Covid-19 and Off-hire
Although the scale and reach of the disruption caused by the Covid-19 pandemic went beyond anything experienced in living memory, the possibility of delays to shipping from illness and infectious disease is nothing new, and the existing legal frameworks should in principle have been well equipped to deal with this situation. However, the volume of queries received from Members and some of the hastily drafted clauses introduced into some charterparties would suggest that there was a great deal of uncertainty as to how existing charterparty provisions allocated the risk of delays relating to Covid-19.
This uncertainty was particularly acute at the early stages of the pandemic when there was little information available on the effects of the condition and the counter-measures needed to limit its spread, and when responses by various authorities had not been co-ordinated. It appeared that some agencies were taking a stricter approach than others, and that in some cases there was overreaction leading unnecessarily to increased costs and delays. There were then questions about how those costs and delays should be allocated between the parties to a time charter.
This article looks at some of the issues the Club considered with its members by reference to some hypothetical scenarios which illustrate the possible outcomes. In each of these scenarios it is assumed the parties have agreed a charterparty in an unamended NYPE 1946 form, and the vessel has arrived at the discharge port and has been given orders to discharge. Enquiries are then made by the port authorities and the vessel is informed that it has not been given free pratique, and it is not authorised to approach the berth, which is otherwise available.
It can be assumed that in each scenario the vessel is unable to perform the service required, which is to berth and discharge, and that time is being lost. The question is then whether this has been caused by one of the categories of off-hire event listed in clause 15:
“deficiency of men or stores, fire, breakdown or damages to hull, machinery or equipment, grounding, detention by average accidents to ship or cargo, drydocking for the purpose of examination or painting bottom, or by any other cause preventing the full working of the vessel…”
Whether caused by any of these will of course depend on the nature of the restrictions, and why the authorities have refused to give permission to berth. Three typical scenarios are described below, together with a view on the most likely outcome.
Scenario 1 – Covid-19 confirmed, crew members unwell
In the first scenario, the reason for the refusal by the authorities is that they have received reports from the vessel that several crew members have tested positive for Covid-19, and that they are so unwell that they are unable to perform their duties and the vessel cannot effectively operate in their absence.
Looking at the wording of clause 15, the first category that might be said to apply is “deficiency of men”. The word “deficient” is not entirely clear in that it could be used to indicate a lack of crew members or a crew that does not have the ability to perform its obligations for whatever reason. However, it appears that this phrase does have the narrower meaning, referring only to a situation where there is an insufficient number of crew members to begin with. It would not apply where there are enough crew members on board but some of them are unable to perform their duties.
In most cases the situation will be clearly one or the other, but one can imagine scenarios where the dividing line between the two hypotheticals would be blurred. For example, where there is a full complement of crew members but one of them is very ill, this would not be a deficiency of men, but if that crew member were to pass away from his illness, the vessel may no longer have a full roster of crew members and at that moment the “deficiency of men” wording might be engaged. It would seem odd that the seafarer’s unfortunate demise should trigger the wording when, before his death, the effect of the illness was the same: the vessel was unable to perform the service required.
This does not appear to have been explored in the cases, probably because in this situation the charterer might be more inclined to rely on the “any other cause preventing the full working of the vessel” sweep up provision in clause 15 (more on this below). However, there is surprisingly little guidance on how this wording operates in the context of delays from crew illness. In The Apollo  1 Lloyd’s Rep 200, the charterers claimed that the vessel was off-hire when time was lost due to the authorities’ refusal to grant free pratique following reports that two crew members had disembarked and taken to hospital receive treatment for typhus. It was not argued that this constituted a “deficiency of men”, so it is likely that the departure of the crew members did not leave the vessel short-handed, but it was decided that the delay due to the action taken by the health authorities did bring the off-hire clause into play. The off-hire clause in this case had been amended to include any other cause “whatsoever” which, as discussed in more detail below, significantly widens the category of causes that might be considered as “any other cause”. There was some discussion about the effect this had, but it is not clear whether the inclusion of “whatsoever” was determinative, or whether the vessel would have been off-hire without this amendment. Until that point is clarified it is at least arguable that crew illness would count as “any other cause” even without the inclusion of “whatsoever”, and the vessel would be off-hire for any time lost in this scenario.
Scenario 2 – Covid-19 confirmed, crew members fit and well
Contrast the above with another scenario, in which the crew members have tested positive for Covid-19 and restrictions are placed on the vessel, and it is prevented from berthing, but here the crew members do not feel unwell. They are able to carry out their responsibilities on board the vessel effectively so that, if it were not for the restrictions imposed by the authorities, the vessel could berth and discharge the cargo.
