The outbreak of COVID-19 pandemic has plunged the world into economic, political, and social turmoil and had major impacts on the shipping sector.
Restrictions, such as the prevention in the embarking/disembarking of crews, to delayed port clearance, and the imposition of quarantine were some of the implications that the shipping industry has met. Consequently, charterparties are frequently being urged to plan for potential disruption by reviewing the terms and conditions of their current charters and ensuring appropriate provisions for the implications of Covid-19 in any future negotiated charters.
Charterparties may expressly provide for the potential implications of the Coronavirus by ensuring that their charter contains a clause paramount incorporating the Hague-Hague Visby Rules. Namely, Article IV, Rule 2 of the Hague-Visby Rules, stipulates that neither the carrier nor the ship bears responsibility for loss of, or damage to, cargo resulting from; "(h) quarantine restrictions; (j) strikes or lockouts or stoppage or restraint of labour from whatever cause, whether partial or general; (q) any other cause arising without the actual fault or privity of the carrier." Accordingly, the effect of such a provision protects owners should any Covid-19 related quarantine restrictions result in loss or damage to the cargo.
In the absence of such express provisions, there are other well-established areas of charterparty law that can protect parties in maritime contract disputes.
Safe Port Warranties
Most maritime contracts will include an express or implied safe port warranty, which prevents the charterers from ordering a vessel to an "unsafe port." The UK Supreme Court specifies that "a port will not be safe unless ... 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.1
Subsequently, this may extend to dangers to the crew, namely, risk of illness. Ultimately, whether the coronavirus outbreak will deem a port unsafe depends on the facts of the specific case. For a shipowner to be permitted to refuse its charterer's orders is a delicate matter, particularly since a refusal to follow a legitimate order can amount to a repudiatory breach.
Off-Hire clauses, which are frequently encompassed in time charters, release charterers from their obligation to pay hire while their vessel is being prevented from performing the charter service. Industry-standard off-hire clauses include the New York Produce Exchange Form (NYPE) (Clause 15) and Shelltime 4 form. The former form specifies that a vessel is deemed to be off-hire where there is a "deficiency and/or default and/or strike of officers or crew."
The latter form, which similarly references a general deficiency of personnel as grounds for being off-hire, specifically deems a vessel off-hire where time is lost for; (a) "obtaining medical advice or treatment for any sick or injured person," or (b) "due to any delay in quarantine arising from the master, officers, or crew having had communication with the shore at any infected area without the written consent or instructions of Charterers."
An illness such as the Coronavirus (e.g. where the vessel is being held in quarantine due to actual, or suspected, cases of Covid-19) would fall within the aforementioned form's scope, thus rendering the time charter off-hire, where the time charterer incorporates a similar to the aforementioned clauses wording.
Force Majeure Clauses:
A force majeure clause describes a contractual provision under which one or both parties may be released from the contractual performance, either in whole or in part, or is entitled to temporarily suspend performance or to claim an extension for performance, following a specified event(s) occurs beyond their control.
Whether the coronavirus pandemic constitutes an appropriate force majeure event will be case and jurisdiction dependent. Where contracts do not include force majeure clauses, the doctrine of frustration could be relied on; however, the threshold for a successful frustration claim is higher. Ultimately, if the relevant force majeure clause lists an "epidemic," or "quarantine" as an event beyond the control of the parties, it is likely that the Coronavirus could trigger the clause.
In response to these unprecedented and rapidly changing conditions, as well as the need for continuous updates and information arising from this force majeure situation, the Cyprus Maritime Administration has prepared a special section on its webpage in order to provide to the shipping community all necessary information related to the measures taken due to the Coronavirus (COVID-19) outbreak and the link can be found here.
While the full effects of the Coronavirus pandemic are unknown, it is evident that the shipping industry has not been left unscathed by the virus's commercial implications. Its effects are likely to persist for the foreseeable future. In this context, charterparties should plan for potential disruptions by ensuring that their current and future charters afford them adequate protection.
1. The Eastern City  2 Lloyd's Rep 127
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.