COVID related off-hire decisions from the LMAA

The COVID pandemic has impacted nearly every aspect of global commerce, and the shipping industry is no exception having experienced severe disruption in many different ways.

Over the past two years, most maritime lawyers will have received multiple enquiries in relation to delays caused to vessels by COVID, where there is a dispute as to whether owners or charterers are liable under the terms of the charterparty.

Against this background, two London arbitration awards have recently been published which shed some light on how Tribunals are grappling with these issues.

London Arbitration 4/22 ((2022) 1099 LMLN 1)

This case concerned a vessel time chartered on an amended NYPE form for one trip, loading coal in Indonesia for discharge in South China.

After arriving at the discharge port on 4 March 2020, the three pilots attending on board were temperature checked by the Third Officer using a contactless hand-held infrared thermometer. All three temperatures were found to be in excess of 37.5oC, exceeding the maximum allowed under owners’ company policy. The Master required the pilots to have their temperatures taken again with a mercury thermometer. The pilots refused and disembarked later that day.

The piloting company maintained that the Master should have relied on the temperature readings taken at the pilot station before the pilots boarded the vessel, and refused to send further pilots on board until the Master issued a formal apology. An apology was forthcoming on 6 March on a without prejudice basis. However, by this time the berth had been cancelled and replacement pilots were not provided until 13 March, with the vessel delayed by 10 days.

Charterers argued that the Master’s actions on 4 March were unreasonable and that the vessel was off-hire for the period of delay. They said that:

  • there was a “default of officers or crew” under the off-hire clause (clause 15) of the charterparty;
  • time did not count because the Master’s actions amounted to the vessel being “put back contrary to the orders or directions of the Charterers”, in which case “hire is to be suspended from the time of her … putting back until she is again in the same or equidistant position from the destination” (also clause 15). Similar bespoke provisions existed at clause 58; and
  • by refusing to allow the pilots to stay on board, or to allow the pilots to navigate the vessel, owners were in breach of clause 8 in failing to follow charterers’ orders as regards the vessel’s employment.

Owners denied that the vessel was off-hire. They argued that:

  • the Master had acted reasonably and had an overriding responsibility for safety, entitling him to refuse orders which would potentially endanger the ship, its crew or cargo;
  • the Master was not in default where he was complying with the owners’ company policy;
  • the vessel had not been “put back” where it had remained at the same geographical location and simply been delayed; and
  • the charterers were not entitled to immediate compliance with their orders (The Houda [1994] 2 Lloyd’s Rep 541).

While the Tribunal acknowledged that owners were operating at a difficult time, when there was a great deal of uncertainty as to the transmission of COVID, they said this did not permit owners to refuse to comply with charterers’ voyage orders, nor to unilaterally implement such a policy without charterers’ agreement or, at least, without giving notice to them.

As a result, the Tribunal found that owners were in breach of clause 8 and charterers were therefore entitled to recover in damages the value of hire and bunkers for the time lost.

The Tribunal went on to say that whilst it was not necessary to consider the application of the off-hire provisions given the success of this argument, had they been required to do so, the vessel was also likely to be off-hire. Although there had been no “default” of officers or crew, the vessel was likely off-hire on the basis of the “put back” provisions in clause 15 and clause 58.

London Arbitration 6/22 ((2022) 1099 LMLN 3)

The second case concerned a vessel on an amended NYPE form performing a one-trip time charter from India to China. Charterers claimed the vessel was off-hire for the time lost due to, among other things, crew sickness.

The delay related to a period from 26 July until 28 July 2020 while awaiting permission from a Chinese quarantine officer to discharge. Permission was withheld on the basis that “…ONE CREW FEVER (CREW’S TEMPERATURE WAS A LITTLE HIGH/37.4°C, NUCLEAC ACID TEST HAD TO CONDUCTED AS REQUEST)”, as per the relevant statement of facts.

Charterers relied on:

  • the “deficiency of men” or “any other cause” as off-hire events under clause 15; alternatively
  • a breach of rider clause 45 which provided “Officers and crew to comply with vaccination and sanitary regulations in all ports of call and corresponding certificates to be available on board, enabling the vessel to obtain free pratique by radio”.

Owners argued that:

  • the risk of delays caused by free pratique and/or health or quarantine issues were not for owners’ account;
  • rider clause 45 did not apply;
  • the delay was not caused by crew sickness where the crewman’s temperature was within a normal range.

The Tribunal found that the vessel was not off-hire and so charterers were required to pay hire for the period of delay. This decision was reached on the basis that the crewman was not unwell (his temperature being within the normal range) and, as a result, there were no good reasons for the actions of the port authorities. There was also no breach of clause 45.

Analysis

In both cases, the Tribunal focused on the reasonableness of the parties’ actions, which is perhaps not surprising given the unprecedented circumstances in which owners, charterers, port authorities and many others have found themselves following the onset of the pandemic in 2020.

Although both decisions concerned events in the early days of the pandemic (when considerable uncertainty existed as to the transmissibility of the virus and greater susceptibility to severe disease), the Tribunals held that this did not give parties ‘carte-blanche’ to make capricious, arbitrary or unreasonable decisions where there was not a genuine risk or threat to the vessel on the facts.

In 4/22, they concluded that owners were unreasonable in not seeking to agree, or at least notify in advance, charterers of their intention to screen the temperatures of the boarding pilots. They were also criticised for the accuracy of the equipment they used to measure their temperatures.

In 6/22, the port authorities were criticised for having responded unreasonably to a crew temperature reading within the normal range and found this was not something for which owners should be held accountable.

Today, where crew and shore personnel are more likely to be vaccinated and there is an improved understanding of virus transmission and how to prevent infection and serious illness, we expect LMAA tribunals may become even less sympathetic to parties (or their agents) taking unreasonable measures which cause delay.

However, given the ongoing issues presented by COVID, it remains the case that vessels are likely to be delayed in the case of actual or suspected crew illness, whether due to COVID or other causes. This is particularly the case in China and other countries which have chosen to pursue zero COVID strategies. These early decisions of LMAA arbitrators are helpful in demonstrating that such delays will not always fall on the vessel owner.