The COVID-19 (novel coronavirus 2019) outbreak is a headline news story. At the moment, 99% of all confirmed cases are in China but cases are being reported elsewhere in Asia and beyond. More information on the disease, symptoms and precautions relating to the prevention of its spread is available on the website of the World Health Organization (WHO). Additional information on some of the virus’ implications for ships and crew is also available on Gard’s website.
Is it useful to compare the COVID-19 with earlier disease outbreaks?
A comparison with the Ebola outbreak in West Africa in 2014 – 2016 is probably not useful as the Ebola virus has different characteristics and was mostly restricted to small areas in West Africa, crossing state borders.
It may be more useful to compare the current outbreak with the SARS-CoV-2 outbreak of 2002/2003 and the MERS-CoV outbreak which peaked in 2014. However, although the three viruses come from the same family it appears there are significant differences between them in terms of contagiousness and outcomes for sufferers (also known as their virulence):
The CDC estimates, reported on 7 February 2020, are that seasonal flu this year has resulted in more than 12,000 deaths in the USA but with at least 22,000,000 flu-related illnesses. That translates into a fatality-rate of only 0.055%.
Current opinion is that there are simple measures which should prevent transmission of the COVID-19. That may be correct but what is clear is that the number of victims and the rate of transmission has been much higher than in earlier comparable outbreaks. This may be explained by COVID-19 having a longer incubation period before symptoms present themselves.
Experts also indicate that COVID-19 has the potential to mutate and the race is on to develop a vaccine to help fight the disease.
What is happening?
The outbreak is already causing disruption in the global supply chain and transport networks:
The situation is evolving and there are many potential implications for the shipping industry: crew and passenger health; difficulty with crew changes; the potential for crew to strike or refuse to go to an affected area or serve with a crew-member who is from an affected area; delays at Chinese and subsequent ports of call; cargoes which are no longer available or which it is no longer possible to load or discharge, to name but a few.
In spite of this potential for disruption the shipping industry will likely play a central role in ensuring that vital trade routes remain open, disruption is minimized and the world remains supplied with food, energy and other vital services. But at what price and who will pay for it?
How will COVID-19 impact on me as a shipowner?
In this article we try to identify some of the questions which are likely to arise and address them from the point of view of the shipowner in his relations with his charterer. In all respects, it is assumed the charter is an industry-standard time charter subject to English law. It is also assumed that the ship is being asked to call at a port to which the charterers could ordinarily direct the vessel and the only issue which might deter owners from going is the COVID-19 outbreak.
DO I HAVE TO GO?
The first question on everyone’s minds is often:
Q. If my ship is ordered to a port in China, or somewhere else affected by the COVID-19, does it have to go?
A. Each charter must be interpreted according to its own terms and the factual situation is fast-evolving and may develop to the point where the answer is ‘no’, but at the moment the most likely answer is ‘yes’.
From a legal standpoint, the relevant question is likely to be ‘Is this a safe port?’ because most (but not all) charters contain a warranty from the charterer that the port will be prospectively safe, i.e. safe at the time of the arrival of the vessel. Even if the port is within the agreed range, if the port is or becomes unsafe the ship does not have to call at it and an order to go could be refused.
What does ‘safe’ mean in the context of the CORVID-19 outbreak? The standard definition of a safe port in this context is:
“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…” (The Eastern City  2 Lloyds Rep p127)
Whilst this is primarily directed towards issues of navigation, seamanship and the physical safety of the vessel, the English courts have long accepted that safety also includes political unsafety, war-like activities and the risk of delay, providing the delay is of a sufficient duration. Whilst there is no direct authority on this point, a court or tribunal is likely to approach the question of the safety of a port in the following way:
Is there a significant risk or danger of:
AND the risks cannot be avoided by good navigation and seamanship (which in this context would likely mean following prevailing medical advice to avoid or minimise the risk of transmission / infection)?
If ‘yes’ THEN a court or arbitration tribunal might accept that the port was unsafe.
At the moment the answer to this question appears likely to be ‘no’. However, if the situation worsens – and at least one cruise ship has been quarantined at the time of writing - the answer to this question may become ‘yes’. The port will be then be unsafe and owners would be within their rights to refuse to call at it and ask charterers to nominate a different port.
Some further considerations:
Q. Are there any other terms of the charter contract which might also be relevant to this question?
A. Possibly. It is difficult to anticipate every situation and every way a claim might be framed but other clauses may be relevant: for example, if the charter has a force majeure clause, this may be triggered and may give rise to different considerations and a different result in terms of whether the risk of delay or even cancellation falls on owners or charterers.
Q. Apart from the charter contract, are there any other legal principle which might come into play?
A. If the situation develops to the point where the contract, as originally envisaged, becomes incapable of being performed it may be that the law steps in to relieve both parties of their obligations to perform under the doctrine of ‘frustration’.
IF I GO AND THERE IS A DELAY WILL CHARTERERS STILL HAVE TO PAY HIRE?
Q. Will my ship be on or off-hire if there is a delay resulting from COVID-19?
A. It depends on the term of the charter and the reason for the delay.
Where there is a delay under a time charter, charterers’ thoughts often turn to off-hire. Off-hire does not require a breach of contract, rather it is a right, in certain situations, for charterers to stop paying hire.
The question will be ‘Can charterers bring themselves within the off-hire clause(s)?.’It will depend on the reasons for the delay. Different examples considered by reference to the NYPE form clause 15 illustrate the different ways this question might be resolved:
Q. Might I be able to claim the hire as an implied indemnity for following charterer’s orders?
A. Perhaps, but it would not be a straightforward claim and it is probably still too soon to say as it is not yet clear how serious the COVID-19 situation is.
Q. If my crew get sick can I deviate to help them?
A. Yes, assuming it is a necessary step to take but also, in the normal way, it is likely that the time spent doing this will be off-hire, unless a right to claim as a result of implied indemnity has arisen.
A further consideration is that a vessel may no longer be seaworthy if its crew, or some of them, are suffering from COVID-19.
A LAST BIT OF ADVICE
Consult your Defence handler before entering into an obligation which you may not be able to fulfil or if it appears a claim may be on the horizon: in law, as in medicine and life generally, prevention is better than a cure.