Coronavirus - what does it mean for shipping?

 

Owners are generally obliged to comply with the Charterers legitimate orders, unless in so doing the vessel is exposed to a safety risk. The standard formulation for port safety is derived from the English Court of Appeal's judgment in The Eastern City [1958] 2 Lloyd's Rep. 127: 

 

"a port will not be safe unless, 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…". 

 

In practical terms this means that even if governmental advice is that no travel should be undertaken to a particular port, it may prove difficult to establish that potential exposure to Coronavirus renders a port unsafe such that a vessel can refuse a charterers legitimate orders to call at that port. A refusal to follow charterers orders without legitimate reasons could expose an owner to a damages claim for breach of contract. The charterparty may of course contain terms that address such situations and it is therefore important that close attention is paid to contractual terms when considering charterers orders. 

 

 

The tendering of Notice of Readiness (NOR) is an event that influences the use of laytime and, ultimately, the potential earning of demurrage by the vessel. The charterparty will set out the terms under which NOR must be tendered; a failure to follow those terms could mean that demurrage is not earned. 

 

Generally a vessel must have arrived before NOR can be tendered. Local restrictions however, such as an outbreak of virus onboard the ship, may prevent the vessel from tendering NOR as local authorities refuse to grant free pratique. If NOR cannot be tendered it is possible there may be questions as to the commencement of laytime and subsequent issues over hire and demurrage. 

 

Those contemplating calls at ports that may be affected by coronavirus should consider, certainly when fixing their vessels, whether they could also use alternative provisions such as WIPON, WIBON, WCCON and WIFPON, to address delay any potential delays. 

 

 

Though a familiar term to those involved in the maritime industry, force majeure is not recognised in English law, which instead has the concept of frustration. If there is no force majeure clause in the contract, then it cannot be relied upon or implied under English law. 

 

In practical terms, even if a contract does contain a force majeure clause, the burden of proof is on the party relying on that clause to prove the force majeure event by demonstrating: the event was beyond its control; it prevented or hindered the party’s ability to perform the contract; it took all reasonable steps to avoid or mitigate the event. 

 

Comment 

 

The impact of the coronavirus is a changing beast. It is important that relevant advice is sought where necessary to address what will inevitably have an impact on shipping contracts and we look forward to assisting you with any enquiries you may have.