What is the balance to be struck between owners and charterers in allocating responsibilities and costs during a serious outbreak of a highly contagious disease? This is the question which has been brought into sharp focus for the shipping industry by the Covid-19 pandemic which has affected communities around the world and impacted international trade and the day-to-day lives of seafarers.

The importance of preventing crews from being exposed to serious illness and the attendant risks for owners and charterers of costs and delays to vessels are issues which need to be addressed when fixing time and voyage charter parties.

To put BIMCO’s work into context, the IOCD Clauses were originally developed in 2015 during the Ebola outbreak to provide a generic contractual solution for epidemics. The concern to ship owners is to protect their crew against the infection and the consequences to the ship when trading these areas. This is why the IOCD Clauses are owner focused and give them strong rights when an outbreak of a disease occurs.

Clauses will aim for generic application
The Covid-19 pandemic in contrast has presented different challenges because it is a pandemic and its impact is global. This means in the context of the IOCD Clauses that the entire world could arguably be an “Affected Area”.

The revised IOCD Clauses will be appropriate for outbreaks of both an epidemic and pandemic scale. The aim is not to produce specific COVID-19 clauses but instead to ensure that the revised IOCD Clauses have a generic application with a long shelf life because no one can predict the nature of epidemics or pandemics in the future.

Since not every disease covered by the clauses will pose a significant risk to human life, there will not be an automatic right for owners to refuse to call at an area where there is an outbreak. The revised clauses will take account of the fact that protective measures can be put in place to protect the crew and still allow the ship to trade.

Refusal to call at a port: the last resort
Under the new clauses the right of owners to refuse to call at a port will be a remedy of last resort available only in extreme situations where whatever measures the owners have taken will be insufficient to protect the crew. The clauses attempt to balance the health and welfare of the crew against the commercial interest of the parties and the fulfilment of obligations under the underlying sale contracts to transport and deliver the cargo.

One of the principal commercial challenges of the Covid-19 pandemic have been delays to ships due to local port restrictions or quarantine and how to allocate responsibility for them under charter parties. Under a time charter, it is charterers who decide where the ship is to trade. The revised time charter clause aims to allocate the risk of delay primarily to charterers unless caused by owners’ failure to take adequate protective measures to safeguard the ship and its crew.

The position is more nuanced under a voyage charter party or a contract of affreightment because owners have agreed to go to a specific port or range of ports and the charter party is often entered into in support of a specific sale contract or trade. The revised voyage charter party clause will aim to find the appropriate balance between the interests of owners and charterers in consultation with the industry.

The IOCD Clauses are being revised by a group of industry experts including representatives from Norden, Oldendorff Carriers, Vale, ENI, West and UK P&I Club. The clauses are due for publication in November 2021.