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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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Business

Singapore: Maritime Census 2023 survey deadline extended to 23 October 

‘MPA is conducting an annual survey to collect timely statistics on the maritime industry’s activities, technology, sustainability and manpower developments,’ says the port authority.

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The Maritime and Port Authority of Singapore (MPA) on Wednesday (27 September) said the Maritime Census 2023 survey deadline has been extended to 23 October. 

“MPA is conducting an annual survey to collect timely statistics on the maritime industry’s activities, technology, sustainability and manpower developments,” it said in a social media post. 

Maritime firms selected for the survey will be notified by email or post to complete the survey online via go.gov.sg/mpasurvey . 

“Your participation will help us shape policies and programmes that will drive #MaritimeSG forward,” it added. 

Manifold Times previously reported MPA announcing it was conducting the census to collect timely statistics. 

Related: Singapore: MPA conducts Maritime Census 2023 to collect timely statistics

Photo credit: Maritime and Port Authority of Singapore
Published: 28 September, 2023

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Alternative Fuels

GCMD, BCG survey highlights three maritime decarbonisation archetypes

Survey identified three decarbonisation archetypes within the shipping industry, differentiated in their outlook, investment appetite and the challenges faced.

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September 28, 2023

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The Global Centre for Maritime Decarbonisation (GCMD) and Boston Consulting Group (BCG) conducted an industry survey to take stock of shipowners and operators’ progress in establishing six elements needed for the shipping industry to reach net zero, according to BCG on Wednesday (27 September). 

The survey saw strong participation from 128 shipowners and operators across vessel types, fleet sizes and geographies, which collectively own or operate 14,000 merchant vessels, and account for USD500 billion in revenue.

The duo found high decarbonisation ambitions: Most respondents viewed net zero as a strategic priority, and 77% had already set concrete decarbonisation targets. The industry has also mobilised resources to decarbonise: respondents are investing 2% of their revenues into green initiatives, and 87% have personnel working toward green objectives.

The path to net zero for shipowners and operators requires six elements:

  • A robust strategy and roadmap
  • Four specific decarbonisation levers to reduce emissions: operational efficiency, technological efficiency, fuel transition, and shipboard carbon capture
  • Enablers such as dedicated sustainability teams, strategic investments in green initiatives, internal carbon prices, and digitalization

While the industry has made some progress in adopting mature and cost-effective efficiency levers, adoption of complex or nascent levers remains low. Drop-in green fuels are constrained by costs and supply-side gaps, and optimism for future cleaner fuels is yet to translate into firm commitment.

The industry is now at a pivotal point, with many shipowners and operators ramping up their decarbonisation efforts. Three-quarters of respondents plan to increase investments in green initiatives. Stakeholders can build on this momentum with a variety of supportive actions. But to be effective, they need to tailor their interventions to address the specific challenges that shipowners and operators face at each stage of decarbonisation.

Three Decarbonisation Archetypes

GCMD and BCG saw three archetypes, differentiated in their outlook, investment appetite, and the challenges faced.

Frontrunners have the greatest ambitions and are willing to invest heavily. They are pushing boundaries, adopting even nascent decarbonisation levers, such as wind propulsion and air lubrication. A majority plan to pilot shipboard carbon capture solutions by 2025. Frontrunners are also planning to adopt methanol and ammonia as early as 2026 and 2029 respectively, and the availability of fuels and bunkering infrastructure will be critical to enabling adoption.

Followers believe in decarbonising their fleets, but have tighter investment thresholds and a near-term outlook. They have kept pace with Frontrunners in adopting mature and cost-effective efficiency levers, such as main engine improvements and slow steaming, but are behind in the adoption of nascent levers, such as wind propulsion and air lubrication.

Conservatives are still early in their decarbonisation journey, likely due to a lack of awareness and familiarity with the various decarbonisation levers, and the capabilities to assess and deploy them. They are best supported by measures that increase their familiarity with the levers and help contextualise them to their specific fleets and operational requirements.

