CORONAVIRUS AND CHARTERPARTIES: WHAT TO DO?

  • The fast spread of a new coronavirus in China has prompted global alarm, with neighbouring states closing their borders, global airlines suspending flights and most of the states barring entry to foreign nationals who have recently been to the Asian country. Furthermore, regarding to limit the spread of the virus to the countries with weak health systems, the World Health Organization (WHO) on January 30 declared a public health emergency of international concern. That unexpected and fast spread of the Coronavirus started to show also its impact on maritime trade. That is why, the ship owners and charterers started to look for a reasonable and fair solution for continuing their trade on one hand and taking the necessary measures against the possible spread and negative impacts of Coronavirus on the other. One of the solution might be inserting a clause on Coronavirus to the charter parties. That clause may be enacted by the parties or, as accustomed in maritime trade, constructed clauses might be inserted. If the related parties prefer to insert constructed clauses; BIMCO Infectious or Contagious Diseases Clauses might be preferable. BIMCO prepared two different clauses for voyage and time charter parties after the outbreak of Ebola in African ports on 2015. This clauses would be analysed in detail here. BIMCO Infectious or Contagious Diseases Clauses for Voyage Charter Parties 2015 The clause is as follows: “(a) For the purposes of this Clause, the words: “Disease” means a highly infectious or contagious disease that is seriously harmful to humans. “Affected Area” means any port or place where there is a risk of exposure to the Vessel, crew or other persons on board to the Disease and/or to a risk of quarantine or other restrictions being imposed in connection with the Disease. (b) The Vessel shall not be obliged to proceed to or continue to or remain at any place which, in the reasonable judgement of the Master/Owners, becomes an Affected Area after the date of this Charter Party (c) In accordance with Sub-clause (b): (i) at any time before loading commences, the Owners may give notice to the Charterers cancelling this contract of carriage or may refuse to perform such part of it as will require the Vessel to enter or remain at an Affected Area; (ii) if loading has commenced, the Owners may notify the Charterers that the Vessel will leave with or without cargo on board, provided always that if the Charter Party provides that loading or discharging is to take place within a range of ports, the Owners shall first request the Charterers to nominate any other safe port which lies within the range for loading and discharging and may only cancel this Charter Party or leave the loading port if the Charterers fail to nominate such alternative safe port within forty-eight (48) hours of receipt of notice of such request. If part cargo has been loaded, the Vessel may complete with cargo for the Owners’ account at any other port or ports whether or not on the customary route for the chartered voyage. (d) If prior to or after arrival and in accordance with Sub-clause (b) the discharging port is determined to be in an Affected Area, the Owners may request the Charterers to nominate an alternative safe port which lies within the Charter Party range. If the Charterers fail to make such nomination within forty-eight (48) hours of receipt of the Owners’ request, the Owners may discharge the cargo, or such cargo remaining on board if discharging has not been completed, at any safe port of their choice (including the port of loading) in complete fulfilment of the contract of carriage. If discharge takes place at any port other than the loading port or at a port that lies outside the range of ports in the Charter Party, the Owners shall be entitled to recover from the Charterers the extra expenses of such discharge, to receive full freight as if the cargo had been carried to the discharging port and, if the extra distance exceeds 100 miles, to additional freight which shall be the same percentage of the freight contracted for as the percentage which the extra distance represents to the distance of the normal and customary route. The Owners shall have a lien on the cargo for such extra expenses and freight. (e) The Owners shall not be obliged to sign, and the Charterers shall not allow or authorise the signing of, bills of lading, waybills or other documents evidencing contracts of carriage for any Affected Area. (f) If, notwithstanding Sub-clauses (b) to (e), the Vessel does proceed to or continue to or remain at an Affected Area: (i) The Owners shall notify the Charterers of their decision but the Owners shall not be deemed to have waived any of their rights under this Charter Party. (ii) The Owners shall endeavour to take such reasonable measures in relation to the Disease as may from time to time be recommended by the World Health Organisation. (iii) Any additional costs, expenses or liabilities whatsoever arising out of the Vessel visiting or having visited an Affected Area, including but not limited to screening, cleaning, fumigating and/or quarantining the Vessel and its crew, shall be for the Charterers’ account and any time lost shall count as laytime or time on demurrage. (g) The Vessel shall have liberty to comply with all orders, directions, recommendations or advice of competent authorities and/or the Flag State of the Vessel in respect of arrival, routes, ports of call, destinations, discharge of cargo, delivery or in any other respect whatsoever relating to issues arising as a result of the Vessel being or having been ordered to an Affected Area. (h) If in compliance