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Ince: Novel Coronavirus (2019-nCoV) Legal issues and Impact on International Trade & Transportation

WHO has declared the outbreak as a Public Health Emergency of International Concern and has proposed certain Temporary Recommendations be issued.

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Wai Yue Loh, Kimarie Cheang, and Cindy Wang, of international law firm Ince on Friday (31 January) published an article reviewing potential contractual issues for the maritime sector due to Novel Coronavirus (nCOV) outbreak:

The novel coronavirus was first reported in late December 2019. The outbreak of the virus originated from the inland city of Wuhan, the capital of the Hubei province, PRC, but has quickly spread to coastal cities within China such as Shanghai, Guangzhou, Shenzhen, Tianjin, etc. Additional cases are identified in a growing number of countries internationally.

By 30 January 2020, the World Health Organisation (WHO) has declared the outbreak as a Public Health Emergency of International Concern (PHEIC) and has proposed certain Temporary Recommendations be issued.

We highlight below some potential contractual issues for consideration.

Safety of the port – Can an Owner refuse to go to an affected port?

Generally, under a time charter, an Owner is obliged to comply with a Charterer’s legitimate employment orders, unless compliance with the Charterer’s order exposes the ship to a safety risk.  It is currently unclear whether the virus is at a stage where it may render a port ‘unsafe’. Although the WHO has declared the outbreak as a PHEIC, it has at the same time recommended that no travel or trade restriction be imposed. However some countries are already implementing a ‘No travel’ policy to China.  Various shipping ports have imposed additional checks and quarantine measures on vessels arriving from China, or those with Chinese crew on board. 

It is accordingly difficult to determine the ‘unsafety’ of an affected port.  This will depend on the facts bearing in mind the evolving situation. If an Owner refuses to follow a Charterer’s order without sufficient grounds, the Charterer may well be entitled to terminate the contract and/or claim damages (depending on whether such conduct can be said to be repudiatory or renunciatory) so an Owner should carefully review its contractual position.   Equally, if an Owner does follow a Charterer’s order(s) and suffers loss as a result, it would most likely be entitled to an indemnity from the Charterer (depending on the terms of the contract).

Quarantine, Off Hire, and Laytime & Demurrage – What happens if a crew member becomes infected?

Under a time charter, an Owner will generally be responsible for matters relating to the crew.  If a crew member becomes infected, the Owners should ensure that the crew member is quarantined and arrange for the treatment and repatriation of the crew member.  Where the illness results from a Charterer’s order, the Owner may be able to claim any costs of repatriation, medical expenses, etc., from the Charterer depending on the terms of the charter. 

Where the ship is in port at the time the symptoms of the virus are discovered on board, it is unlikely that a valid NOR could be tendered.  Laytime & demurrage will therefore not run until a valid NOR can be tendered.

Further, where a vessel has to deviate to obtain medical assistance for its crew member, would the Charterer be entitled to place the ship off hire?  This depends. If the crew member becomes infected as a result of a Charterer’s order, then the deviation may not give rise to off hire unless the Owner is deemed to have accepted the risks of going to an affected port. 

Of course the legal regime is dependent upon individual Charterparty wordings and it would be prudent for all new fixtures to incorporate the BIMCO Infectious or Contagious Diseases Clause.  The provisions were developed following the outbreak of the Ebola virus a few years ago, and are intended for use in response to extreme illness as opposed to more commonly encountered widespread diseases and are based on the principles in BIMCO’s war and piracy clauses.

Force Majeure – Can an affected party rely on FM?

Given the recent declaration by the WHO, force majeure provisions are likely to be increasingly relied upon and invoked by an affected party.  The China Council for the Promotion of International Trade (CCPIT) announced that it would be offering “force majeure certificates” to businesses in China affected by the outbreak of the Coronavirus in Wuhan.  

Whether a party can successfully invoke FM and/or rely on the CCPIT certificates to do so, will depend on the governing law of the contract and the terms of the relevant clause.

