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“A port is not an Affected Area merely by virtue of exposing a vessel to the risk of quarantine or other restrictions if the vessel has arrived carrying crew members infected by a serious contagious disease.”
(per Mr Justice Henshaw, Bunge S.A. v Pan Ocean Co Ltd, The SAGAR RATAN [2025] EWHC 193 (Admlty))
The Admiralty Court has clarified the meaning of an “Affected Area” under the BIMCO Infectious or Contagious Diseases Clause for Time Charter Parties 2015. This clarification is welcome given the number of cases that arose during the COVID-19 pandemic and provides helpful guidance on the English courts’ approach to interpreting more sophisticated agreements.
"Costs are for Charterers’ account and the Vessel remains on hire as a result of the Vessel visiting an Affected Area."
BACKGROUND
This was an appeal under section 69 of the Arbitration Act 1996 where Bunge S.A., as disponent owners (the “Owners”), sought to overturn the Tribunal’s decision in favour of Pan Ocean Co., Ltd (the “Charterers”).
The dispute arose under one time charter trip on an amended NYPE form dated 17 February 2022 where Owners chartered the SAGAR RATAN (the “Vessel”) to Charterers from the Philippines via Australia to China with a cargo of alumina in bulk. Owners chartered the Vessel from its registered owners (the “Head Owners”) under a time charter dated 8 October 2021.
The relevant clauses of the time charter trip were:
- Additional Clause 129 – BIMCO Infectious or Contagious Diseases Clause for Time Charter Parties 2015 (the “BIMCO Clause”) – “Affected Area” means any port or place where there is a risk of exposure to the Vessel, crew or other persons on board to the Disease and/or to a risk of quarantine or other restrictions being imposed in connection with the Disease. Costs are for Charterers’ account and the Vessel remains on hire as a result of the Vessel visiting an Affected Area”;
- Additional Clause 38 – Quarantine / Radio Pratique; and
- Additional Clause 50 – Deviation/Put Back.
FACTUAL BACKGROUND
On 11 March 2022, the Vessel loaded cargo at Gladstone, Australia, and seven crew members were changed.
On 30 March 2022, the Vessel arrived in Bayuquan, China, tendered NOR and berthed. Several crew members tested positive for COVID-19.
Rather than waiting at the port, the Head Owners and Disponent Owners replaced the COVID-19-infected crew members in Ulsan, South Korea and then sailed back to Bayuquan.
On 10 April 2022, the Vessel re-tendered NOR and completed discharge on 25 April 2022. Charterers deducted hire and expenses in respect of a period from 07:50 LT on 31 March 2022, when the crew first tested positive at Bayuquan, to 18:30 LT on 14 April 2022 (the “Period of Delay”).
Owners claimed for the total hire withheld by Charterers for the Period of Delay and an indemnity for any claim from Head Owners for the cost of replacing the four COVID-19-infected crew members at Ulsan. Charterers rejected Owners’ claims and claimed they were entitled to deduct from hire for the time lost and expenses incurred.
THE TRIBUNAL’S DECISION
The Tribunal decided that COVID-19 was a qualifying “Disease” for the purpose of Clause 129. However, the quarantining of the Vessel resulted from the positive crew tests and not because of the Vessel being in an affected area under the clause. Accordingly, the decision to replace the COVID-19 infected crew at Ulsan was an off-hire event and Owners were not allowed to avail themselves of the BIMCO Clause.
"The contract must be read as a whole by objectively ascertaining the overall purpose of the contract."
PERMISSION TO APPEAL
Mr Justice Butcher gave permission to appeal in respect of the following questions of law:
- Issue 1 – Additional Clause 129: On the true construction of the BIMCO Clause is a port or place an “Affected Area” if it carries a “risk of quarantine or other restrictions” or does that definition implicitly exclude situations where a) the crew had a Disease upon arrival there, and/or b) the risk was no greater upon arrival there than it was when the charterparty was concluded?
- Issue 2 – Additional Clause 38: For the purposes of an off-hire clause, is there a “detention” for “quarantine” if the vessel can and does avoid quarantine by changing the crew at another port?
- Issue 3 – Additional Clause 50: Is the vessel off-hire in respect of a period when it can and does comply with the service immediately required?
ISSUE 1
The Owners sought to rely on Additional Clause 129(h)(iii) to establish that the Vessel was on-hire throughout the Period of Delay.
