INTERTANKO Covid-19 Clause- Tailor Made Solution to the Pandemic in Voyage Charters

One of the main legal challenges emerging from the ongoing Covid-19 pandemic for shipowners in the context of voyage charterparties is whether a valid NOR can be tendered to enable the running of laytime clock before a “free pratique” certificate is obtained from authorities. Reports suggest that there are significant delays in some ports in obtaining this certificate. Some charterparties might include a “WIFPON” clause (Whether in free pratique or not) and some commentators believe that such a clause removes the need for obtaining a “free patique” certificate so a vessel which is physically ready becomes an “arrived ship” in legal sense of the word. However, as discussed by my colleague Professor Simon Baughen (https://www.youtube.com/watch?v=1wcjbGYwW7o&t=52s) this position has been doubted in a number of authorities (e.g. The Delian Spirit [1971] Lloyd’s Rep 64) although such a finding seems to contradict plain meaning of a “WIFPON” clause.

The most recent clause released by INTERTANKO seems to offer a clarification and much needed certainty for shipowners. If incorporated into the contract, under Clause 2© of the INTERTANKO Covid-19 Clause for Voyage Charterparties, ship owners are able to serve a valid and effective NOR whether or not free pratique certificate has been granted, thereby passing the risk of any delay on to charterers who ordered the chartered vessel to that particular port.

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It needs to be noted that the Clause deals with other issues that can arise in ports that are affected from the current situation. Clause 1 enables the shipowner to refuse an order to proceed to a port affected from the pandemic. An interesting point here is that the right to refuse to proceed is left to the reasonable judgment of the owners or master by taking into account whether there is a risk of exposure of the crew or other personnel on board to Codivid-19. From legal perspective, this subjective test means that owners and masters are likely to be given the benefit of any doubt as to the state and condition of the port in question if the matter becomes the subject of litigation at a later stage. Clause 2 is designed to protect the interest of the owners further. For example, by virtue of Clause 2(a) if the chartered vessel sails 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. Similarly, Clause 2(b) provides that the chartered vessel may still depart and proceed to a safe waiting place if the risk escalates after the arrival of the chartered vessel at the port and even after the tendering of NOR. Clause 2(d) addresses the issues which arise due to the Coronavirus risk, e.g. quarantine and any delay thereby caused, and indicates that such expenses are passed to charterers.

In addition to risks associated in a port that has been directed by the charterer, the clause goes on to allocate the risk of losses that the vessel might suffer after the completion of the voyage (i.e. in the course of its future employment). Clause 3, therefore, provides:

“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.”

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This is a very bold provision and it essentially offers a protection for owners for a period of 30 days after the completion of discharge under a previous fixture so that any delays or expense under a subsequent fixture will fall to the previous charterer.

Needless to say, the INTERTANKO Covid-19 Clause is rather owner friendly and is designed to apply to this particular pandemic unlike BIMCO Infectious or Contagious Disease Clause for Voyage Charter Parties 2015 which has a much wider application, i.e. the latter can apply in any instance when there is “a highly infectious or contagious disease that is seriously harmful to humans”. That said, the INTERTANKO Covid-19 Clause offers a tailor made solution to the legal and practical problems facing the sector at the moment and no doubt some owners might be able to slip it in their charter agreements!

One thought on “INTERTANKO Covid-19 Clause- Tailor Made Solution to the Pandemic in Voyage Charters

  1. puneet sareen

    The 30 days period seems quite extensive! Considering that small ships on international trade can do more than 3-4 port calls in different countries in this period under different voyage charters, some definitive express clauses need to be included to exempt a charterer from any liabilities arising as a consequence to previous port – at least once the next port operation commences. But overall a great beneficial clause for the Owners!

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