with this Clause anything is done or not done, such shall not be deemed a deviation but shall be considered as due fulfilment of this Charter Party. In the event of a conflict between the provisions of this Clause and any implied or express provision of this Charter Party, this Clause shall prevail to the extent of such conflict, but no further. (i) The Charterers shall indemnify the Owners for claims arising out of the Vessel proceeding in accordance with any of the provisions of Sub-clauses (b) to (h) which are made under any bills of lading, waybills or other documents evidencing contracts of carriage. (j) The Charterers shall procure that this Clause shall be incorporated into all bills of lading, waybills or other documents evidencing contracts of carriage issued pursuant to this Charter Party.” The parties decided to insert the above mentioned clause should pay attention to some issues. Firstly; this clause might be applicable not only to the “Affected Area” risking “of quarantine or other restrictions being imposed in connection with the Disease” but also to any port or place risking the exposure of the “Vessel, crew or other persons on board to the Disease”. The first and important rule that is stipulated under this clause is that the vessel should not “be obliged to proceed to or continue to or remain” in a presumed affected area. Furthermore, the clause made a distinction whether or not the affected area is the loading or discharging port. More concretely, if the affected area is in the loading port; the owners would have right to cancel the contract of carriage or may leave the port with or without cargo by refusing to perform the contract. Therefore, if the loading and discharging take place “within a range of ports” the owners will be under the duty to wait 48 hours after giving notice to wait for charterers1 nomination of alternative safe port. When it comes to the discharging port; the owners would firstly be under the duty to request from the charterers to nominate a safe port. If the charterers fail to nominate such port within 48 hours, the owners may discharge the cargo at any convenient port. Such discharge should be admitted as the carriage has been accomplished in conformity with the charter party. Any additional costs arising from such discharge including additional freight if the distance of the convenient discharging port exceeds 100 miles would be on the charterers account. Furthermore, if the vessel remains in the affected area; at first it should not be deemed that the owners have waived of their rights arising from this clause. Besides, any additional costs, expenses, liabilities due to the presence of the vessel in the affected area (such as fumigation, cleaning etc.) would be on the charterers account. Last but not least; any other expenses arising from the visiting of the vessel to the affected area would be on the account of the charterers. 1 The term charterers should be understood in broad sense including but not limited to all related parties of the Cargo. BIMCO Infectious or Contagious Diseases Clause for Time Charter Parties 2015 The clause is as follows: “(a) For the purposes of this Clause, the words: “Disease” means a highly infectious or contagious disease that is seriously harmful to humans. “Affected Area” means any port or place where there is a risk of exposure to the Vessel, crew or other persons on board to the Disease and/or to a risk of quarantine or other restrictions being imposed in connection with the Disease. (b) The Vessel shall not be obliged to proceed to or continue to or remain at any place which, in the reasonable judgement of the Master/Owners, is an Affected Area. (c) If the Owners decide in accordance with Sub-clause (b) that the Vessel shall not proceed or continue to an Affected Area they shall immediately notify the Charterers. (d) If the Vessel is at any place which the Master in his reasonable judgement considers to have become an Affected Area, the Vessel may leave immediately, with or without cargo on board, after notifying the Charterers. (e) In the event of Sub-clause (c) or (d) the Charterers shall be obliged, notwithstanding any other terms of this Charter Party, to issue alternative voyage orders. If the Charterers do not issue such alternative voyage orders within forty-eight (48) hours of receipt of the Owners’ notification, the Owners may discharge any cargo already on board at any port or place. The Vessel shall remain on hire throughout and the Charterers shall be responsible for all additional costs, expenses and liabilities incurred in connection with such orders/delivery of cargo. (f) In any event, the Owners shall not be obliged to load cargo or to sign, and the Charterers shall not allow or authorise the issue on the Owners’ behalf of, bills of lading, waybills or other documents evidencing contracts of carriage for any Affected Area. (g) The Charterers shall indemnify the Owners for any costs, expenses or liabilities incurred by the Owners, including claims from holders of bills of lading, as a consequence of the Vessel waiting for and/or complying with the alternative voyage orders. (h) If, notwithstanding Sub-clauses (b) to (f), the Vessel does proceed to or continue to or remain at an Affected Area: (i) The Owners shall notify the Charterers of their decision but the Owners shall not be deemed to have waived any of their rights under this Charter Party. (ii) The Owners shall endeavour to take such reasonable measures in relation to the Disease as may from time to time be recommended by the World Health Organisation. (iii) Any additional costs, expenses or liabilities whatsoever arising out of the Vessel visiting or having