As a matter of English law, force majeure is a creature of contract.  Generally a party who seeks to rely on a FM clause bears the burden of showing:

  1. It could not perform its obligations due to the relevant event.
  2. Inability to perform was beyond its control.
  3. There were no reasonable steps the party could have taken to avoid the event or the consequences.

Our initial view is that where the outbreak escalates and has real implications on the operation of businesses (such as the shutting down of business operations as a direct result of the outbreak), this could well fall within the scope of a FM clause. 

Parties are therefore urged to review their FM provisions carefully to ensure that any notification and/or mitigation requirements are complied with, and to gather as much documentary evidence as possible to evidence any relevant FM event. 

Key Takeaways

There is potentially a high degree of business interruption that will ensue, bearing in mind for example that Singapore has now closed its borders to all who have been in China for the last 14 days, the recent British Airways’ suspension of direct flights to and from mainland China, and Hong Kong’s plans to slash cross-border travel between the city and mainland China.  This would all have a significant impact on enterprises, in particular those with staff and management who may have been in China over the festive period. We are already starting to see declarations of force majeure from Chinese entities involved in the shipping and trading spheres.

We reiterate that for your existing contracts, it would be important to identify the risks and exposures arising from the developing situation. Some of these potential issues have been identified above. To reduce the potential for disputes, parties can consider inserting provisions to deal specifically with these issues.  As for your new contracts – if the intention is to insert a clause to deal specifically with the risks of the Coronavirus, it would be important to be clear as to what you are seeking to achieve and to draft the clause(s) accordingly.

This above is not a complete list of issues to be aware of arising from the Coronavirus, and should you have any queries, please do not hesitate to contact the authors of this article.

 

Source: Ince
Photo Credit: Photo by Bill Oxford on Unsplash
Published: 4 February, 2020

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Biofuel

GCMD concludes its final biofuel blend supply chain trial with Hapag-Lloyd

bp provided the B30 biofuel blend to the “TIHAMA”, a 19,870 TEU container vessel operated by Hapag-Lloyd in final trial; marks the end of a series of trials initiated in July 2022.

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GCMD concludes its final biofuel blend supply chain trial with Hapag-Lloyd

The Global Centre for Maritime Decarbonisation (GCMD) on Thursday (18 July) said it has successfully completed its final supply chain trial for biofuel blended with very low sulphur fuel oil (VLSFO). 

This marks the end of a series of trials initiated in July 2022 as part of a larger pilot to develop a framework to provide quality, quantity and GHG abatement assurances for drop-in fuels.

In this final trial, bp provided the B30 biofuel blend to the TIHAMA, a 19,870 twenty-foot equivalent unit (TEU) container vessel operated by Hapag-Lloyd.

The biofuel component used is certified to the International Sustainability & Carbon Certification (ISCC) standard – a multistakeholder certification scheme for biobased materials. The biofuel component comprised neat Fatty Acid Methyl Ester (FAME) produced from food waste.

Authentix, a tracer solutions provider, supplied and dosed the FAME with an organic-based tracer at the storage terminal outside the Netherlands. The dosed FAME was then transported to the Port of Rotterdam for blending with VLSFO to achieve a B30 blend, before the blend was bunkered onboard the TIHAMA.

Similar to previous trials, GCMD engaged fuel testing company Veritas Petroleum Services (VPS) to witness the operations at all stages – from biofuel cargo transfer to bunkering. VPS also collected and conducted extensive laboratory tests on samples of the biofuel and biofuel blend collected at pre-determined points along the supply chain to assess quality per Standards EN 14214 and ISO 8217.

With well-to-wake emissions of 13.74 gCO2e/MJ, the neat FAME presented a 85.4% emissions reduction compared to the emissions of the fossil marine fuel. The reduced emissions complies with the MEPC 80, which requires a minimum emissions reduction of 65% in order for biofuels to be classified as sustainable.

GCMD and Hapag-Lloyd determined that consumption of the 4,500 MT B30 blend of FAME and VLSFO resulted in 27.9% emissions reduction compared to sailing on VLSFO.

