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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, 29 May 15
SOUTH KOREAN STATE-OWNED UTILITY KOREA MIDLAND POWER INVITES BIDS FOR 780K MT OF COAL FOR H2' 15
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) issued an new tender to buy total 780K Metric Tons (MT) of HCV and LCV ...
Thursday, 28 May 15
TIMEBAR FOR DEMURRAGE CLAIMS - SKULD
KNOWLEDGE TO ELEVATE
English law has traditionally had a strict approach to contractually agreed time bars between commercial parties as well ...
Wednesday, 27 May 15
MARKET INSIGHT - TIMOS PAPADIMITRIOU
Earlier in the year I looked at how the market was reacting to the prolonged fall of the price of oil. Back then it was still unclear if the fallin ...
Tuesday, 26 May 15
HOW HAS THE DROP IN OIL PRICES AFFECTED OTHER COMMODITIES? - CLYDE & CO
KNOWLEDGE TO ELEVATE
The effects of the dramatic drop in the price of both Ice March Brent, the international oil marker, and its US counterpa ...
Tuesday, 26 May 15
MINING ASSOCIATION PERHAPI PUSHES FOR 35,000 MEGAWATT ELECTRICITY PROGRAM - JG
The Indonesian Mining Professionals Association, or Perhapi, has announced its support for a 35,000-megawatt national electricity program, saying i ...
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- Marubeni Corporation - India
- Altura Mining Limited, Indonesia
- Rio Tinto Coal - Australia
- Bukit Makmur.PT - Indonesia
- Goldman Sachs - Singapore
- Straits Asia Resources Limited - Singapore
- Metalloyd Limited - United Kingdom
- Ministry of Transport, Egypt
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Larsen & Toubro Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Maharashtra Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Authority, New Zealand
- Central Electricity Authority - India
- Cement Manufacturers Association - India
- Jorong Barutama Greston.PT - Indonesia
- Simpson Spence & Young - Indonesia
- Timah Investasi Mineral - Indoneisa
- Mercator Lines Limited - India
- Kaltim Prima Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Globalindo Alam Lestari - Indonesia
- Madhucon Powers Ltd - India
- McConnell Dowell - Australia
- Samtan Co., Ltd - South Korea
- Ind-Barath Power Infra Limited - India
- Indogreen Group - Indonesia
- Xindia Steels Limited - India
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- Gujarat Sidhee Cement - India
- Tamil Nadu electricity Board
- Interocean Group of Companies - India
- Indian Energy Exchange, India
- Merrill Lynch Commodities Europe
- Thiess Contractors Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Directorate Of Revenue Intelligence - India
- ASAPP Information Group - India
- Ceylon Electricity Board - Sri Lanka
- Bharathi Cement Corporation - India
- Planning Commission, India
- SMC Global Power, Philippines
- Mjunction Services Limited - India
- AsiaOL BioFuels Corp., Philippines
- Meenaskhi Energy Private Limited - India
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Krishnapatnam Port Company Ltd. - India
- Kumho Petrochemical, South Korea
- Miang Besar Coal Terminal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- PowerSource Philippines DevCo
- Australian Commodity Traders Exchange
- Barasentosa Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Chettinad Cement Corporation Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- GAC Shipping (India) Pvt Ltd
- Ministry of Mines - Canada
- Bukit Baiduri Energy - Indonesia
- Semirara Mining Corp, Philippines
- Global Business Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Agrawal Coal Company - India
- India Bulls Power Limited - India
- Manunggal Multi Energi - Indonesia
- Oldendorff Carriers - Singapore
- Minerals Council of Australia
- Videocon Industries ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Standard Chartered Bank - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Ambuja Cements Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Salva Resources Pvt Ltd - India
- ICICI Bank Limited - India
- Edison Trading Spa - Italy
- Indian Oil Corporation Limited
- Makarim & Taira - Indonesia
- Thai Mozambique Logistica
- Petron Corporation, Philippines
