power Limited - India
- Georgia Ports Authority, United States
- Bhatia International Limited - India
- Price Waterhouse Coopers - Russia
- Lanco Infratech Ltd - India
- Iligan Light & Power Inc, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Commonwealth Bank - Australia
- Anglo American - United Kingdom
- Sree Jayajothi Cements Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Coal and Oil Company - UAE
- Manunggal Multi Energi - Indonesia
- Central Java Power - Indonesia
- Bukit Makmur.PT - Indonesia
- Indonesian Coal Mining Association
- Star Paper Mills Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thai Mozambique Logistica
- Medco Energi Mining Internasional
- Kumho Petrochemical, South Korea
- Parry Sugars Refinery, India
- Bharathi Cement Corporation - India
- Singapore Mercantile Exchange
- McConnell Dowell - Australia
- Standard Chartered Bank - UAE
- Indian Oil Corporation Limited
- Neyveli Lignite Corporation Ltd, - India
- Wilmar Investment Holdings
- Electricity Authority, New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Latin American Coal - Colombia
- Deloitte Consulting - India
- Port Waratah Coal Services - Australia
- Barasentosa Lestari - Indonesia
- Cement Manufacturers Association - India
- Ambuja Cements Ltd - India
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