INTERTANKO Covid-19 (‘Coronavirus’) Clause – Voyage charterparties (Explanatory Notes)
21 February 2020
INTERTANKO Covid-19 (‘Coronavirus’) Clause – Voyage charterparties
- Notwithstanding any other term to the contrary in this charterparty, the Vessel will not be required to call at any port, place, country or region if in the Master’s or Owners’ reasonable judgement there may be a risk of exposure of the crew or other persons on board to Covid-19 (‘Coronavirus’).
- Should Charterers order the Vessel to a port, place, country or region which is presently or subsequently becomes affected by the Coronavirus virus (the ‘Coronavirus Affected Area’) and if such order has not been refused in accordance with sub-clause 1 hereof, then the following provisions to apply:
a) If, prior to reaching the load or discharge port, in the reasonable judgement of the Master or Owners, the level of risk of exposure of the crew and other persons on board to the Coronavirus virus becomes unacceptable, Owners shall be entitled to request fresh voyage orders from Charterers.
b) If, following tender of notice of readiness, either prior to or during loading or discharge, in the reasonable judgment of the Master or Owners, the level of risk of exposure of the crew or other persons on board to the Coronavirus becomes unacceptable, the Vessel may proceed to a safe waiting place and Owners shall be entitled to request fresh orders from Charterers.
c) Any time taken for the purposes of obtaining free pratique shall be for Charterers’ account and shall not prevent the tender of a valid and effective notice of readiness.
d) Charterers shall arrange at their time and expense for all appropriate inspections and certification, including but not limited to screening, cleaning, fumigation, quarantine of the Vessel and/or crew or other persons on board and the obtaining of medical advice and/or treatment, as required at any port or place where the Vessel calls under this charterparty.
e) Owners shall promptly provide any recent crew health records, evidence of the Vessel’s prior trading pattern, and other existing documentation required by the port authorities for the purposes of free pratique. Owners shall ensure that shore leave for any crew member in a Coronavirus Affected Area shall be prohibited.
f) In the event Charterers fail to provide alternative voyage orders as required in sub-clause 2 (a) or (b) above within 48 hours of receiving the request for new orders, Owners shall be entitled to discharge the cargo at any safe port of their choice (including at the loading port) which shall be considered as complete fulfilment of this charterparty. Owners shall be entitled to recover from Charterers the extra expenses of such discharge and to receive the full freight as though the cargo had been carried to the discharge port, Owners shall have a lien on the cargo for such expenses and freight.
- Should the Vessel be boycotted, refused admission to port, quarantined, or otherwise delayed in any manner whatsoever by reason of having proceeded to a Coronavirus Affected Area, for all time lost Owners to be compensated by Charterers at the demurrage rate and all direct losses, damages and/or expenses incurred by Owners shall be paid by Charterers. In the event that the Vessel is boycotted, refused admission, or otherwise delayed as stated above within 30 days after having completed discharge under this charterparty, then Charterers are to compensate Owners for all time lost as a result at the demurrage rate in addition to compensating Owners for all direct losses, damages, and or expenses which may arise as a result of the above.
- Owners and Charterers agree that the outbreak of Coronavirus virus shall not be considered as force majeure or as a frustrating event of the charterparty.
- The Vessel shall have liberty to comply with all orders, directions, recommendations, precautionary measures or advice of any governmental or International authority and/or the Flag State of the Vessel relating to or arising as a result of the Vessel being ordered to a Coronavirus Affected Area.
- Charterers shall ensure that all Bills of Lading for cargo to be carried under this charterparty shall incorporate the above provisions.
The scheme of the clause works in exactly the same way as the INTERTANKO Ebola Clause.
Clause 1 – provides that Owners may first and foremost refuse to call at a Coronavirus-affected area. Clause 1 leaves the determination of the level of risk to Owners and the Master. We consider this preferable to a reference to determination of risk by an outside body e.g. the World Health Organization (WHO), as they may not issue a clear cut decision on whether or not there is a risk of exposure in any particular place.
Members should be aware that sub-clause 1 may be interpreted as meaning that the right to refuse to proceed depends on a reasonable judgment that, if reasonable/normal precautions against Coronavirus are taken, there will still be an unacceptable level of risk.
Clause 2 then carries on so that there is a continual assessment of the risk on the approach to the port and during any port stay.
Clause 2 (a) provides that if the Vessel does sail towards a Coronavirus-affected port, the Master can request fresh orders should the level of risk become unacceptable prior to arrival at the load or discharge port.
Thereafter, Clause 2 (b) provides that if the Vessel arrives at the port and tenders NOR, it may still depart and proceed to a safe waiting place if the risk escalates.
Clause 2 (c) deals with Notice of Readiness (NOR). A number of Members have questioned the validity of an NOR served at a place that is actually or potentially affected by Coronavirus. In order to tender NOR, and for laytime to commence under a voyage charter, a ship must be ready to start cargo operations. To do this, the Vessel must have been granted free pratique. In most cases, free pratique will be a formality enabling the Master to tender a valid NOR without having first obtained free pratique. However, with a risk of Coronavirus at the port or on the Vessel, obtaining free pratique will be more complex. There may be delays whilst investigations are made e.g. into the health of the crew or the Vessel’s previous trading pattern. In those circumstances, a valid NOR cannot be tendered unless the charterparty itself provides for this. Under Clause 2 (c), Owners are able to serve a valid and effective NOR whether or not free pratique has been granted, thereby passing the risk of any delay on to Charterers who ordered the Vessel to that particular port. This is an important provision without which the risk of delay in obtaining free pratique will be borne by Owners.
