Who bears the cost of delays caused by COVID quarantine?

Who bears the cost of delays caused by COVID quarantine | BDM Blog | BDM Law

We continue to see arbitration decisions dealing with the aftermath of delays caused by the wide-ranging quarantine restrictions imposed on ships and their crews by ports during the COVID pandemic.

Of course, the COVID pandemic is ongoing albeit the impact on shipping is now more subdued. Nevertheless, many countries still apply strict quarantine restrictions on ships. Owners and Charterers have since responded by tightening up clauses in their contracts to make it clearer who will be responsible for quarantine delays.

However, a recent arbitration decision1 shows us that the position is perhaps not always as clear as it might appear, particularly where the ship was delivered into a charter with crew members who might have been exhibiting symptoms of COVID-19.

In this arbitration, the vessel was delivered into a charter at the peak of the pandemic when the situation in South America was grave. Fortunately, those drafting the charter had the foresight to include a clause dealing with delays caused by influenza “or other similar disease”. That clause made it clear that the vessel would remain on hire in such circumstances but it went on to say that the vessel would be off hire if the influenza or other similar disease arose from the crew’s prior history to delivery.

There was some debate over the wording of the clause but it was decided that it was a complete code and that COVID was a “similar disease” to influenza.

The vessel arrived at the loading port in South America in early April 2020. She was idle from 12 April 2020 to 1 May 2020 when she was finally cleared to load. Most of this period consisted of a quarantine of the vessel and crew due to the bosun testing positive for COVID-19.

The issue in dispute was whether the bosun was carrying COVID-19 before delivery and, if so, whether that enabled the Charterers to place the vessel off hire.

It transpired that the medical log on the ship showed that one of the engineers had a dry cough dating back to March 2020. This information was passed to the load port authorities together with details of prior shore leave and this led them to insist on COVID-19 testing for all the crew (this was in the days when testing was not common). On 17 April 2020 the entire crew were tested and they all tested negative save for one person, the bosun, who tested positive. The ship was then quarantined for 14 days.

The Tribunal decided that the bosun’s positive test did not arise from any medical issue prior to delivery. He exhibited no symptoms of COVID-19 prior to delivery. The engineer who had the dry cough did display some symptoms but he tested negative. It could not be said that his dry cough was due to COVID-19 nor that he infected anyone else on the ship prior to delivery. On the facts, there was nothing available to the Charterers to show that this situation fell within the exception to the bespoke clause and, for that reason, it was held that pursuant to the bespoke clause the vessel was on hire during the quarantine period. Charterers had to pay the hire due and owing.

There are many other delay claims dating back to 2020 which are yet to be resolved but this decision is an example of the issues that can arise. Although quarantine remains a live issue, ship owners and charterers have now tightened up their clauses such that claims are less common and COVID-19 testing is now of course now routine.

  1. London Arbitration 27/22
Nick Burgess - author profile
Nick Burgess
Partner
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Constantin von Hirsch
Trainee
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