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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, 22 May 15
U.S WEEKLY COAL PRODUCTION STAYS FLAT AT 16 MMST
COALspot.com – United States the second largest coal producer in the world has produced approximately totaled an estimated 16.0 million short ...
Thursday, 21 May 15
PORT OF NEWCASTLE ACHIEVED ITS BEST EVER TOTAL COAL EXPORT TURNOVER OF 159 MILLION TONS IN 2014
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port, has shipped $900 million ...
Thursday, 21 May 15
ATLANTIC PANAMAX MARKET STARTED TO IMPROVE SLOWLY - INTERMODAL
COALspot.com: The Dry Bulk market closed off the week on the green last week, purely on the back of improved Capesize performance, while the rest o ...
Wednesday, 20 May 15
LOWER PRICES SEEN IN NEWBUILDING MARKET ON LOW DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Cash-rich ship owners, or at least, owners with substantial access to financing will be among the prime candidates, who will reap the benefits of t ...
Wednesday, 20 May 15
TANKER MARKET INSIGHT - JOHN N. COTZIAS
Since Early October 2014 the tanker market has been experiencing a very positive momentum and has continued its strong performance so far in 2015. ...
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- Tata Chemicals Ltd - India
- India Bulls Power Limited - India
- Medco Energi Mining Internasional
- Australian Coal Association
- Petron Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Dalmia Cement Bharat India
- Thiess Contractors Indonesia
- GAC Shipping (India) Pvt Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Mines - Canada
- Australian Commodity Traders Exchange
- Directorate General of MIneral and Coal - Indonesia
- Attock Cement Pakistan Limited
- Commonwealth Bank - Australia
- Coalindo Energy - Indonesia
- Jaiprakash Power Ventures ltd
- IEA Clean Coal Centre - UK
- Sinarmas Energy and Mining - Indonesia
- Therma Luzon, Inc, Philippines
- Sojitz Corporation - Japan
- Videocon Industries ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Standard Chartered Bank - UAE
- Riau Bara Harum - Indonesia
- Deloitte Consulting - India
- White Energy Company Limited
- Coal and Oil Company - UAE
- South Luzon Thermal Energy Corporation
- IHS Mccloskey Coal Group - USA
- Lanco Infratech Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Antam Resourcindo - Indonesia
- Wood Mackenzie - Singapore
- Sindya Power Generating Company Private Ltd
- Energy Link Ltd, New Zealand
- Bhushan Steel Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Cigading International Bulk Terminal - Indonesia
- Baramulti Group, Indonesia
- Orica Australia Pty. Ltd.
- Sakthi Sugars Limited - India
- Tamil Nadu electricity Board
- Aboitiz Power Corporation - Philippines
- Trasteel International SA, Italy
- Kalimantan Lumbung Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Siam City Cement - Thailand
- Semirara Mining Corp, Philippines
- Aditya Birla Group - India
- Bukit Makmur.PT - Indonesia
- Grasim Industreis Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Metalloyd Limited - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Timah Investasi Mineral - Indoneisa
- Uttam Galva Steels Limited - India
- Indian Oil Corporation Limited
- Price Waterhouse Coopers - Russia
- Ceylon Electricity Board - Sri Lanka
- Malabar Cements Ltd - India
- Merrill Lynch Commodities Europe
- Bank of Tokyo Mitsubishi UFJ Ltd
- Romanian Commodities Exchange
- Star Paper Mills Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Central Electricity Authority - India
- Minerals Council of Australia
- Neyveli Lignite Corporation Ltd, - India
- European Bulk Services B.V. - Netherlands
- Ind-Barath Power Infra Limited - India
- Madhucon Powers Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Edison Trading Spa - Italy
- Maharashtra Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- London Commodity Brokers - England
- Wilmar Investment Holdings
- Global Business Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Iligan Light & Power Inc, Philippines
- Banpu Public Company Limited - Thailand
- Heidelberg Cement - Germany
- Pendopo Energi Batubara - Indonesia
- Essar Steel Hazira Ltd - India
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- Thai Mozambique Logistica
- Asmin Koalindo Tuhup - Indonesia
