Communicable disease is alive and well
Communicable disease is alive and well
Introduction
With a sinister name that suggests a rogue asteroid, the trajectory of new coronavirus COVID 19 is equally uncertain. Affecting tens of millions and infecting tens of thousands, it has currently caused 1,770 deaths, lengthy lockdown, state-certified economic paralysis and major disruption at airports, in rail stations and on cruise liners.
The “DIAMOND PRINCESS” remains isolated at Yokohama, the “MS WESTERDAM” was rejected by five governments before docking in Cambodia, and if the “COSTA SMERALDA” had tested positive at Civitavecchia those on board could have reflected at leisure on the irony. For it is the Italian quarantena that signposts the 40 days that used to be stipulated for sickness to pass, giving us a word and a procedure widely thought obsolete but now back under scrutiny in almost every corner of the trading world - quarantine.
Main issues
Owners, charterers, other cargo interests, passengers and insurers alike are now revisiting often standard but long unused clauses, and assessing risk. Alongside increasing contagion, uncertain incubation and fretful media headlines, this article briefly outlines the key scenarios before tackling the likely main issues, so parties can consider these, prepare wording and obtain advice.
In essence, the virus will either break out on board during transit or contaminate a destination such that it is closed or restricted. The core marine legal touchpoints will then be:
1. Valid tender of NOR;
2. Free pratique;
3. Laytime and demurrage exceptions;
4. Force majeure;
5. Frustration; and perhaps
6. Safe port.
Valid tender of NOR
This is needed to start laytime, and (subject always to any contrary fixture wording) the vessel must have reached a place where NOR can properly be tendered. This presents the well-known issues on port or berth fixture, and any actual or anticipated new, or wider, local transit or waiting restrictions may prove highly relevant, such that owners might want to say that NOR could be tendered more remotely.
They could also use the familiar WIPON, WIBON, WCCON and WIFPON, to tackle any delay in reaching the relevant place, or in getting customs authorisation, or free pratique.
Free pratique
Commonly considered a mere formality, this is clearance to enter when the vessel has convinced the port authority that there is no risk of infection. It used not to apply everywhere, and local procedures still vary, but it is another perceived dated notion that is once more very significant.
Some fixtures say that even a valid NOR will not trigger laytime unless free pratique has been granted - see for example clause 6.3.3. of BPVOY4, which also provides that, in some circumstances and after a certain time, the Master may issue a note of protest.
So, on what may now be a very important topic, parties will need to agree terms that adequately reflect what could happen, and must be alert for alternatives if free pratique is delayed.
Laytime and demurrage exceptions
Some fixtures expressly cover the situation, so for example time counts if charterers (validly) order the vessel somewhere that is already under quarantine, but not if that comes about during transit, or amid the port call.
Care might need to be taken, though, to ensure any intended application if it was the vessel itself, rather than the location, that proved to be quarantined.
In such cases, charterers might also consider other wording, such as exclusion of any time lost:
“ .. as a result … of deficiency or inefficiency of … Master, officers, crew …”.
They might also reduce outlay under wording that makes only half time count, for example during delay due to:
“closure of, or any restriction of operation at, any port or terminal by order of any local authority”.
Force majeure
This is often invoked when performance is impacted by factors that the affected party claims are beyond his control.
It is widely reckoned to be an established principle, but it is not. It exists only as a contractual term. It is common enough in purchase contracts and fixtures, but the party relying on it must show that what has happened comes within it.
China’s Government has started issuing certificates seeking to protect affected companies from liability. However, whatever may be their effect within that country, it is submitted that, for contracts involving overseas bodies, unless the contract and its governing law say otherwise these are just part of the evidence, they are not conclusive or binding, and the circumstances would still need to fall within the wording of a relevant clause.
Frustration
By contrast, this is a legal doctrine. It means that performance is excused because later events have turned the agreement into something completely different.
Overall, it depends on how seriously the contract has been derailed, and that may turn on how long the particular difficulty has lasted - a single and brief event is not likely to be enough.
Safe port
This too seems almost to have acquired doctrinal status, but it simply concerns which party has agreed to shoulder the risks of any port, or perhaps berth, hazards.
Under commonly agreed wording, charterers can order the vessel only to places that are safe, as defined. Spread of new and incurable disease to a particular location might mean that owners either will not agree to call there - so it would be outside the fixture range, and this issue would not arise - or could validly refuse to go.
Much would depend on the nature and perhaps duration of the call, the layout of the location and the containment or other precautionary measures.
If you would like to discuss anything raised in this article please contact Chris Potts on +(852) 9461 4377 or at chris.potts@crumpslaw.com or Peter Lau on +(852) 9683 7439 or at peter.lau@crumpslaw.com.