Court considers meaning of “Affected Area” under BIMCO Infectious or Contagious Diseases Clause

Court considers meaning of “Affected Area” under BIMCO Infectious or Contagious Diseases Clause 

Bunge S.A. -v- Pan Ocean Co., Ltd (Sagar Ratan) [2025] EWHC 193 (Admty)

This is an important decision which provides valuable feedback on the application of the BIMCO Infectious or Contagious Diseases Clause in time charterparties. In particular, it clearly defines the meaning of the phrase “Affected Area” which provides some clarity for the parties incorporating such clauses. It also reaffirms the English courts’ willingness to define a quarantine in substance and not just form. 

The background facts

In February 2022, the Vessel was delivered to Charterers’ service and was subsequently ordered to Australia to load cargo. In March 2022, the Vessel loaded her cargo and the crew was changed. The Vessel then sailed for the discharge port of Bayuquan, China. 

On or around 30 March 2022, the Vessel arrived in Bayuquan, tendered NOR, and berthed. On 31 March, the crew were tested for COVID-19 and five crew members were found to be positive. Those five crew members were later tested again. Four tested positive again and one (the Master) tested negative.

Rather than leaving the Vessel stationary in quarantine, the Owners arranged to replace the four COVID-infected crew members in Ulsan, South Korea and sailed there accordingly. The four infected crew members disembarked and the Vessel sailed back to Bayuquan, China. 

On 10 April 2022, the Vessel re-tendered NOR at Bayuquana and discharge was completed on 25 April 2022. A day later, on 26 April 2022, the Vessel was redelivered to the Owners. 

The Charterers deducted hire and expenses in respect of a period from 31 March 2022 (the time of the first positive tests at Bayuquan) to 18:30 LT on 14 April 2022. The Court referred to this period as the “Period of Delay”.

The Owners claimed for the total hire withheld by the Charterers for the Period of Delay and for an indemnity for any claim advanced by the Head Owners for the costs of replacing the four COVID-infected crew members at Ulsan. 

The Charterers denied the Owners’ claims and argued that they were entitled to make the deductions because of the time lost and additional expenses. Both parties argued that, regardless of the Tribunal’s findings, they were entitled to recover a small balance from the other. Both parties also claimed interest and costs.

The charterparty 

The three key terms of the charterparty were Additional Clause 38, Additional Clause 50 and Additional Clause 129. 

Clause 38 stated that normal quarantine time/expenses for the Vessel’s entering port shall be for Charterers’ account, but any time of detention/expenses for quarantine due to illness of the Master/crew shall be for Owners’ account.

Clause 50 stated that 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, hire would 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 equidistant position to the destination, and any related expenses would be for Owners’ account. 

Clause 129 incorporated, in amended form, the BIMCO Infectious and Contagious Diseases Clause for Time Charter Parties 2015 (the BIMCO Clause) which effectively provided that where the Vessel visits an “Affected Area”, any costs incurred in doing so are for Charterers’ account. This was effectively an exception to off-hire. 

The Tribunal’s award 

The Tribunal’s findings were as follows: 

a. The Vessel was off-hire during the Period of Delay, under clauses 38 and 50 of the Charterparty.

b. The Owners were not entitled to rely on Additional Clause 129, as the Vessel was not delayed due to visiting an “Affected Area” but, rather, the delay was brought about solely by the positive Covid-19 tests of the crew members.

c. The crew’s positive Covid-19 test results must be taken at face value, contrary to the Owners’ contention that they were inaccurate. There was insufficient evidence to conclude what the cause of the positive Covid tests were and/or when or where the infection to the crew occurred. 

d. Clause 15, the basic off-hire clause, which had been amended to require that the loss of time be “due to vessel’s fault”, probably did not apply. It was not necessary to reach a firm conclusion on that point because the Tribunal was satisfied that Additional Clauses 38 and 50 applied. 

e. The Charterers’ submission that Additional Clause 131 (BIMCO COVID 19 Crew Change Clause) applied was rejected. This clause was invokable by the Owners if they had to deviate from the port to which the vessel had been ordered to allow crew changes to take place.

f. The decision to sail to Ulsan to replace the infected crew members provided certainty and could not be criticised as unreasonable.

