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Legal issues arising from the Japanese earthquake

I have had numerous friends in the business approach me for my views on the effect the earthquake, and resulting tsunami, has had on the ports and coastlines of Japan. While I cannot imagine the human cost of this disaster and the impact to the Japanese economy, I would imagine that there was and will be, widespread repercussions for the shipping industry. Some of these I see briefly are as follows:

Safe port issues

Shipowners may be reluctant to call at particular Japanese ports in case they have become unsafe. This will require a review of the relevant charter party terms before deciding on which course of action to take. Where a charterparty has a safe port warranty, the warranty will be prospective. In other words, at the time of nomination, the port should be prospectively safe to approach, use and depart from for the period of the ship's likely visit to that port. In the case of time charters containing a safe port warranty, where the Japanese port was nominated prior to the earthquake but the port is likely to have become unsafe by the time the ship is due to load or discharge there, the time charterer may be obliged to give new voyage orders, so long as the ship can effectively comply with those new orders. In the case of a voyage charter, the position is less clear and a detailed review of the terms of the charter party will need to be undertaken before reaching any conclusions.

Frustration/force majeure

In the case of supervening events, the charter party may contain a provision that allocates such risk. Where there is such a provision but it does not expressly cover the earthquake/tsunami situation, then one or other of the parties might seek to rely on frustration of the contract.

Depending on the choice of law provision, it may be difficult to prove that the contract has been frustrated. Under English law, for example, the party alleging frustration will have the burden to prove that circumstances have changed to such a radical extent since the contract was concluded that the contractual obligation in question can  no longer be performed or if performed, would be very different to the obligation originally contracted for.

If looking at force majeure, an exception such as "Act of God" would arguably apply. However again, the relevant provision and circumstances would have to be analyzed before concluding whether or not there was a force majeure event.

Deviation

The charter party will need to be consulted to see whether it contains a liberty clause which allows the ship to deviate to a different port. The shipowner does have an implied right to deviate in order to avoid danger to the ship, cargo or those on board. Thus, where radiation is the concern, such risk will have to be analyzed based on the facts faced by the shipowner at the time the decision is to be taken.

Delay

The congestion at Japanese ports that will have resulted from the disaster means that any ships already at Japanese ports, or due to call there, are likely to experience delays in loading or discharging their cargoes. Time charterers may seek to argue that the ship is off hire in such circumstances but, generally speaking, hire will continue to run unless the charter party is frustrated or the ship is ordered to an alternative port pursuant to any relevant charter party terms. However, the wording of the off hire clause in the charter party will need to be reviewed carefully.

This is an extremely short overview of the type of legal issues that may arise as a result of the Japanese earthquake. This is not legal advice. If you have any questions regarding this issue or any other involving shipping, you may reach me at miamipandi@comcast.net or through LinkedIn at http://www.linkedin.com/in/michelleoterovaldes.

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