As a matter of construction, the court said when it comes to the interpretation of sophisticated agreements that were negotiated and prepared by skilled professionals:
- they must be interpreted principally with close textual analysis;
- the words of the clause must be assessed “in their documentary, factual and commercial context” in the light of the facts that were known to the parties when the contract was executed; and
- the contract must be read as a whole by objectively ascertaining the overall purpose of the contract. For that purpose, Clause 129 must be read, so far as possible, consistently with Clauses 38 and 50.
Mr Justice Henshaw said that under the BIMCO Clause, there are two limbs to the definition of an “Affected Area”. An “Affected Area” can be a port or place where there is a risk of exposure to the vessel, crew or other persons on board from:
- the disease (“Limb 1”); and/or
- a risk of quarantine or other restrictions being imposed in connection with the disease (“Limb 2”).
This case is concerned with Limb 2. The court, in agreeing with the Tribunal’s decision, confirmed that Limb 2 applies where the risk of quarantine or other restrictions is: (a) one of general application arising from the Disease; and (b) by reason of having previously visited a port affected by the Disease.
The court said that the above approach to Limb 2 is to be preferred and consistent with the general rule that owners’ related delays, such as with the vessel and crew, will be for their account (in contrast to any orders from Charterers).
"The general rule that owners’ related delays, such as with the vessel and crew, will be for their account."
A vessel is not in an “Affected Area” based on a risk of quarantine or other restrictions being imposed if an incoming vessel has crew members infected with the Disease as defined in the clause.
However, the court also ruled that the BIMCO Clause contained a causation requirement, i.e. there must be a connection between the visit to the Affected Area and the period of delay under the BIMCO Clause. The clause is not meant to offer a blanket protection to Owners:
“The core purpose of the Clause is to protect Owners where, as a result of Charterers’ decision to visit an Affected Area, a delay or other cost arises. This does not offer a blanket protection for a delay encountered on a visit to an Affected Area howsoever incurred and regardless of all other provisions in the Charterparty…” (see paragraph 49 of the judgment).
Accordingly, Bayuquan was not an “Affected Area” since the delay did not result from a characteristic of the place to which Charterers ordered the Vessel to proceed.
"“Detention” is to be determined by whether it impedes the core venture of the charterparty."
ISSUE 2
The court agreed with the Tribunal that there was a “detention” under clause 38 and as such the Vessel was off-hire for the Period of Delay.
In particular, the court said that “detention” has been given a broad meaning in charterparties and the case law indicates that “detention” is to be determined by whether it impedes the core venture of the charterparty, not by whether it prevents movement in any direction. For the purpose of clause 38, quarantine was such an event.
The fact that Owners deviated to another port to replace the crew did not change the fact that the quarantine procedure had prevented its entry into Bayuquan and would continue to do so, until the Vessel’s crew were not infected by COVID-19.
ISSUE 3
"The Vessel was not providing the service immediately required and was off-hire."
The court answered the question in the negative. The Vessel was not providing the service immediately required and was off-hire during the Period of Delay pursuant to Clause 50. Crew illness which results in quarantine restrictions is not “in the ordinary way” of a charterparty so the vessel remains on hire.
CONCLUSION
Although COVID-19 is a distant memory, vessels are still at risk of being exposed to infectious or contagious diseases with the resulting possibility of a quarantine or other restrictions.
Owners should be mindful of the narrow approach adopted by the Court to the definition of an “Affected Area” under the BIMCO Clause which will affect whether Owners are protected by such clause if the vessel is subject to a quarantine or other restrictions because of an infected crew member.
In this case, the judge acknowledged that his interpretation of the BIMCO Clause struck a fair balance between the parties and is consistent with the general rule of thumb that the Owners should be responsible for delays arising from problems with the vessel and crew. The judge clarified that Limb 2 typically applies to, “vessels who have previously visited specified destinations”. This is reasonable as otherwise the Owners’ approach would be liable to render all or most ports “Affected Areas” if an infected crew is on board.
In circumstances where the court adopts a narrow approach to an “Affected Area”, Owners who are ordered to trade in areas where such risks exist may wish to ensure that proper checks and tests on crew are carried out before and after they enter those ports. If the crew was infected at a previous port, this chain of evidence may help Owners to argue that they should be afforded the protections of the BIMCO Clause if the vessel is subject to quarantine or other restrictions because of an infected crew member.
