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Shipping industry modifies clauses in contracts for Ebola risks

Posted On: Dec. 16, 2014 12:00 AM CST

(Reuters) — Some of the shipping industry’s biggest trade associations are modifying freight contracts to reduce commercial exposure for companies whose ships travel to countries affected by the Ebola outbreak and to protect crews from the deadly virus.

Uncertainty about the spread of Ebola is adding to legal and financial issues for those involved in shipping oil, cocoa and minerals from the region. Last month, Reuters reported that individual shipping lines and traders were starting to tweak contracts to protect themselves.

INTERTANKO, whose independent members own the majority of the world’s tanker fleet, has now introduced an Ebola clause including stipulations to find alternative ports if there is risk to the crew. Charterers will also be liable for any costs if a vessel is quarantined.

“We have seen clauses designed to deal for example with war risks where the drafter has simply crossed out ‘war’ and replaced it with ‘Ebola’ without much thought. That kind of approach can only lead to uncertainty and disputes,” INTERTANKO’s general counsel Michele White said.

BIMCO, the world’s largest global shipping association whose members include owners and brokers, is about to introduce a clause, but not one that will be Ebola specific.

“We consider the generic clause approach to be more pragmatic than issuing a ‘single issue’ clause,” Grant Hunter of BIMCO said.

“Charter party clauses should have a long shelf life ... Ebola is quite likely to be one of a number of infectious or contagious diseases that will have an impact on international trade in the years to come.”

The worst outbreak of Ebola on record has killed 6,583 people in the three hardest-hit West African countries, Sierra Leone, Liberia and Guinea, and infected 18,188 people, the World Health Organization says.

Michael Frodl, of U.S. based consultancy C-Level Global Risks, said Ebola screening at borders was not effective.

“We already foresee problems for a ship to find not only a port that will let the vessel pull in, but also then let a transfer ... occur.”

Industry sources said the rise in deaths from Ebola in West Africa was likely to affect insurance premiums.

“Claims will be difficult to assess as loss adjusters may be prevented from visiting the claim scene owing to quarantine restrictions and concerns over the spread of disease,” Jonathan Moss of law firm DWF said.