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Coronovirus and Maritime Law issues By Dr. (Capt.) Vivek Jain- ALCO Insurance Brokers Pte Ltd

Implied indemnity           

Owners may also have an implied indemnity if they can show that the loss arose out of a risk which they had not agreed to bear. The scope of the indemnity is however narrow as owners will have to show that the risk was one which was not reasonably foreseeable. It is arguable whether there is even any implied indemnity when there is a specific protective clause relating to the present outbreak. 

BIMCO protective clause: charterers responsible for resulting liabilities when trading to an area or zone of danger

Somalia waters Piracy hotspot, zone of danger


Members will be aware that BIMCO has drafted specific clauses for infectious or contagious diseases for both voyage and time charter parties. In these clauses owners may refuse to trade to an area or zone of danger. If, nevertheless, that option is waived and the vessel proceeds, charterers will be responsible for resulting liabilities and any additional costs of preventative measures taken by owners to protect the vessel and crew. It is important to note that whether an area presents the degree of danger justifying a refusal to proceed is a subjective decision to be taken by owners in the light of available evidence and information. 

Owners will need to consider the most effective means of obtaining appropriate financial guarantee from the charterer

Under the time charter party clause, and recognizing charterers’ commercial control over the vessel, charterers’ obligations are expressly stated to include post contractual costs such as cleaning, quarantine or fumigation arising from the vessel’s previous trading pattern. In this respect and in order to secure their interests, owners will need to consider the most effective means of obtaining appropriate financial guarantees either at the time of fixing or when agreeing to allow the vessel to proceed to an area considered to be at risk. 

Parties should know about events that arise prior to or during negotiations

The voyage charter version expressly limits application of the clause to situations arising after the date of the charter party. This is because parties should know about events that arise prior to or during negotiations and make appropriate arrangements accordingly. Events arising post-fixture may be more problematic and so the clause sets out a regime to address such changed circumstances. Any delay due to the outbreak will count as laytime and/or demurrage.

Owners and charterers should consult their respective P&I Club to ensure compatible inclusion

The provisions in the clauses might result in contractual or geographic deviation. Accordingly, when considering incorporating the clause, owners and charterers should consult their respective P&I Club to ensure that inclusion will be compatible with their cover and also to discuss any special considerations or requirements that might be applied. 

Duty of care towards to crew 



Closer Collaboration Needed on Seafarer Welfare; Report launch with Kitack Lim (IMO Secretary-General), Nusrat Ghani MP (UK Shipping Minister), Captain Esteban Pacha (AoS Vice Chair of Trustees) and Martin Foley (AoS National Director).

 

Employers owe a duty of care towards their crew. Recommended precautions need to be followed. 

Notice Of Readiness; when NOR is given, vessel must be both physically and legally ready

When the NOR is given, the vessel must be physically ready but also legally ready. It is common to provide for the commencement of laytime “whether in free pratique or not”. Even where there is no such express provision, if those matters are reasonably believed to be “mere formalities” and routine, NOR may be given without having obtained the necessary clearances. However, where there is a known, or even perhaps just a suspected problem, this “mere formalities” exception to the general principle of readiness will not apply.

Deviation for the purpose of saving life is justifiable

A deviation for the purpose of saving life is justifiable. Many standard charters will give the owner the right to deviate in such circumstances (Gencon 1994 clause 3 and NYPE 1946 clause 16). Unless the charter states otherwise, the vessel will not be off hire if the ship has to deviate in order to save the life of an infected crew.

Owners need to add a clause providing for additional freight when a vessel deviates to save the life of a crew

With regards to owners under a voyage charter, although the deviation would be justifiable, owners would not be able to claim additional freight. Owners may want to add a clause providing for additional freight if the vessel is forced to deviate to save the life of a crew who was infected as a result of visiting a port. 

Under a bill of lading contract, a similar deviation would be justifiable (article IV rule 4 of the Hague Visby Rules).    

Safe Port: coronavirus could render the port unsafe

The coronavirus could render the port unsafe. Under most standard charter party forms charterers are generally obliged to nominate a safe port. The owners must generally comply with the order to proceed to a port unless there is an unacceptable risk that the port is unsafe. The master does not have to instantly obey charterers’ orders if he is in doubt of the prospective safety of the port. He will have reasonable time to make enquiries. 

If the port becomes unsafe during the stay, charterers to order the ship to leave under time charter parties

Under time charter parties, if the port becomes unsafe after the first nomination, charterers then have an obligation to nominate another (safe) port. If the port becomes unsafe during the stay, charterers must order the ship to leave. 

In the case of a voyage charter party, where the port has already been nominated, the view is that charterers have no general duty or right to re-nominate. If the charter (and the B/L) have a liberty clause (e.g. “so near thereto as she may safely get”), then the owner may discharge the cargo at some other port. 

Frustration and force majeure 

Frustration occurs when without default of either party; the performance of a contract is rendered impossible or changes the party's principal purpose for entering into the contract so as to render it “radically different”.

When charter is frustrated, main factor is whether the interruption substantial in relation to the remainder of the charter period.

The outbreak of the virus could leave to substantial delays due to quarantine for example. A charter may be frustrated if the performance of the charter is sufficiently delayed. The main factor is whether the interruption will be, (or likely to be) substantial in relation to the remainder of the charter period. The length and effect of the interruption must be assessed at the time that the cause of the delay operates and without the benefit of hindsight. If at the outset of an event, the delay appears likely to be of short duration, the contract will be frustrated when subsequently it appears that the delay will be inordinately lengthy. 

coronavirus may frustrate a voyage charter  while it may not a time charter


Diamond Princess quarantined off Japan coast 

 

The virus may not necessarily render the charter frustrated depending on the terms of the charter. The coronavirus may frustrate a voyage charter whilst it may not have any effect on a time charter with a wider trading limit. In effect, if the charter permits the ship to trade between other places then the charter will not be frustrated even though the charterer may find it hard to find an employment for the ship. 

With regards to whether this disease would be a force majeure event, this would greatly depend on the wording of the clause.


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