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Newsletter August 2014

How does Ebola outbreak affect charterers?

Unfortunately there have always been infectious diseases in this world. For those who remember: the Indian Plague in 1994 and more recently SARS in 2002. And now a serious outbreak of Ebola in West Africa. How does this affect charterers?

Obviously there are different Charter Party contracts and each with their own specific terms and conditions. On a general note, and depending on the exact situation, Time Charterers have the duty to nominate a safe port, which under English law means “…in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence being exposed to danger which cannot be avoided by good navigation and seamanship…”. This is very much relating to the physical safety of the vessel. The burden of proof of unsafety is with the owner and not easy to prove, when it comes to an infectious disease where precautions may be possible. It will be different if a port is closed. Under a Time Charter charterers can give new instructions for another port.

Under a voyage charter, the same safe port arguments apply. However, there will be little to no room to instruct the vessels to an alternative port. Depending on the terms, owners may even be allowed to go to another port of their (reasonable) choice. Many charters have the provision “..or so near as she may safely get”. Or it may even lead to frustration of the Charter Party. If a port is not closed it may be difficult for an owner to refuse going to a port in any of the affected countries under a voyage charter with named port(s).

A port may not be legally “unsafe” simply because it is affected with Ebola.

Apart from protecting their crew, the owners also have a financial or operational interest to try and avoid such ports, as this may jeopardize a possible next employment.

A number of countries and ports refuse or quarantine ships coming from an infected area. This should also be a consideration for charterers intending to use multiple ports. Owners, supported by their P&I Clubs, are now trying to include an Ebola Clause in the Charter Party, which is in many ways ambiguous and the clause leads to contract uncertainty. Charterers should be aware. Especially the part where it says “…may expose the vessel and or crew…” is ambiguous. It is uncertain what triggers the words “may expose”.

Also “..shall indemnify the Owners for any time or expense incurred by Owners, including claims from holders of the Bills of Lading..”.

And “Any delays and additional costs and expenses….at subsequent ports” in para E). The clause can have far-reaching consequences both commercial and legal. For a commodity trader this can even lead to frustration under the sales contract. Possibly even ending with a distressed cargo on board a ship, rapidly losing market value. Moreover there is an exposure for charterers in respect of time loss / delays or possibly deviation under the Bill of Lading. Events that are most likely not covered under an insurance policy.

In our view owners have to be upfront in the charter party negotiations. They either accept or refuse to go to an infected area. When a situation deteriorates in an agreed port and the port is closed, owners are automatically protected. This still leaves charterers with possible delays and time loss but the commercial exposure is far better manageable and legally they are better protected.

Accepting this clause charterers are faced with an uncertain contract and un insurable losses.

Charterama is an international service provider and I'm happy to serve our clients in the Asia Pacific region.
Kwan Tang - Deputy Director Business Development

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