The research highlights five key actions for stakeholders:

Conduct technical pilots and facilitate data sharing, especially for nascent levers

  • Create innovative financing mechanisms to de-risk adoption of less mature levers
  • Raise awareness, contextualize levers, and build capabilities, especially among Conservatives
  • Start to build out future fuels infrastructure at ports
  • Develop mechanisms to equalize and share the costs of levers across the ecosystem
  • Maritime decarbonization is a complex, critical endeavor. The successful implementation of these five key actions demands a whole-of-value-chain approach. By working together, stakeholders can transform the maritime sector into a beacon of environmental stewardship, and set a course for a greener future where decarbonization and commercial success go hand in hand.

Note: The GCMD-BCG Global Maritime Decarbonisation Survey report can be downloaded here.

Photo credit: Venti Views on Unsplash
Published: 28 September, 2023

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Ammonia

Itochu enters MoU with firms for study of ammonia bunkering safety for container carrier

Through this cooperation, several companies and organisations will come together to discuss and study safety issues during ammonia bunkering of a container carrier that uses ammonia as a bunker fuel.
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Itochu enters MoU with firms for study of ammonia bunkering safety for container carrier

Tokyo-based Itochu Corporation on Tuesday (22 September) said it has executed a Memorandum of Understanding for a joint study of ammonia bunkering safety for an ammonia-fuelled container carrier among eight companies and organisations with the aim of implementing the use of ammonia as a bunker fuel in shipping industry. 

Through this cooperation, several companies and organisations will come together to discuss and study safety issues during ammonia bunkering of a container carrier that uses ammonia as a main fuel.

“This MOU for Ammonia Bunkering Safety for Container Carrier is an important milestone for social implementation of the use of ammonia as marine fuel on a global scale, and also a necessary step toward the realisation of the Integrated Project consisting of the construction of a global ammonia supply chain and the development of ammonia-fuelled ships by ITOCHU and its partner companies,” the firm said in a statement. 

A joint study that will be carried out under the MOU is a successive phase of the existing Joint Study Framework launched in 2021 by 34 companies and organizations including ITOCHU and Joint Study Framework for Ammonia Bunkering Safety launched in 2022 by 16 companies and organizations including ITOCHU, and focused on discussion and study of safety issues of ammonia bunkering to ammonia-fueled container carriers among experts from port authorities, container liner operators, bunkering related players and shipping company. 

A key subject of the joint study under this MOU for Ammonia Bunkering Safety for Container Carrier is the safety assessment for simultaneous operations of container cargo operations and ammonia bunkering in a container terminal, which is generally required for container carriers to achieve operational efficiencies.

ITOCHU said it is promoting a development of ammonia-fueled container carriers with potential partners following the development of ammonia-fuelled bulk carrier, which obtained Approval in Principle in 2022. ITOCHU will accelerate the development of an ammonia-fueled container carrier based on findings of this MOU for Ammonia Bunkering Safety for Container Carrier and plans to bring it to the international shipping market in late 2020s.

ITOCHU will accelerate the development of sustainable energy systems through these initiatives and ensure its contributions to the SDGs and improvement of related efforts, one of the basic policies laid out in its new medium-term management plan, as the company pursues a low-carbon society.

The eight companies and organisations are; Algeciras Bay Port Authority, Spain; Port of Rotterdam, Netherlands; CMA CGM, France; A.P.Moller Maersk A/S, Denmark; Mitsui O.S.K. Lines, Japan; Pavilion Energy Singapore, Singapore; TotalEnergies Marine Fuels, Singapore; and ITOCHU. 

Related: Itochu-led joint study of ammonia as an alternative marine fuel expands to 34 players
Related: 23 industry players participate in joint study of ammonia as an alternative marine fuel
Related: Singapore: Pavilion Energy, MOL, Total join Itochu and Vopak ammonia bunker fuel study
Related: Spain: Itochu, Peninsula enter MOU for joint development of ammonia bunkering in Gibraltar Strait
Related: Japan: “K” Line, ITOCHU and partners receive ClassNK AiP for ammonia-fuelled bulk carrier

Photo credit: Itochu Corporation
Published: 28 September, 2023

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