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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, 04 June 15
DRY BULK MARKET FAILED TO OFFER ANY POSITIVE SURPRISES - INTERMODAL
COALspot.com: This has been another week that the Dry Bulk market failed to offer any positive surprises, while the BDI, which is still faring belo ...
Wednesday, 03 June 15
SHIPPING MARKET INSIGHT - VASSILIS LOGOTHETIS
For some time now the Dry Bulk market has been severely affected by China’s slowing GDP growth rate that occurs in the background of increase ...
Tuesday, 02 June 15
FOB INDONESIA COAL Q3 SWAP ADVANCED 1.73% MONTH OVER MONTH
COALspot.com: Indonesian coal swap for delivery Q3 2015 gains month on month and lost week over week, this past week.
The Q3 swap was climbed ...
Tuesday, 02 June 15
FOB RICHARDS BAY COAL SWAPS; Q3'15 CLOSED HIGHER THAN Q1'16
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q3' 2015 up month over month and week over week.
The Q3 swap was up US$ 0.80 (1 ...
Monday, 01 June 15
35,000 MW POWER PLANTS TO BOOST COAL CONSUMPTION - JP
The government’s program to develop 35,000 megawatt (MW) power plants will increase domestic coal consumption, which currently stands at arou ...
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- Tata Chemicals Ltd - India
- GVK Power & Infra Limited - India
- Krishnapatnam Port Company Ltd. - India
- Thai Mozambique Logistica
- Aditya Birla Group - India
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Antam Resourcindo - Indonesia
- Simpson Spence & Young - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kobexindo Tractors - Indoneisa
- Global Business Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Romanian Commodities Exchange
- GN Power Mariveles Coal Plant, Philippines
- Sree Jayajothi Cements Limited - India
- The Treasury - Australian Government
- Riau Bara Harum - Indonesia
- Wood Mackenzie - Singapore
- Eastern Coal Council - USA
- Grasim Industreis Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Central Electricity Authority - India
- Makarim & Taira - Indonesia
- Standard Chartered Bank - UAE
- Maharashtra Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Binh Thuan Hamico - Vietnam
- Price Waterhouse Coopers - Russia
- Directorate General of MIneral and Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Medco Energi Mining Internasional
- Ministry of Finance - Indonesia
- Anglo American - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Xindia Steels Limited - India
- Wilmar Investment Holdings
- Kumho Petrochemical, South Korea
- International Coal Ventures Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Australian Commodity Traders Exchange
- Baramulti Group, Indonesia
- Sojitz Corporation - Japan
- ICICI Bank Limited - India
- Cement Manufacturers Association - India
- San Jose City I Power Corp, Philippines
- Agrawal Coal Company - India
- India Bulls Power Limited - India
- New Zealand Coal & Carbon
- Kapuas Tunggal Persada - Indonesia
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- ASAPP Information Group - India
- Directorate Of Revenue Intelligence - India
- Coastal Gujarat Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- Formosa Plastics Group - Taiwan
- Lanco Infratech Ltd - India
- Bulk Trading Sa - Switzerland
- Bahari Cakrawala Sebuku - Indonesia
- LBH Netherlands Bv - Netherlands
- Jorong Barutama Greston.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- Australian Coal Association
- Bayan Resources Tbk. - Indonesia
- Global Green Power PLC Corporation, Philippines
- Power Finance Corporation Ltd., India
- Meralco Power Generation, Philippines
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- Bukit Asam (Persero) Tbk - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indogreen Group - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Semirara Mining and Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Iligan Light & Power Inc, Philippines
- Mercator Lines Limited - India
- Essar Steel Hazira Ltd - India
- The University of Queensland
- Siam City Cement - Thailand
- Parliament of New Zealand
- Mjunction Services Limited - India
- London Commodity Brokers - England
- Heidelberg Cement - Germany
- Larsen & Toubro Limited - India
- Kideco Jaya Agung - Indonesia
- GMR Energy Limited - India
- Economic Council, Georgia
- Deloitte Consulting - India
- Georgia Ports Authority, United States
- Ministry of Mines - Canada
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indian Energy Exchange, India
- Marubeni Corporation - India
- Africa Commodities Group - South Africa
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- The State Trading Corporation of India Ltd
- Salva Resources Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- MS Steel International - UAE
- Borneo Indobara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Gujarat Sidhee Cement - India
- Independent Power Producers Association of India
- SN Aboitiz Power Inc, Philippines
- Electricity Authority, New Zealand
- Sakthi Sugars Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- IHS Mccloskey Coal Group - USA
- Renaissance Capital - South Africa
- Indian Oil Corporation Limited
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- Globalindo Alam Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Electricity Generating Authority of Thailand
- PowerSource Philippines DevCo
- Dalmia Cement Bharat India
- Mercuria Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining Corp, Philippines
- Jaiprakash Power Ventures ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Planning Commission, India
- Energy Link Ltd, New Zealand
- Chamber of Mines of South Africa
- Bhoruka Overseas - Indonesia
- PTC India Limited - India
- Port Waratah Coal Services - Australia
- Kohat Cement Company Ltd. - Pakistan
- SMG Consultants - Indonesia
- Indika Energy - Indonesia
- IEA Clean Coal Centre - UK
- Siam City Cement PLC, Thailand
- Videocon Industries ltd - India
- Bhushan Steel Limited - India
- Ceylon Electricity Board - Sri Lanka
- Indo Tambangraya Megah - Indonesia
- Energy Development Corp, Philippines
- Metalloyd Limited - United Kingdom
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- OPG Power Generation Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Thiess Contractors Indonesia
- PNOC Exploration Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Trasteel International SA, Italy
- Altura Mining Limited, Indonesia
- Bangladesh Power Developement Board
- Holcim Trading Pte Ltd - Singapore
- Intertek Mineral Services - Indonesia
- Mintek Dendrill Indonesia
- CIMB Investment Bank - Malaysia
- Rio Tinto Coal - Australia
- Savvy Resources Ltd - HongKong
- Asmin Koalindo Tuhup - Indonesia
- Indonesian Coal Mining Association
- Commonwealth Bank - Australia
- Cigading International Bulk Terminal - Indonesia
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Madhucon Powers Ltd - India
- Vizag Seaport Private Limited - India
- Ambuja Cements Ltd - India
- CNBM International Corporation - China
- Eastern Energy - Thailand
- Coal and Oil Company - UAE
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- Sinarmas Energy and Mining - Indonesia
- Vedanta Resources Plc - India
- Barasentosa Lestari - Indonesia
- Carbofer General Trading SA - India
- Bhatia International Limited - India
- Sical Logistics Limited - India
- Star Paper Mills Limited - India
- Bukit Makmur.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- Bukit Baiduri Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Merrill Lynch Commodities Europe
- Bharathi Cement Corporation - India
- McConnell Dowell - Australia
- Latin American Coal - Colombia
- Kepco SPC Power Corporation, Philippines
- Parry Sugars Refinery, India
- Interocean Group of Companies - India
- AsiaOL BioFuels Corp., Philippines
- Attock Cement Pakistan Limited
- Billiton Holdings Pty Ltd - Australia
- Ministry of Transport, Egypt
- SMC Global Power, Philippines
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- Minerals Council of Australia
- Banpu Public Company Limited - Thailand
- Central Java Power - Indonesia
- Petron Corporation, Philippines
- VISA Power Limited - India
- Orica Mining Services - Indonesia
- Straits Asia Resources Limited - Singapore
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