Shipping needs to prepare for coronavirus restrictions; Hill Dickinson

Maritime law firm Hill Dickinson has warned that the shipping industry needed to be prepared for restrictions both in China and internationally as the authorities act to try to slow the spread of the coronavirus that originated in the city of Wuhan, China.

Hill Dickinson partner Beth Bradley said that shipping should be prepared for similar measures implemented during the outbreaks of Sars (in 2003) or Ebola in West Africa from 2014 to 2016, and also twice in the past few years. These included infection of crew members, quarantine measures, closure of ports, and possible repercussions on charterparty obligations.

“While this outbreak is not currently anticipated to cause the global complications experienced by the Ebola and Sars outbreaks, it is wise for ship operators and charterers to be prepared for any greater spread of this virus,” she said.

Bradley noted that delays caused by quarantines and deviations had a different impact under charterparties. In relation to the safety of the crew, employers have a duty of care towards the crew under their employment contracts, and a breach of such a duty could lead to exposure to a variety of claims.

Under time charterparties, when a vessel is delayed by a quarantine or is forced to deviate due to an infected crew member, the vessel may be placed off-hire, subject to the wording of the charter, said Bradley. Common wordings of charterparties have been held to place the vessel off-hire due to legal or administrative restraints if they related to the efficiency or condition of the vessel or crew.

In spite of this, should the delay be the inevitable result of orders resulting from how the charterers chose to employ the vessel, the vessel may remain on hire. The outcome in each case will depend on the facts and the wording of the charterparty. Under voyage charters, a deviation for the safety of the crew will be at the shipowner’s expense as no additional freight may be payable unless, under the Hague or Hague-Visby Rules, a “reasonable deviation” defence is successfully raised.

In order to commence laytime under a voyage charterparty, owners need to tender a valid Notice of Readiness (NOR). For owners to do so, a vessel requires free pratique. In the absence of any wording to the contrary in the charterparty, everyday practice provides that a Master can give a valid NOR without having first obtained free pratique, provided that there is no reason to assume that it is anything other than a mere formality.

However, in cases of an outbreak, a vessel may be subject to quarantine delays, such that the assumption that the vessel will be able to obtain free pratique will not be a mere formality.

If a vessel is calling or has called in an infected area, special protective measures may cause delays until the health of the crew is ascertained. The risk of such delays until a valid NOR is capable of being tendered is borne by the owner, unless the charterparty provides otherwise.

Bradley noted that a contagious disease could legally make a port unsafe.

Under a charterparty, charterers are under an obligation to nominate a safe port, an order with which the shipowners must comply with unless there is an unacceptable risk, or the port is known to be unsafe. Risks to the crew may render a port unsafe, even where there is no risk of real damage to the vessel. The safety of a port would depend greatly on whether proper precautions and protective measures were in place to ensure that a vessel can call at the port without risking infection of its crew. Such measures were taken during both the Ebola and MERS outbreaks, and numerous ports remained open, despite being affected by the outbreak.

Bradley said that at present (in a rapidly developing situation) the Wuhan virus was not at a stage where it might render a port unsafe. “The severity of the outbreak would need to escalate significantly before owners could reasonably refuse to call at scheduled or nominated ports on the basis of the ports being unsafe”.

A standard force majeure clause suspends and/or terminates the contract on the occurrence of an extraordinary event beyond the parties’ reasonable control, which materially affects the parties’ ability to perform their contractual obligations. Such an occurrence should not reasonably have been foreseen or provided against.

John Agapitos, Hill Dickinson paralegal, added that at the time of writing there had only been internal transport bans affecting certain Chinese cities around the centre of the outbreak. “There has not yet been a travel ban to China or any other neighbouring countries. It is unlikely that any given situation will fall within the scope of a force majeure clause, unless the wording of a particular clause is quite broadly drafted”.

However, he warned that, if the outbreak escalated in the future and/or travel bans were imposed, “questions of whether it amounts to a force majeure event may come to the fore.”