The recent case of Bunge S.A. v. Pan Ocean Co., Ltd. [2025] EWHC 193 (the “Sagar Ratan”) sheds helpful light on the interpretation of the BIMCO Infectious or Contagious Diseases Clause for Time Charter Parties 2015 (“BIMCO Clause”) and in particular, the definition of an “Affected Area”.
Background
This was an appeal by Owners of the M/V “SAGAR RATAN”’ (the “Vessel”) under Section 69 Arbitration Act 1996 against an arbitration award in favour of Charterers.
It concerned delay under a time charter trip from the Philippines via Australia to the port of Bayuquan, China.
Upon arrival at Bayuquan, four crew members tested positive for COVID-19.
Rather than leaving the Vessel stuck in quarantine, Owners decided to take her to Ulsan, South Korea and there replace the crew. The Vessel then returned to Bayuquan to discharge cargo.
The Tribunal ruled that the delay caused by this detour was not due to the Vessel visiting an “Affected Area” under the BIMCO Clause (which was incorporated in the charterparty) but was due solely to the positive tests of the crew members. The Tribunal also found that the Vessel was off-hire for the period during which discharge had been delayed.
On Owners’ application, the Court granted permission to appeal the Tribunal’s award on specific questions of law.
Court Decision
The Court considered three key provisions incorporated into the charterparty.
The BIMCO Clause
The BIMCO Clause (as amended), provided in part as follows:
“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”
[…]
“If […] the Vessel does proceed to or continue to remain at an Affected Area […] the Vessel shall remain on hire throughout”.
“If in compliance with this Clause anything is done or not done, such shall not be deemed a deviation, nor shall it be or give rise to an off-hire event…”
The question considered by the Court was whether on the true construction of the BIMCO Clause, a port or place is an “Affected Area” if it carries “a risk of quarantine or other restrictions”. In addition, they asked if the definition of “Affected Area” explicitly excluded situations such as that in this case where: (i) the crew had a disease upon arrival at the port and/or (ii) the risk was not greater upon arrival than it was when the charterparty was concluded.
The Court decided as follows:
- A port is not an “Affected Area” merely because it exposes a vessel to the risk of quarantine or other restrictions if the vessel arrived carrying crew members infected by a serious contagious disease that took place on board before arrival.
- There are two limbs to the definition of an “Affected Area”: (i) the Disease and (ii) the risk of quarantine or other restrictions being imposed in connection with the disease. Owners’ case on the second of these was that the definition of Affected Area applied to a port or place “which carried a risk of quarantined or other restrictions” and included a port which imposed quarantine on a vessel because its crew tested positive for Covid-19.
- Owners’ approach here was problematic. The language “where there is a risk of exposure to the Vessel” in the definition of “Affected Area” was most naturally directed at a characteristic of the port or place itself, such as the policies or other measures it had introduced in response to the Disease, rather than to a risk arising because a particular vessel happened to arrive at a port with an infected crew. Owners’ approach was also overly wide, because it would mean that if a crew member had a “Disease”, then any port in the world that regarded the Disease as sufficiently dangerous to require quarantine would be considered an “Affected Area” within the meaning of BIMCO Clause.
- The quarantine imposed depended entirely on the infected status of the crew, and did not arise from any policy of quarantining incoming vessels in general, or vessels who had visited particular countries. It was essentially a characteristic of the vessel/crew rather than a characteristic of the place to which charterers ordered the vessel to proceed.
- Owners could not therefore rely on the BIMCO Clause in support of their case that the Vessel was on hire during the period of delay.
Clause 38: Quarantine / Radio Pratique
Clause 38 was a quarantine-specific allocation of time and costs, which addressed delays and the allocation of risk between the parties in the event of quarantine restrictions:
“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.”
The question for the Court was whether there was a “detention” for “quarantine” within the meaning of Clause 38 if the vessel can and does avoid quarantine by changing the crew at another port.