Clause 2 (d) passes the cost of addressing the issues which arise due to the Coronavirus risk, e.g. quarantine and any delay thereby caused, to Charterers.
Clause 2 (e) A number of jurisdictions are putting in place measures to require the Vessel/Master to report on the medical health of the crew prior to arrival as well as previous port calls, including that no crew members are showing any Coronavirus symptoms. We have therefore expanded the clause to include a specific reference to Owner’s obligations as regards any mandatory port call protocols.
The scheduling for this varies from place to place and should be checked well in advance with local agents and/or P & I to ensure compliance. For example, some ports require declarations on crew health in the event that the Vessel and/or any of the crew have called in China within a defined period (this can be the 14 day incubation period or up to 30 days) or within the number of last port calls (typically between three and five).
The North of England P & I Club for example is collating individual country requirements. https://www.nepia.com/industry-news/coronavirus-outbreak-impact-on-shipping/
The clause also provides, sensibly, that crew members should not go ashore.
Clause 2 (f) - (For voyage charters only) addresses the situation where Charterers fail to provide alternative orders in order to give them the incentive to give the order. This is not necessary for the time charter version where the Vessel will simply remain on hire.
Clause 3 – provides that time counts under both a voyage and time charter (at the demurrage rate/on hire respectively) for any Coronavirus associated delays during the fixture. Any losses or expenses will also fall to Charterers. One issue that has troubled many of our Members is that there may be consequences subsequent to the conclusion of the charterparty for a Vessel that has called in a Coronavirus-affected port; we have built in a protection for Owners for a period of 30 days thereafter so that any delays or expense under a subsequent fixture will fall to the previous Charterer.
Clause 4 – deals with force majeure. Members have questioned if ‘force majeure’ can be used to justify suspension of the performance of charterparty obligations due to the outbreak of Coronavirus. Members should note that ‘force majeure’ is not a principle of English Law but must be written into the contract/charterparty. How it then works will depend on the specific words used in the clause itself and the circumstances said to have resulted from the ‘force majeure’ event. It also involves a requirement to mitigate. For example, has the outbreak prevented you from physically performing the charterparty (Note that the fact it has become more expensive or unprofitable will not count)? Have you tried to mitigate, for example by taking protective measures, or seeking alternative orders?
Further, does Coronavirus frustrate the contract? This is unlikely as it would need to make the contract radically different or impossible to perform.
To avoid this discussion, we have drafted the Clause 4 to include an agreement that force majeure and frustration will not apply.
Clause 5 – expressly provides for good order that the Vessel may comply with orders of both the port and Flag State.
Clause 6 - as there may be consequences between Owners and a bill of lading holder e.g. if a Vessel deviates from the original destination due to a Coronavirus outbreak, we have built in a provision requiring Charterers to ensure the clause is incorporated into the bills of lading. This should entitle Owners to an indemnity for any claims brought by bill of lading holders.
What if my SIRE or CDI Inspection is cancelled due to Coronavirus?
We have previously reported on the impact of Coronavirus on vetting inspections:
OCIMF has advised that:
‘Where a Vessel operator has any concerns about the coronavirus pandemic and how this may impact the conduct of SIRE Inspections, they should engage with the OCIMF member commissioning the inspection at the earliest opportunity’.
INTERTANKO advises that Members faced with the possibility of a cancelled inspections should have contingency plans in place:
- Assume that the problems in China will last into the summer.
- Plan ahead and undertake a SIRE inspection at the earliest opportunity if the next is planned to take place in China.
- Liaise with your commercial department.
- Contact your charterer as soon as possible to inform them of any cancellation of inspection.
- If needed, remind the charterer of the operation of the system where inspection reports are maintained on the index for a period of 12 months from the date of receipt.
- Take steps to mitigate by undertaking a loading SIRE inspection.
- Keep all parties informed.
If Members follow the practical advice above, a delay in a vetting inspection, whether SIRE or CDI, should generally be accepted and understood by Charterers as unavoidable, with an allowance being made for the Vessel’s trading pattern until an inspection can be arranged. For Members who would prefer to include a contractual provision to this effect in their charter, we suggest the addition of the following:
In the event of cancelled SIRE/CDI inspections in a Coronavirus Affected Area, the SIRE/CDI requirements in this charterparty shall be suspended and shall not be re-instated until the Vessel’s trading pattern permits such inspection’
Members must keep up to date with the practical measures and guidelines that have been issued by national and international authorities to deal with Coronavirus risks.
Further information and links to information resources about the issue can be accessed here. Many of INTERTANKO’s Associate Members in the P&I and Agency business have issued helpful and locally specific guidance that has been widely distributed. One very useful resource may be Associate Member Wilhelmsen’s global port restrictions map which can be accessed here.