MERS Prompts Warning Over Charterparty Wording

The outbreak of the Middle East Respiratory Syndrome (MERS) in South Korea once again highlights the need for clauses tied to contagious diseases in charterparty agreements, law firm Clyde & Co has warned.

In a commentary released on 2 July, Clyde & Co’s Singapore-based partner and chief representative Ik Wei Chong and legal director Bethan Bradley noted with cruise ships having cancelled calls to South Korean ports and confirmed cases of MERS in the port of Pyeongtaek, shipowners and charterers would be concerned if their ships are to call at the country.

Ik and Bradley wrote, “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.

“Shipowners are obliged to follow charterers’ legitimate orders unless to do so would expose the crew to unacceptable risk. Whilst charterers under a timecharter 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 the outbreak is in the port city itself, the port may be safe as long as there are appropriate precautions. Because of this, shipowners may be liable for a breach of contract if they refuse to let their ships call at the port. “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, which will be able to give timely and appropriate guidance as the situation develops,” said Ik and Bradley.

The number of new MERS cases in South Korea has been declining since 28 June, and the government is working with the World Health Organization to eradicate the disease in South Korea.

Ik and Bradley said, “In the event that a timechartered 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.

“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 that can arise in this area.”

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