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