BIMCO issued the new Infectious or Contagious Disease Clause for Time Charter Parties 2022 replacing the 2015 Disease Clause to provide a revised standard clause for Time Charter Parties in cases of future pandemics and epidemics.
The impact of covid-19 on the shipping industry had been severe and still continues to be. Its impact in the shipping industry has ranged from ships being stuck in quarantine to crew members being trapped in a ship for months or to even ships being denied entrance to ports. The unpredictable nature of covid-19 prompted the update and revision of the previous rules for the shipping industry. To manage and regulate these emerging issues, BIMCO has issued a new disease clause, the Infectious or Contagious Disease Clause (ICOD) for Time Charter Parties 2022 replacing the previous disease clauses which originated from the Ebola outbreak.
The previous disease clause could not regulate pandemics at the rate of transmission and scale of covid-19 where contaminated crew had to be changed quickly and/or quarantined for extended time periods and this coupled with specific restrictions of certain countries and port closures, the ship had to deviate from its course of trade or had to face extended delays.
Although covid-19 was the trigger for the issuance of the ICOD, this clause should not be considered to be limited to the covid-19 pandemic only, but it is drafted to deal with and regulate future cases of pandemics like covid-19 as well as epidemics at national level.
What are the general principles of ICOD?
ICOD is drafted to serve as a standard clause to be signed between a time charterer and a shipowner and deals with issues of apportionment of responsibility in cases of pandemics or epidemics of infectious or contagious diseases whereas the previous clause failed to deal with the allocation of liability. Therefore, with the previous clause in place, the shipowner would not have been liable if he could prove that he exercised due diligence so to avoid the contamination of his crew. What has been changed in the ICOD is that in cases of severe outbreaks, the liability is now shared between the shipowner and the charterer.
For the enforcement of ICOD, there is a high threshold of a virus’s severity status. This threshold has been set in order to avoid its misuse by the charterers or the shipowners. Although this threshold cannot be easily defined, it should be considered as being set at a high severity status, so it covers only instances of extreme illness. One indication that the high severity risk is considered to have been reached to automatically trigger the ICOD is a public health emergency declaration from a public authority, such as WHO which will help to assess the contagiousness of a disease as defined in ICOD.
Pursuant to ICOD, the Time Charter Party shall be liable for post contractual costs that arise from the trade pattern, such as cleaning, quarantine, fumigation or disinfection.
According to BIMCO, ICOD also aims to provide solution to problems that arise in cases of pandemics and epidemics, such as quarantines, which challenge the commercial trade by sea.
Undoubtedly, the highly infectious nature of pandemics may lead to unfit crew members or ships that require the ships to deviate from their voyages and return to the nearest port so to change the infected crews. However, ICOD is drafted on the supposition that many outbreaks of diseases may be highly infectious, but not so life-threatening, and that many times, measures can be taken in order to avoid the contamination of the crew, even without stopping the voyage of the ship. Consequently, the issuance of ICOD is based on three key principles. Firstly, that the owner shall take actions and measures to protect the crew’s welfare. Secondly, that in cases of delay the liability is shared between the shipowner and the charterer. Thirdly, that the owner has the right to refuse orders from the charterer.
Conclusion
Cyprus plays a prominent role as a leading shipping and ship management center and undeniably, covid-19 put a lot of pressure on the Cyprus shipping industry. The new BIMCO clause will be useful for Cypriot vessels and charterers that struggled during covid-19 pandemic. With the ICOD there will be a framework based on which issues emerging as a result of pandemics and epidemics can be dealt in a way that the commercial trade by sea is affected as little as possible.
The full text of the ICOD BIMCO can be found here.
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