The Owners appealed to the High Court, arguing that the Tribunal had made errors of law.

The Court decision 

The Court dismissed the appeal which focused on the three following issues

i) 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) 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) For the purposes of the off-hire/deviation clause, is the vessel off-hire in respect of a period when it can and does comply with the service immediately required?

"The Owners sought to rely on Clause 129(h)(iii) to establish that the Vessel was on-hire throughout the Period of Delay. They argued that Bayuquan was an Affected Area because it carried “a risk of quarantine or other restrictions” in connection with COVID-19, and as such the Vessel would be on-hire. 

The Charterers, in turn, submitted that Clause 129(h)(iii) imposed a three-stage test for the Owners to be able to claim hire, i.e. that the Owners must be able to prove that (a) Bayuquan must have been an Affected Area, (b) the Vessel must have incurred additional expense or delay, and (c) visiting an Affected Area must have caused the additional expense or delay. 

The Court held as follows:

a. Bayuquan was not an Affected Area. The quarantine imposed depended entirely on the actual infected status of the crew, and did not arise from any policy of quarantining incoming vessels in general or vessels that had visited particular countries. The quarantine of the Vessel resulted from a characteristic of the Vessel/crew rather than a characteristic of the place to which the Charterers ordered the Vessel to proceed. 

b. The BIMCO clause applies “where the risk of quarantine or other restrictions is one of general application arising from the Disease”, i.e. where a risk of quarantine or other restrictions arises at a port by reason of the Vessel having previously visited a port affected by the Disease. 

c. The BIMCO clause does not provide a blanket protection for owners for a delay encountered on a visit to an Affected Area howsoever incurred and regardless of all other provisions in the Charterparty. BIMCO Clause (h)(iii) contains a causation requirement, which was not satisfied here, as the Vessel was delayed only because its crew tested positive for Covid-19. As such, the Period of Delay did not result from the Vessel having actually visited an Affected Area.

The Owners contended that although there may have been a detention, there was no quarantine. The Charterers contended that there was clearly a detention due to crew illness, and so Clause 38 had been triggered. 

The Court indicated that whether a restraint was a “detention” was to be determined having regard to whether it impeded the core venture of the charterparty, not by whether it prevented movement in any direction. A quarantine, at minimum, was a restriction on contact or movement imposed in order to avoid the spread of disease.

On that basis, the Court found that a detention for quarantine was imposed on the Vessel at Bayuquan. The Vessel’s subsequent action in sailing to another port to replace crew did not alter the fact that a quarantine procedure had prevented its entry into that port. 

More generally, the Court found that there could still be ‘detention’ for ‘quarantine’ if a vessel had to spend time sitting in quarantine or travelling/waiting for a crew change in lieu of quarantine, before it was permitted to enter or berth at a port.

• The Court stated that the service required of the Vessel was discharge at Bayuquan, not a detour to South Korea in order to replace an infected crew. The Court further held that crew illness which resulted in quarantine restrictions was not “in the ordinary way” of a charterparty so as to mean the Vessel remained on hire. Accordingly, the Vessel was not providing the service immediately required and was, therefore, off-hire.

Comment 

The Court followed the earlier decision of the Court of Appeal in The Doric Pride [2006] 2 Lloyd’s Rep 175, which distinguished issues for which: (i) shipowners are responsible, such as the health of the crew from; (ii) issues for which charterers are responsible, such as restrictions imposed by ports. 

In circumstances where a delay or quarantine arises from Covid-19 on board the vessel, shipowners hoping to rely on the BIMCO Clause should take note of the narrower definition of “Affected Area” applied by the Court, such that where a crew member has an infectious disease and the vessel is not permitted to berth and there is no finding that the infection arose as a result of a call at an infected area under the current charterparty, the vessel will prima facie be off-hire and the protections of the BIMCO Clause do not necessarily apply.