In this scenario time is being lost because the vessel is unable to perform the service required which is to berth. The difference is that the crew members are not ill, at least not in the sense that they cannot work. Perhaps they are not adversely affected by the virus at all or become only mildly ill in a way that does not affect their work. As in the first scenario, the crew cannot be described as being deficient because there are enough crew members on board. The crew members are also willing and able to do their duties so the inability to perform the service required does not arise from the condition of the vessel itself or the crew. Instead, the immediate cause is a legal or administrative restriction imposed by the authorities. Would this be considered to be “any other cause preventing the full working of the vessel”?
The general principle is that where a sweep up provision such as “any other cause” comes at the end of a list, it will be interpreted as including only other examples which are similar to those named in the list. Since the items listed all relate to the physical condition of the ship or its crew or cargo, the relevant cause must also relate to the physical condition of the ship, crew or cargo. Where the action taken by the authorities is reasonable and is based upon the condition or the suspected condition of the vessel or its crew, it is likely that the restriction would meet this requirement and would therefore fall within the “any other cause” sweep up provision (The Laconian Confidence  1 Lloyd’s Rep 139).
In light of the above, much will depend on whether the decision of the authorities to impose restrictions is reasonable. Where there is evidence of an infection, such as confirmed test results, it will be fairly clear that the decision was reasonable, but quick, reliable testing was not always available and there have been instances of some decisions being made on the basis of less scientific evidence, such as information that the vessel had recently called at a port considered to be a Covid hotspot. In such cases the reasonableness of the decision will be much less certain.
In other cases the evidence of a possible Covid infection was even less convincing, as the next scenario illustrates.
Scenario 3 – No Covid-19, crew members fit and well, overcautious authorities
In the final scenario, the crew members are all well and able to perform their duties, and it has been confirmed that they have all taken Covid-19 tests which have come back negative. There is no confirmed infection or evidence that the crew is infected, yet the authorities are concerned and are taking a very cautious approach.
This is perhaps the more difficult scenario because there is unlikely to be enough evidence to show whether the approach by the authorities was justified, or whether they were simply overreacting. However, where it is clear that there was no basis for the decision, it cannot be described as reasonable, and so would not fall within the “any other cause” sweep up provision in the way described above.
The approach that is likely to be taken in this scenario is demonstrated in a recent London arbitration decision (LMLN 6/22). This involved a vessel which arrived at a discharge port in China where temperature checks were carried out and a crew member was reported as having a slightly high temperature (although this was reported to have been only 37.4°C). The vessel was quarantined as a result, even though there were no confirmed cases of Covid on board. The tribunal found that the temperature reported by the vessel was within a normal range, and it was clear that the actions of the authorities were excessive and unjustified. Some allowance was made for the fact that this was during the early days of the pandemic, but the actions were considered to be a panic response and unjustified, meaning that they did not come within the “any other cause” provision.
Although it is not mentioned, it is likely that the off-hire clause had not been amended to refer to “any other cause whatsoever”. The position might be different if the off-hire clause has been amended in this way, because it disapplies the general principle requiring the cause to be similar to those already listed as discussed above. It is possible that this would mean that even an unreasonable, capricious or arbitrary decision by the authorities might fall within the clause.
The above examples show that, even though the possibility of delays from an outbreak of infectious disease has long been commonplace, there is still some doubt about how the risk should be allocated under one of the most widely used charterparty forms. Some other forms such as the Shelltime 4 charterparty include wording dealing more squarely with these types of issues, including delays from obtaining medical advice or treatment or quarantine. That might help to clarify who is responsible.
Another approach is to include specific clauses dealing with illness and infectious diseases. One commonly used formulation is to make Owners responsible for infection that was present on delivery of the vessel, with charterers being responsible for an infection that was introduced to the vessel at one of the ports in charterers’ trading route. The problem with this is that it assumes that the parties will have clear evidence about when and where the infection arose, which is rarely the case. Good luck to the party trying to prove that it was one of the stevedores in the second shift who brought the infection on board!
As a result, the use of bespoke clauses can often lead to more uncertainty about the position. Some parties prefer to use the standard BIMCO clause which takes a similar approach but gives Owners the right to assess the risk of exposure to infectious disease at a port and refuse orders to go there, similar to the right to refuse orders under a war risks provision. Owners might take some comfort from this, but there can be uncertainty here too, requiring a judgment to be made as to whether there is a risk of exposure, in circumstances where this might not be clear (see, for example, the discussion on The Triton Lark  1 Lloyd’s Rep 151 here and here).
Whichever approach is preferred it goes without saying that no party could have legislated for all eventualities in the face of a global pandemic that varied in severity and coverage and which triggered a range of responses. Whilst the worst of Covid-19 is now clearly behind us, more localised epidemics like recent Ebola and Zika outbreaks are a constant threat and raise many of the same issues albeit on a smaller scale, and no one can be sure that another pandemic is not around the corner. It therefore continues to make sense for Owners and charterers to consider how this risk is allocated between them, whether by relying on the existing provisions in the standard forms, or by introducing more targeted wording like the BIMCO clause or something more bespoke.
Syndicate Associate Claims