With the coronavirus continue to spread all over the world, rigorous prevention and control measures have been taken at global ports. Among the recent cases and consults handled by the Association, a lot were about disputes at foreign ports. Since what and how port authorities do to grapple with the pandemic differ, risks involving cargo delivery, quarantine measures and time losses due to possible infection may affect obligations under a charterparty on different levels. Both parties tend to resolve disputes based on the interpretation of specific clauses. However, with the precise terms of each charter vary, the below article seeks only to offer some advices for owners and charterers in negotiating and formulating protective provisions in the context of the pandemic.

I.     Land transportation problems

Time charter parties under which cargos are generally transportable, seldom set out clauses that place ships off-hire should consignors fail to provide the cargo on time. In contrast, responsibilities for potential delays may need to be allocated between both parties under voyage charter parties where the exact type of cargo and loading/discharging port are usually settled.

The author would like to point out that laytime and demurrage clauses under voyage charter parties are applicable only to loading and unloading of cargo and cannot be extended to delays in its production, provision and transportation ashore. Therefore, to exempt demurrage charges, agreement on delays caused by reasons other than cargo operations at port shall be specified in the contract. Note also that force majeure clause cannot exempt such responsibilities as, first, it is not an established principle in English law and second, such delays cannot be identified as force majeure events. Instead, some general exemption clauses in standard charter parties can be referred to as examples.

In addition, charterers who are obliged to provide a large quantity of cargo over a given period of time under a contract of affreightment (COA) are in greater need of protection by such exemption clauses.

II.      Port quarantine and commencement of laytime

As the coronavirus situation keeps escalating, it is now required at some ports that ships from the epidemic area or elsewhere shall be quarantined for 14 days before applying for berthing. Some were even ordered to leave the port after anchoring or berthing. These epidemic prevention measures have, therefore in practice, given rise to issues in tendering NOR as well as running of laytime and demurrage.

In order to tender a valid NOR, the vessel must not only be an arrived ship, but it must also be actually ready to begin cargo operations. First, in terms of whether the vessel has arrived, technically she has not reached the designated place to tender a NOR if she is quarantined outside the port. Even she is quarantined at the berth in port and parties has agreed that NOR may be tendered “whether in free pratique or not” (WIFPON), it should be pointed out that such clauses are made so that the ship is entitled to tender NOR in its usual waiting anchorage when the berth is not available. It may not be applicable especially when the ship is quarantined at a designated anchorage other than the usual waiting anchorage.

Second, in terms of whether the vessel is physically ready, it is commonly accepted that in normal situations quarantine is a mere formality and NOR can be tendered regardless of whether free pratique is obtained. WIFPON clauses are provided to that effect. However, in the context of the pandemic, if the vessel is quarantined prior to or after the NOR is tendered, she may not tender an effective NOR.

To come to the point, it will be prudent of both parties of a voyage charter to carefully investigate the protocols and procedures currently at the destination port and negotiate the contract accordingly.

III.     Time loss due to possible infection

The previous part has addressed the situation where pilots and port authorities may refuse to perform their duty without justification. Further, the Association has observed another situation that may lead to time loss under charter parties, that is when crew members with suspected symptoms like fever or coughing are proved to be infected with just a flu after quarantine and inspection.

In order to stop the running of laytime under a voyage charter, the charterer will have to either prove that it’s the owner’s fault that has deprived them of the ship’s operation, or that specific exception clauses are included to prevent demurrage being payable. The former way can be tricky and so it is advisable to have specifically made clauses in the contract.

It remains a contentious issue in practice that whether ships can be placed off hire under time charters. The most widely used off hire clauses refer to deficiency/default of men, which does not cover the particular situation here. Parties may end up in more disputes if charterers intend to place the ship off hire by relying on the general “or any other cause” sweeping up language.

IV.    Wording of contract clauses

In addition to above situations, disputes resulted from vague expressions in contracts have also been reported. Words like “epidemic area” or “risk area” can be obscure if definitions are not provided. Both parties shall make sure they have fully understanded the announcement mechanism of an official or international organization if they are to be related to the exercise of rights in the contract, or the clauses may not be applicable.

V.     Conclusion

To protect themselves against the influence of the pandemic with effective and targeted clauses, parties shall utilize multiple resources to get a comprehensive knowledge of the policies and situations at the destination port and remember also to make clearly worded contracts accordingly. Some coronavirus clauses have already been available now apart from the BIMCO IOCD clauses. The Association will keep following on the latest development and have the Members updated.

The above content is only for Members’ reference and does not mean that the Association has expressed any view on any specific case, nor can it be used in any publication. For further information, please feel free to contact the FD&D department.