Partner & Affiliates Insights | The Novel Coronavirus – Issues and Charter Party Considerations

Partners & Affiliates Insights | by Françoise Fouchier-Matte

Françoise Fouchier-Matte, Filhet Allard Maritime

While each situation should be specifically considered depending on its governing charter party terms, we hope our check list with general recommendations is of assistance during the worldwide pandemic.   

1. Is there a «force majeure» clause in your charter party?

Under English law, owners and charterers can rely on a force majeure event only if there is a relevant clause in the charter party. A force majeure clause provides an exhaustive list of the events triggering its application. For one to declare force majeure, the event must be mentioned in the clause. The list of events may include “epidemic or pandemic” and/or “any law or action taken by a government or public authority” and/or “restraint of princes, ruler or people”, providing the action is sufficiently proximate to the event. It is similarly common for a force majeure clause to include a provision stating that such an event should not be reasonably foreseeable. For one to rely on a force majeure event, there must be no possible alternative available for the charterer to fulfil their obligations under the charter party. 

2. Is there a quarantine clause in your charter party?

Some charter parties contain a quarantine clause addressing a different calculation of laytime and demurrage (the charge payable to the owner of a chartered ship on failure to load or discharge the ship within the laytime agreed), depending on whether the port was already quarantined when the vessel was fixed or the port was quarantined when the vessel was en-route.

Note: Even if a government enforces a country the lockdown of a country due to Covid-19, the ports of such countries may not be entirely closed/quarantined. The lockdown may alter port operations, the rate of work and berthing prospects but allow it to remain open.

3. Sale contract and charter parties

If you are acting at the same time in your capacity as seller under a contract of sale and as charterer to carry the said cargo, special attention should be paid to the stipulations of the sale contract, notably the wording of the force majeure clause. In order to prevent any gap and potentially high exposure, you should ensure, if possible, that the wording of the clause in the sale contract matches the wording of the force majeure clause of the charter party. If they do not match, you may end up in a situation where the buyer is able to rely on a « force majeure » event triggering the suspension of the sale contract, while under the Charter Party you may not be entitled to cancel. 

4. Drafting considerations

a) BIMCO Infectious or Contagious Disease Clause

Where charterers are negotiating contracts or entering new fixtures involving ports that are or may become affected by the Novel Coronavirus, consideration should be given to incorporating terms covering situations that are likely to arise. We would like to stress the fact that owners may incorporate BIMCO clauses (BIMCO Infectious or Contagious Disease Clause for Time and Voyage Charters) in charter parties specially drafted to defend owners’ interests in the sense that all costs and time lost are for the charterers’ account. Obviously, it would be wiser to resist incorporating these BIMCO clauses as they contain indemnities and financial exposures which are not covered by the P&I charterers’ liability insurance such as operational costs and demurrage.

b) WIFPON clause in a voyage charter party

We recommend the voyage charterers to NOT accept any clause stating that the laytime shall commence « whether in free pratique or not » (WIFPON) as it will be too onerous to them if the vessel is subject to quarantine.