- PNOC Exploration Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Bhoruka Overseas - Indonesia
- Posco Energy - South Korea
- Sical Logistics Limited - India
- CNBM International Corporation - China
- Electricity Generating Authority of Thailand
- Singapore Mercantile Exchange
- Central Java Power - Indonesia
- Formosa Plastics Group - Taiwan
- PTC India Limited - India
- Gujarat Sidhee Cement - India
- Sarangani Energy Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Savvy Resources Ltd - HongKong
- Mercuria Energy - Indonesia
- Indika Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Xindia Steels Limited - India
- Energy Development Corp, Philippines
- Kideco Jaya Agung - Indonesia
- OPG Power Generation Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Ambuja Cements Ltd - India
- Barasentosa Lestari - Indonesia
- Bayan Resources Tbk. - Indonesia
- Sree Jayajothi Cements Limited - India
- McConnell Dowell - Australia
- Anglo American - United Kingdom
- Economic Council, Georgia
- Pipit Mutiara Jaya. PT, Indonesia
- Renaissance Capital - South Africa
- Orica Mining Services - Indonesia
- The University of Queensland
- Eastern Energy - Thailand
- SMC Global Power, Philippines
- San Jose City I Power Corp, Philippines
- GMR Energy Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Georgia Ports Authority, United States
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- Simpson Spence & Young - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Globalindo Alam Lestari - Indonesia
- Latin American Coal - Colombia
- Chettinad Cement Corporation Ltd - India
- Altura Mining Limited, Indonesia
- Larsen & Toubro Limited - India
- VISA Power Limited - India
- ASAPP Information Group - India
- Makarim & Taira - Indonesia
- Electricity Authority, New Zealand
- Power Finance Corporation Ltd., India
- Petrochimia International Co. Ltd.- Taiwan
- Intertek Mineral Services - Indonesia
- Africa Commodities Group - South Africa
- Karaikal Port Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Mercator Lines Limited - India
- Planning Commission, India
- ICICI Bank Limited - India
- Semirara Mining and Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Jindal Steel & Power Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Parry Sugars Refinery, India
- Meenaskhi Energy Private Limited - India
- The Treasury - Australian Government
- LBH Netherlands Bv - Netherlands
- Meralco Power Generation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- Kumho Petrochemical, South Korea
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- Oldendorff Carriers - Singapore
- Cement Manufacturers Association - India
- SMG Consultants - Indonesia
- Miang Besar Coal Terminal - Indonesia
- New Zealand Coal & Carbon
- Rio Tinto Coal - Australia
- Mintek Dendrill Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Independent Power Producers Association of India
- Bharathi Cement Corporation - India
- Eastern Coal Council - USA
- Mjunction Services Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Chamber of Mines of South Africa
- Carbofer General Trading SA - India
- MS Steel International - UAE
- Vizag Seaport Private Limited - India
- Binh Thuan Hamico - Vietnam
- Borneo Indobara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Port Waratah Coal Services - Australia
- CIMB Investment Bank - Malaysia
- Bukit Baiduri Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Ministry of Transport, Egypt
- Marubeni Corporation - India
- Agrawal Coal Company - India
- Leighton Contractors Pty Ltd - Australia
- Goldman Sachs - Singapore
- Straits Asia Resources Limited - Singapore
- Indian Energy Exchange, India
- Parliament of New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Vedanta Resources Plc - India
- GVK Power & Infra Limited - India
- SN Aboitiz Power Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Kartika Selabumi Mining - Indonesia
- Indogreen Group - Indonesia
- AsiaOL BioFuels Corp., Philippines
- TeaM Sual Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- PowerSource Philippines DevCo
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kobexindo Tractors - Indoneisa
- Interocean Group of Companies - India
- The State Trading Corporation of India Ltd
- Bhatia International Limited - India
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