Owners’ view was that, although there may have been “detention”, there was no “quarantine”, because there were alternatives open to the Vessel instead of quarantining, as evidenced by what the Vessel actually did – sailing to Ulsan to change crew. Owners therefore said that Clause 38 was not triggered and the Vessel remained on hire.
The Court disagreed:
- Owners’ arguments depended on a narrow definition of “detention for quarantine” in isolation from all other vessels, people and places.
- A “detention” for the purposes of this clause was to be determined by whether it impeded the core venture of the charterparty, and not whether it prevented movement in any direction. Entering a port was part of the core venture of the charterparty that could not be fulfilled because of the infection.
- Thus, the Vessel was “detained for quarantine” at Bayuquan and was thus within the scope of Clause 38: the vessel was off-hire.
Clause 50: Deviation/ Put Back
Finally, Clause 50 dealt with off-hire provisions concerning crew sickness:
“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 in the same position or equidistance position to destination”.
The question for the Court was whether in the context of this clause, after the crew members had tested positive for COVID-19, the Vessel was capable of performing “the service immediately required” of her.
Owners argued the Vessel did perform “the service immediately required” in sailing to change her crew at Ulsan and subsequently returning to Bayuquan for discharge.
Again, the Court disagreed:
- The service “immediately required” was to discharge at Bayuquan and not a detour to South Korea to replace the infected crew, however reasonable that course may have been.
- This was a different case to the Berge Sund, where a cleaning exercise was a “service immediately required” because it was “in the ordinary way” an activity required by a time charterer. In this case, crew illness and subsequent action to replace the crew was not “in the ordinary way” an activity required by a time charterer. Therefore, the vessel did not remain on hire under Clause 50.
Comment
The Sagar Ratan is a key decision on the interpretation of the BIMCO Clause, which clarifies that in order to qualify as an “Affected Area” there must be risk of detention to the vessel over and above that which would impact the vessel at any other port. Since the introduction of the 2015 clause, a newer version was released in 2022. This has removed the “Affected Area” definition, instead focusing on “Preventative Measures” defined as: “all reasonable, applicable and available measures to prevent exposure to the Vessel, its crew or other persons on board to a Disease”. This allows for a broader application, accommodating various scenarios without being limited to designated “Affected Areas”.
The broader definition gives more flexibility to shipowners to refuse orders that may expose the vessel, crew or others on board to a “Disease” and/or where there is a risk of quarantine or other restrictions. Thus, had the 2022 version been incorporated into the charterparty, it is arguable that the Court’s decision could have been different on issue 1 (i.e. the interpretation of the BIMCO Clause) and it may also have found that the Vessel was off-hire.
For completeness, a specific COVID-19 Crew Change Clause was released in 2020 in response to the COVID-19 pandemic which gives liberty to vessels to deviate from their voyage for the purpose of effecting crew changes when COVID-19 restrictions prevent such changes at scheduled ports. While both clauses are designed to address issues arising from infectious diseases, they do so from different angles: the BIMCO Infectious Diseases Clause provides a general framework for disease exposure management, while the COVID-19 Crew Change Clause offers targeted solutions for crew change logistics during the COVID-19 pandemic.
Implications for Maritime Contracts
The Sagar Ratan ruling will have significant implications for future maritime contract negotiations:
- It emphasized that the BIMCO Clause applies when quarantine restrictions are imposed amendments allocating risk more favourably if they want it to encompass pre-existing infections of the crew.
- The ruling highlights that operational risks, such as crew health management, tend to remain with shipowners, unless explicitly provided otherwise.
- “Detention” in the context of allocation of time and cost clauses will be interpreted by reference to its impact on the core venture of the charterparty. Therefore, owners should contemplate negotiating specific exclusions for pandemic-related delays to mitigate revenue loss.
- Steps taken by an owner to avoid quarantine delays will not be considered a “service immediately required” in the context of an off-hire clause (as in the “Berge Sund) because crew illness and subsequent action to replace crew is not “in the ordinary way” an activity required by a time charterer.
Conclusion
In the wake of this decision, parties should reassess their contracts to mitigate the risks posed by future pandemics and quarantine measures.