Bird Flu - Contractual Implications

April 2006

As at mid-March 2006 there had been been more than 170 confirmed human cases of the H5N1 virus (otherwise know as bird flu) worldwide. Although these have predominantly been in the Far East, particularly Indonesia, Vietnam and Thailand, recently cases have been reported in European countries such as Turkey. Such human cases remain rare but scientists fear that the virus is showing an increasing propensity to mutate from birds to humans and may soon become a problem affecting humans on a pandemic scale.

Unsurprisingly, shipping contracts in use today do not contain any specific provisions dealing with bird flu, but existing clauses in charterparties may have an impact in the context of bird flu.

Time Charters

An outbreak of bird flu may give rise to an off hire event, depending on the facts.

For example, if one crew member contracted the virus and was unable to work, this would not constitute a "deficiency of men ... preventing the full working of the vessel", but if the rest of the crew or the stevedores refused to work the vessel or the vessel is quarantined due to the sick crew member, the full working of the vessel would be prevented and the vessel could be off hire.

A similar situation could arise if dead birds are found on board the vessel, although if the vessel has been employed by charterers between or to/from ports in Far East hot spots, hire may continue to be payable on the basis that the presence of the birds is a result of the charterers' use of the vessel. Although quarantine restrictions can constitute "restraint of princes"¹ hire would still be payable unless the charterer was physically prevented from paying hire.

Voyage Charters

A vessel arriving from a foreign port needs to obtain "free pratique" - permission from the port authorities for the crew to go ashore and for visitors to go on board - in order to be ready to load or discharge and for laytime to commence. If free pratique is not granted due to the presence on board of an infected disease, such as bird flu, the vessel would be quarantined and laytime would not commence. However the position would be different where the charter provides that laytime is to commence "WIFPON" "whether in free pratique or not", in which case the obtaining of free pratique is irrelevant to the commencement of laytime.

Safe Port

Both time and voyage charters often include a provision which obliges a charterer to only employ a vessel between safe ports. Can a port be regarded as unsafe if it is infected with bird flu or is in a high risk area? There is currently no authority on the issue of whether a disease ridden port is unsafe. As with questions of safety, this depend on the facts at the particular port. It is too early to say with any certainty whether an outbreak of bird flu or the high risk of such an outbreak at a port nominated by a charterer would render that port unsafe. This could cause real problems for owners if charterers nominate such a port and the crew refuse to go there. It is hoped that in such situations common sense would prevail and steps would be taken to allay the crew's fears by collating and disseminating accurate information about the risks involved, but as bird flu is still a new phenomenon, there is much uncertainty about the risks involved and owners are currently probably not entitled to refuse to comply with charterters' order on the basis that the port is unsafe.

While the current situation is necessarily uncertain, as the virus continues to spread across the world and incidence of mutation to humans increases, it is only a matter of time before these issues become very real and if members are concerned about the impact of bird flu on their operations, the Managers would be happy to assist wherever they can.

1 See clause 16 of the New York Produce Exchange (NYPE) charter