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MERS throws spotlight on legal impact for charterparties

MERS throws spotlight on legal impact for charterparties
With the outbreak of MERS seemingly under control in South Korea, although the 34th death was reported on Wednesday, fresh cases of the deadly virus have surfaced in the Philippines, and law firm Clyde & Co has raised concerns over potential legal impact on charterparties.

The spread of MERS (Middle East respiratory syndrome), also known as camel flu, had earlier hit South Korea’s Pyeongtaek city, leading to cruise ships cancelling their calls at Pyeongtaek port and a drop in passenger arrivals.

“Thankfully South Korea’s MERS outbreak appears to be subsiding however cases of MERS have now been reported in China, Malaysia, Thailand and most recently in the Philippines. There clearly remains a risk of future outbreaks, whether of MERS or other infectious/contagious diseases which would raise the spectre of similar charterparty implications,” said Bethan Bradley and Aislinn Fawcett of Clyde & Co.

This week, the Philippines has confirmed its second MERS case, shortly after Thailand saw its first case, igniting fears of an outbreak in Southeast Asia.

Bradley and Fawcett said that parties can take steps to protect themselves from the uncertainty surrounding such outbreaks by inserting a contagious/infectious disease clause into their prospective charter parties.

An earlier article written by Ik Wei Chong and Bradley from Clyde & Co pointed out that whether the outbreak will have legal implications on a charterparty will very much depend on the wording of the charterparty in questions, as standard form charterparties are unlikely to include wording dealing with outbreaks of such disease.

Some areas to consider specific charterparty wordings could include safe port warranties, quarantine and deviation, free pratique and force majeure, according to Ik and Bradley.

For safe port warranties, 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.

In the event that a time-chartered vessel becomes subject to quarantine delays or is forced to deviate to land an ill seafarer, the hire/off-hire provisions may result in the vessel being placed off-hire, Clyde & Co said. The specific charterparty wording would need to be carefully considered to assess whether this might be the case.

In free pratique, if a vessel has recently called to a port in an infected area, the vessel is likely to be subject to quarantine delays. In such a scenario, unless a charterparty provision states otherwise, owners bear the risk of the delay.

As for force majeure, 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, the law firm pointed out.

Meanwhile in Korea, quarantine measures have been strengthened at the ports, with electronic quarantine being replaced with onboard checks, Clyde & Co noted.

“Various shipping lines active in the region have also reportedly taken preventive measures to safeguard their crew by, for example, implementing regular body-temperature checks and issuing orders to report any suspected symptoms immediately,” said Bradley and Fawcett.