A newly developed tracer deployed with this supply chain

GCMD collaborated with Authentix to develop and deploy a new organic-based tracer to authenticate the origin and verify the amount of FAME present in the blend. The proprietary tracer blended homogeneously with FAME and was detected at expected concentrations at all sampling points along the supply chain.

This trial marks the first deployment of this tracer in a marine fuel supply chain. Previously, similar tracers were used to authenticate and quantify biofuels in road transport and LPG supply chains.

Development of a comprehensive biofuels assurance framework underway

With the completion of this trial, GCMD has deployed a diverse range of tracer technologies, including synthetic DNA and element-based tracers, in addition to the organic-based tracer used in this trial. The trials have also included the development of a chemical fingerprinting methodology and the evaluation of lock-and-seal and automatic identification systems (AIS) as additional solutions to ensure the integrity of the biofuels supply chain.

Learnings on tracer limitations and benefits will be incorporated into a framework that recommends appropriate use to ensure consistent and robust performance. This effort will complement existing ISCC by providing additional supply chain assurance through physical traceability.

The insights from these trials will be shared in a series of reports covering issues, such as traceability, biofuel degradation, supply chain optimisation and abatement costs. These findings will culminate in a comprehensive assurance framework to provide guidance on biofuels use, slated for release in the fourth quarter of 2024.

 

Photo credit: Global Centre for Maritime Decarbonisation
Published: 19 July 2024

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Ammonia

MPA, ITOCHU and partners sign MoU on ammonia-fuelled bulk carriers study

As a government agency, MPA,will review and provide their views to the designs of the ammonia-fuelled ships to ensure their safe operations, says ClassNK.

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Classification society ClassNK on Thursday (18 July) said it signed a Memorandum of Understanding (MoU) with ITOCHU Corporation, Nihon Shipyard Co., Ltd., and Maritime and Port Authority of Singapore (MPA) regarding a joint study for the design and safety specifications of ammonia-fuelled ships which are under development by ITOCHU and partners.

“The discussion for a specification of ammonia-fuelled ships with a governmental body related to their operation is essential for a social implementation of ammonia-fuelled ships,” ClassNK said. 

“As one of parties of the MoU, MPA, a government agency overseeing the world’s busiest bunkering hub, will review and provide their views to the designs of the ammonia-fuelled ships to ensure their safe operations.”

The MoU is based on the premise that 200,000 deadweight ton class bulk carriers will be built by Nihon Shipyard with an ammonia dual-fuelled engine.

“The necessary clarifications of the specification for the ammonia-fueled ship to carry out ammonia bunkering in Singapore will be conducted among parties of this MoU, for the commercialisation of ammonia-fuelled ships,” ClassNK added.

 

Photo credit: Venti Views on Unsplash
Published: 19 July 2024

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Biofuel

“K” Line to use biofuel on three Gram Car Carriers-chartered vessels in Singapore

Biofuel will be supplied to the sister vessels “Viking Ocean”, “Viking Diamond” and “Viking Coral” while bunkering in Singapore, says Gram Car Carriers.

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“K” Line to use biofuel on three Gram Car Carriers-chartered vessels in Singapore

Norwegian transportation firm Gram Car Carriers (GCC) on Thursday (18 July) said Kawasaki Kisen Kaisha (“K” LINE) will use biofuel on three vessels chartered from GCC from July onwards. 

“The biofuel will be supplied to the sister vessels Viking Ocean, Viking Diamond and Viking Coral while bunkering in Singapore, an Asian hub for marine biofuels,” GCC said on its social media. 

“The use of biofuel is a key environmental initiative to reduce emissions across the entire value chain (well-to-exhaust) and an effective way of transitioning to low-carbon marine fuels amid globally tightening environmental regulations.”

“We support the green mobility shift. This means that GCC commit to supporting the transition of both vehicles and their logistic chain towards a zero-emission future in close cooperation with leading customers such as K-Line,” said Georg A. Whist, CEO of GCC.

 

Photo credit: Gram Car Carriers
Published: 19 July 2024

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