The global Ebola virus outbreak is causing issues with charterparties and bills of lading as ports clampdown on ship calls from affected countries
The shipping world is facing a significant challenge following the outbreak of the Ebola virus, with potentially dramatic implications for shipowners involved in trade to and from Western Africa. This article gives a general overview of the legal implications, although these may vary from case to case depending on the underlying contract.
Here, we give four anticipated scenarios and the implications under English law.
The vessel (either due to the owner or the crew) refuses to enter a port that is allegedly ‘Ebola infected’. Here the principle of safety of ports may apply. In the given context a port will probably not be safe if it exposes the crew to an imminent risk of contraction of the Ebola virus that cannot be avoided by taking appropriate measures. This is rather a question of facts than of law and medical advice should be sought. For this first scenario we will imply that the port is indeed unsafe.
It should be remembered there is no concept of ‘Force Majeure’ in English statutory law and the doctrine of frustration is interpreted strictly
Under a time charter, a port can be unsafe at the time the order was given (rendering the order invalid and owners have grounds for the refusal), or become subsequently unsafe, i.e. after charterers have given the initially valid order to proceed to a port which only thereafter became affected by the virus. In the latter case owners can refuse the subsequently invalid order and charterers will have to give fresh and safe port orders. Please note that frustration of a time charter will probably not be arguable as charterers can give new orders (absent impossibility or radically different performance in absence of breach of either party).
The position under a voyage charter party would be different. The charter may be found to have been frustrated, ie. it can be terminated free of liabilities to any party. Here, the unsafe nature of the port will affect the contract ‘at the core’, as most voyage charters are for one voyage only. It should be remembered, however, there is no concept of ‘Force Majeure’ in English statutory law and the doctrine of frustration is interpreted strictly.
However, whether the contract might be frustrated depends on the terms of the voyage charter or the bill of lading, as there might be transhipment or lightering clauses included. If this is indeed the case owners will have to tranship or lighter the cargo even though this will cause additional costs and/ or loss of time.
Further, the ban on entry or unsafe state of the port has to be permanent. The prospects of whether a ban may be eventually lifted have to be looked at from a reasonable perspective at the time of the incident. A mere delay (even if lengthy) is not enough.
Finally, if all the above requirements are fulfilled then the voyage charter or the bill of lading might be frustrated. The consequences of the contract being frustrated depend greatly on whether the vessel was already laden with cargo.
Under a voyage charter and given that the vessel is not loaded, the situation is simply that the contract is terminated without any liabilities for any party to the contract terminated. In laden condition the question arises as to whether freight was earned at the time of the termination. This will depend on the terms of the charter party.
Further, if in a laden condition the question remains what will happen to the cargo on board once the contract is terminated. Under a bill of lading, the owners have the duty to care for the cargo and, once frustrated, to discharge the cargo at a location which seems reasonable to all parties. It is worth mentioning that owners may have a claim for reasonable pay for such discharge operation.
The vessel refuses to enter a port because either the crew or the owner fear that following charterers´ order would result in an imminent risk of contraction of the virus.
Again, this is a question of (medical/ expert) facts rather than law. If the port can indeed be considered safe then the owner will be in breach of the charterer’s valid order and consequently the vessel will be off-hire and liable for damages that the charterers may have for this delay. It may also lead to a possible repudiatory breach by owners and liabilities under bills of lading.
The vessel is prevented from entering port A due to her previously calling port B (which authorities in port A allege is Ebola infected).
Under a time charter the answer here is probably that if calling port A is prevented due to calling port B and calling port B was the charterer’s order under the same charter party then there is presumably no liability for delay on the owner and the vessel remains on-hire. The charterer may need to give fresh alternative orders, or accept the time of any possible quarantine.
Under a voyage charter or under a bill of lading the situation may again be so that the contract is frustrated with above consequences.
In the given scenario it might be worth mentioning that the application of defences under the Hague Visby Rules might be prejudiced (cf. Article IV rule 2 (g) and (h): “Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from (g) arrest or restrain of princes […] (h) [due to ] quarantine restrictions”).
This might be the case when the owner/charterer knew about the quarantine restrictions in port A already at the time when they were calling at port B, and still agreed/ordered the vessel to go to Port A.
The vessel cannot enter a port due to an infected/ suspected crew on-board, or due to potentially infected stowaways on-board. Here, depending on charter party clauses, the vessel may potentially be off-hire and the owner responsible for any delay/losses. Nevertheless, the owner may try and argue that there is a causational link between a last port of call under charterer’s order and the denied entry to a port.
Any legal issue related to demurrage will depend on the type of the charter – ie whether it was a port or a berth charter – where a valid notice of readiness can be tendered and whether the vessel is required to be in free pratique or not. There may be laytime exceptions applicable, and whether the delay was caused due to the unsafe state of the port.
Finally, we may add some comments on cargo liabilities that owners may face under the bill of lading for delay or deviation. If the relevant bill of lading does not seem to be frustrated then the owner may be liable for costs related to transhipment, lightering or alternative transportation to the place of the intended discharge. Further, the owner might be liable towards the receiver for delay-losses (this represents the difference between the market value at the day of intended discharge and the market value of the day of actual arrival) and potentially for resale profits.
As with all covered risks we strongly recommend to inform your insurer of all potential issues relating to the outbreak of the Ebola virus and further, to follow closely developments and to take all recommended preventive measures.
Finally, in order to avoid risks and expenses incurred in the future we suggest that operating charter party clauses are scrutinised and protective clauses are incorporated where possible in new fixtures.
Niklas Tjorben Sonnenschein is a claims executive at Skuld in its Oslo office. He can be contacted on Direct: +47 22 00 22 14 or firstname.lastname@example.org.