The ongoing Covid-19 pandemic continues to impact the industry, from the shipping container crisis, ports denying entry, and crew being stuck onboard vessels for months at a time.
Many shipping companies have been reluctant to enter certain countries due to the high risk of crew contracting Covid-19, or the potential of the rest of the vessel having to quarantine due to Covid-19 restrictions imposed by the destination country. Alongside this, delays have been caused due to crew contracting Covid-19, which sees them either having to self-isolate or requiring medical treatment. This – along with testing of the rest of the crew – causes severe delays in ports.
Other issues include denying ships the ability to load or discharge cargo at certain ports due to concerns of spreading or contracting Covid-19. During the webinar, panellists discussed the BIMCO disease clause and how it aims to assist these issues, as well as where the clause falls short and how this is being addressed.
The BIMCO disease clause: What is it?
Originally created during the 2015 Ebola outbreak to provide a generic solution for epidemics, the BIMCO Infectious or Contagious Diseases Clause for Time Charter Parties addresses issues faced by ship owners in protecting their crew against disease, infection, and the consequences that may be faced by the ship when trading in certain regions. The sections within the clause focus on ship owners’ rights.
One of the key focal points noted within the clause is the definition of disease, according to the clause: “Disease means a highly infectious or contagious disease that is seriously harmful to humans”.
Alongside this, another definition that is key when discussing impacts of the Covid-19 pandemic is affected area. According to the clause: “Affected area means any port or place where there is a risk of exposure to the vessel, crew or other persons on board to the disease and/or to a risk of quarantine or other restrictions being imposed in connection with the disease”.
In order to assist vessel owners decide if docking at a port within an affected area should proceed or not, the clause states that once a decision has been made, ship owners should immediately notify charterers. Upon notifying if the vessel is at anywhere that is considered – with reasonable judgement – to be an affected area, then the vessel can leave immediately.
Charterers are obligated to issue alternative voyage orders within a 48-hour time period, which if not adhered to allows owners to discharge any cargo already onboard at any port or place. In this case, charterers are responsible for all additional costs, expenses, and liabilities incurred.
Issues with the current clause
Although providing clarity and grounds for vessel owners who find themselves in uncertain waters when considering if docking is a safe option, the clause does have its setbacks.
One key issue surrounds the use of the term ‘affected area’. The outbreak of the Covid-19 pandemic has been unpredictable and dynamic in nature, which has presented a number of challenges for the clause – mainly when it comes to labelling an ‘affected area’, due to the entire world being affected.
Paired with the issue of ‘affected area’, another concern that was raised during the webinar was that of the original Covid-19 clause being intended to apply to the novel, original Covid-19 variant. BIMCO stated that these clauses and guidelines for charter parties and owners could be applied not solely to the novel Covid-19 strain but to other similar viruses in the future. However, due to the dynamic ever-changing nature of Covid-19, the virus no longer fits into one single category.
Anna Hoffman, a barrister at UK firm 4 Pump Court, touched on this issue: “This provision is only intended to apply to the most severe cases, and a high threshold is needed to trigger that mechanism. That means instances of extreme illness cannot be misused for commercial purposes, in relation to more commonly encountered or widespread viruses.”
“That, of course, creates a slight tension because the more widely Covid-19 spreads, and as more people are vaccinated, it no longer neatly fits into the definition of such an extreme illness, and rather more like a commonly encountered or widespread virus, which creates some questions as to how to deal with that.”
The upcoming changes
Although unable to discuss the direct changes explicitly during the webinar, Nina Stuhrmann, manager of the contracts and clauses department at BIMCO, touched on which areas were receiving revision and why. Stuhrmann explained that, due to the clause originally being developed to provide a genetic contractor solution for epidemics during the Ebola outbreak, the clause fell short of how to manage a pandemic.
Stuhrmann explained: “The concern back then for ship owners, was to protect their crew against infection and the consequences to the ship when operating in these areas. This is also why the clauses are owner-focused and give them strong rights when an outbreak of a disease occurs. As we have discussed, the situation we are facing now is very different from that. We are in a pandemic and the current clauses were not drafted for these situations – this can cause problems when they are operated.”
“Large parts of the world are arguably an ‘affected area’, so [different] ways have to be found for trade to continue in a workable and acceptable way for owners and charters, and also to ensure that the disease is not spread, because this is also something we have to avoid.”
Another section that is under revision is the definition of ‘disease’ within the clause. With Covid-19 variants emerging, and with vaccine rollouts becoming increasingly successful globally, the fatality rate of Covid-19 has decreased in the majority of cases. This allows trade to continue – albeit with precautions in place.
Stuhrmann says: “The impact of a pandemic, such as the current one, is more on how it affects society – we have the labour shortage and all these problems. The actual challenge for the industry which we have identified is allocating the cost for the crew, protective measures and the liabilities for the vessel and the delivery of cargo.”
“The definition of disease, which has caused a lot of problems, has been amended to make sure that diseases like Covid-19, which are causing a pandemic, are also covered.”
The aim of reviewing the clause is to ensure that a balance is struck between owners and charterers, when it comes to allocating responsibilities and costs during a serious outbreak of disease.