Bunge S.A. v Pan Ocean Company, Ltd “Sagar Ratan”

Hearing date: 2 December 2024

Draft judgment circulated to parties: 8 January 2024

Approved Judgment

(A) INTRODUCTION

The claimant, Bunge S.A. (“ Owners”), brings this appeal under section 69 of the Arbitration Act 1996, in respect of an arbitration award dated 17 January 2024 (the “ Award”) made in favour of the defendant, Pan Ocean Co Ltd (“ Charterers”) concerning the vessel “ Sagar Ratan” (the “ Vessel”). The arbitration was heard by an LMAA tribunal comprising Jonathan Elvey and Mark Hamsher (the “ Tribunal”).

In very brief outline, the arbitration concerned delay which arose when, on arrival in Bayuquan, China, members of the crew tested positive for COVID-19. Rather than leaving the Vessel stationary in quarantine, Owners decided to sail her to Ulsan, South Korea, in order to replace the crew. The Vessel then returned to Bayuquan and discharged her cargo. The Tribunal concluded that the Vessel was off hire during the time this took, pursuant to Additional Clauses 38 and 50 of the charterparty (to which I refer later), and that Owners were not entitled to rely on Additional Clause 129. The latter clause incorporated, in amended form, the BIMCO Infectious or Contagious Diseases Clause for Time Charter Parties 2015 (the “ BIMCO Clause”). The Tribunal concluded that the Vessel was not delayed due to visiting an “ Affected Area” pursuant to Clause 129 but, rather, the delay was brought about solely by the positive tests of the crew members.

Permission to appeal was granted to Owners on 24 June 2024 by Mr Justice Butcher in respect of the following questions of law:

i) [Additional Clause 129] On the true construction of the BIMCO Infectious or Contagious Diseases Clause for Time Charter Parties 2015, 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?

ii) [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?

iii) [Additional Clause 50] Is the vessel off-hire in respect of a period when it can and does comply with the service immediately required?

Owners' case can be summarised as follows:

i) On a natural reading of the BIMCO Clause, the limb of the definition of Affected Area applying to a port or place which carries “a risk of quarantine or other restrictions” includes a port which imposes quarantine on a vessel because its crew tests positive for COVID-19.

ii) Where a vessel visits an Affected Area and suffers delay (e.g. by being placed in quarantine), the vessel remains on-hire throughout the period of delay, regardless of whether the delay was as a result of visiting the Affected Area.

iii) As to question 2, there is no “ detention” for “ quarantine” if the Vessel can sail to another port to change crew, since there is no sufficient geographical constraint on the vessel's movement. The Vessel was accordingly not off hire under Additional Clause 38.

iv) As to question 3, the “ service immediately required” in the present case was to sail to another port to change crew, as in fact occurred. The Vessel was therefore not off hire under Additional Clause 50 either.

Charterers' case may be summarised thus:

i) The Tribunal correctly took the view that an Affected Area must be a port or place with a risk of quarantine or other restrictions beyond that which exists at any port to which the Vessel might go under the charterparty, and/or beyond that which existed at the port in question at the time the charterparty was entered into.

ii) The quarantine limb of the BIMCO clause applies to a port the visiting of which gives rise to a risk of infection or of subsequent quarantine at a later destination as a result of having visited it. Bayuquan was not such a place.

iii) To take the benefit of the BIMCO Clause, Owners must prove that the delay was caused by the Vessel's visit to the Affected Area. Owners have not challenged the Tribunal's finding that the legally effective cause of the delay was the crew's COVID-19 infections, not the visit to the (putative) Affected Area.

iv) As to question 2, the deviation from the contractual voyage to replace infected crew members did constitute a ‘detention’ which rendered the Vessel off-hire.

v) As to question 3, the deviation was also not what was ‘immediately required’ of the vessel, such that it was ‘inefficient’ and off-hire for the period of the delay. Moreover, Owners have not properly challenged the Tribunal's finding that when the Vessel sailed to another port to change crew, she was not performing the service immediately required of her by Charterers.

I have concluded that each of the questions should be determined against the Owners, and that the Tribunal made no error of law. 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. Bayuquan was not an Affected Area and, even if it had been (for instance, because there was a risk of infection at Bayuquan itself), the delay was not caused by visiting an Affected Area but by the crew's infected state. Further, both off-hire clauses (Additional Clauses 38 and 50) were triggered and hence the Vessel was off-hire for the period during which it was delayed from discharging its cargo at Bayuquan by reason of the positive COVID-19 tests.

(B) BACKGROUND

(1) The Charterparty

The Vessel was chartered by Owners to Charterers by a fixture recap and amended NYPE form dated 17 February 2022 (the ‘ Charterparty’) for one time charter trip from the Philippines via Australia to China with a cargo of alumina in bulk. Owners were disponent owners who had chartered the Vessel from its registered owners (the ‘ Head Owners’) under a time charter dated 8 October 2021.

The three key terms of the Charterparty for present purposes were Additional Clause 38, Additional Clause 50 and Additional Clause 129 (which is a version of the BIMCO Clause with various deletions). They are set out below. In Clause 129 I have shown the deletions from the standard BIMCO Clause by strikethrough.

“ Clause 38 – Quarantine / Radio Pratique

(38) Normal quarantine time and expenses for the Vessel's entering port shall be for Charterers' account, but any time of detention and expenses for quarantine due to pestilence, illness and etc. of Master, officers and crew shall be for Owners' account.

[…]”

“ Clause 50 – Deviation / Put Back

In the event of loss of time either in port or at sea, deviation from the course of the voyage or putting back whilst on voyage, by reason of … sickness or accident to the Master, officers, crew … the hire shall be suspended from the time of the Vessel's inefficiency in port or at sea until the time when the Vessel is again efficient in the same position or equidistance position to the destination.

All directly related expenses incurred including bunkers consumed during such period of suspension shall be for Owners' account. Under this clauses neither Owners not Charterers to be allowed to be benefited at the expense of the other party.”

“Clause 129 — BIMCO Infectious or Contagious Diseases Clause for Time Charter Parties 2015

BIMCO Infectious or Contagious Diseases Clause for Time Charter Parties 2015 only sub-Clause b to g deleted

(a) For the purposes of this Clause, the words:

“Disease” means a highly infectious or contagious disease that is seriously harmful to humans.

“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.

(b) The Vessel shall not be obliged to proceed to or continue to or remain at any place which, in the reasonable judgement of the Master/Owners, is an Affected Area.

(c) If the Owners decide in accordance with Sub-clause (b) that the Vessel shall not proceed or continue to an Affected Area they shall immediately...