- Australian Coal Association
- Deloitte Consulting - India
- Parliament of New Zealand
- IHS Mccloskey Coal Group - USA
- Anglo American - United Kingdom
- Maheswari Brothers Coal Limited - India
- The University of Queensland
- Kapuas Tunggal Persada - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement PLC, Thailand
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- PTC India Limited - India
- Bayan Resources Tbk. - Indonesia
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Eastern Coal Council - USA
- Aditya Birla Group - India
- SN Aboitiz Power Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jindal Steel & Power Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Renaissance Capital - South Africa
- Leighton Contractors Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Port Waratah Coal Services - Australia
- London Commodity Brokers - England
- GVK Power & Infra Limited - India
- VISA Power Limited - India
- Coastal Gujarat Power Limited - India
- OPG Power Generation Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Carbofer General Trading SA - India
- The State Trading Corporation of India Ltd
- Indo Tambangraya Megah - Indonesia
- International Coal Ventures Pvt Ltd - India
- Baramulti Group, Indonesia
- Banpu Public Company Limited - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement - Thailand
- Alfred C Toepfer International GmbH - Germany
- Sakthi Sugars Limited - India
- Bhoruka Overseas - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sojitz Corporation - Japan
- CNBM International Corporation - China
- New Zealand Coal & Carbon
- MS Steel International - UAE
- Kepco SPC Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Attock Cement Pakistan Limited
- Rashtriya Ispat Nigam Limited - India
- Trasteel International SA, Italy
- Meralco Power Generation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- European Bulk Services B.V. - Netherlands
- Dalmia Cement Bharat India
- Romanian Commodities Exchange
- Malabar Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Grasim Industreis Ltd - India
- Mintek Dendrill Indonesia
- IEA Clean Coal Centre - UK
- Jaiprakash Power Ventures ltd
- Posco Energy - South Korea
- Independent Power Producers Association of India
- Pendopo Energi Batubara - Indonesia
- Antam Resourcindo - Indonesia
- LBH Netherlands Bv - Netherlands
- Vedanta Resources Plc - India
- Singapore Mercantile Exchange
- Global Coal Blending Company Limited - Australia
- Energy Link Ltd, New Zealand
- Bangladesh Power Developement Board
- Africa Commodities Group - South Africa
- Formosa Plastics Group - Taiwan
- Uttam Galva Steels Limited - India
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- White Energy Company Limited
- Chamber of Mines of South Africa
- Sical Logistics Limited - India
- Power Finance Corporation Ltd., India
- Coalindo Energy - Indonesia
- Star Paper Mills Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Intertek Mineral Services - Indonesia
- Latin American Coal - Colombia
- Medco Energi Mining Internasional
- Borneo Indobara - Indonesia
- Vizag Seaport Private Limited - India
- Commonwealth Bank - Australia
- Kobexindo Tractors - Indoneisa
- Central Java Power - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- The Treasury - Australian Government
- Mercuria Energy - Indonesia
- GMR Energy Limited - India
- Kideco Jaya Agung - Indonesia
- Electricity Generating Authority of Thailand
- Bhushan Steel Limited - India
- San Jose City I Power Corp, Philippines
- Bulk Trading Sa - Switzerland
- Karaikal Port Pvt Ltd - India
- Orica Mining Services - Indonesia
- Energy Development Corp, Philippines
- Wood Mackenzie - Singapore
- Ministry of Finance - Indonesia
- Economic Council, Georgia
- Essar Steel Hazira Ltd - India
- PNOC Exploration Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Energy - Thailand
- Therma Luzon, Inc, Philippines
- Heidelberg Cement - Germany
- Indonesian Coal Mining Association
- SMG Consultants - Indonesia
- Parry Sugars Refinery, India
- Toyota Tsusho Corporation, Japan
- Orica Australia Pty. Ltd.
- Georgia Ports Authority, United States
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