visited an Affected Area, including but not limited to screening, cleaning, fumigating and/or quarantining the Vessel and its crew, shall be for the Charterers' account and the Vessel shall remain on hire throughout. (i) The Vessel shall have liberty to comply with all orders, directions, recommendations or advice of competent authorities and/or the Flag State of the Vessel in respect of arrival, routes, ports of call, destinations, discharge of cargo, delivery or in any other respect whatsoever relating to issues arising as a result of the Vessel being or having been ordered to an Affected Area. (j) If in compliance with this Clause anything is done or not done, such shall not be deemed a deviation, nor shall it be or give rise to an off-hire event, but shall be considered as due fulfilment of this Charter Party. In the event of a conflict between the provisions of this Clause and any implied or express provision of this Charter Party, this Clause shall prevail to the extent of such conflict, but no further. (k) The Charterers shall indemnify the Owners if after the currency of this Charter Party any delays, costs, expenses or liabilities whatsoever are incurred as a result of the Vessel having visited an Affected Area during the currency of this Charter Party. (l) The Charterers shall procure that this Clause shall be incorporated into all sub-charters and bills of lading, waybills or other documents evidencing contracts of carriage issued pursuant to this Charter Party.” It could be assessed that this clause for time charter parties is the harmonized version of the above explained voyage charter party clause. After giving the definition of the affected area, this clause also stipulates the first and important rule of the non-obligation of the vessel “to proceed to or continue to or remain” in a presumed affected area. Accordingly, the owners should immediately inform the charterers about their decision on not proceeding or continuing to the affected area. If the vessel is already in the affected area, the master may immediately leave the area with or without cargo on board after notifying the charterers. In such cases, the charterers, after being notified by the decision of the owners, should present an alternative voyage order within 48 hours. If the charterers fail to present an alternative voyage order; the owners may discharge the cargo at any convenient port. Furthermore, the vessel would be accepted to be on hire during this time and any further expenses arising from this discharge would be on charterers account. Last but not least, similar to the voyage charter party clause; all the relevant expenses, costs or liabilities arising from the wait or comply of the vessel to the alternative voyage order or the visit of the vessel to the affected area would be on the charterers. What to do if the vessel is on the road to affected area and the charter party did not contain a relevant clause? In case of Voyage Charter Party Unless otherwise expressly agreed in voyage charter parties, the charterers would be under the obligation to nominate the loading and discharging port. Such nomination might be done during the conclusion of the voyage charter party or afterwards. Therefore, it is commonly accepted that the charterer, in the nomination of the loading and discharging port, would be under the duty to select safe port. The duty of the charterer to nominate safe port(s) is commonly accepted as warranty. That is why if the port is unsafe, it is commonly agreed that the owner would not be under the obligation to enter the port and should request from the charterer to nominate another port at earliest convenient time. In case of Time Charter Party In every type of time charter party, the employment clause contains a general rule of lawful trade between safe port that might be stipulated differently. In other words, according to time charter party employment clause, the charterers are under the duty to carry lawful merchandise and such carriage should be accomplished between safe ports. A port may be assessed unsafe if the physical or political conditions might prevent the vessel to anchor or to leave from such port. Safe Port and Coronavirus Even though there exists a lot of factor for determining whether or not a port is a safe port; the main point should be, as defined in Eastern City case by Sellers LJ “a port will not be safe unless, in the relevant period of time, the particular ship can reach it, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship” In the light of this definition, the question to be raised here would be should a port alarmed for coronavirus be deemed as unsafe? More concretely, would a coronavirus alarm in a port be acceptable for owners to call this port unsafe and prevent the vessel to proceed this port? This was a question that was discussed during the expansion of Ebola in 2014 and it was accepted that the Ebola expanded port might be acceptable unsafe if there exists a real danger of exposure of the crew to the virus. Such reasoning should be accepted for coronavirus as well. In other words, if there is a high probability of the exposure of the crew to the coronavirus once they get in the port despite the precautionary measures in place; such port might be deemed unsafe and the owners may prevent the vessel to proceed for this port under the employment clause and all other relevant clause of the related time charter party. Last but not least, regarding to diseases or viruses, yesterday it was Ebola, today it is Coronavirus tomorrow another virus or contagious disease might appear. That is why, this reasoning should be accepted for all king of infectious and contagious diseases.