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Ebola - An overview of the impact on international trade

Ebola has fast become a fear that has gripped the world. Declared as an “International Public Health Emergency” by the United Nations, the death toll has passed 4,000 and is increasing. The most serious cases of Ebola have been reported in Liberia, Sierra Leone and Guinea. Small numbers have been detected in Nigeria, a major port for oil export. This month, a nurse in Spain became the first person to contract Ebola outside of West Africa.  

Ebola has been a known virus since 1976 but the outbreak in recent months has left far-reaching implications beyond the tragic death toll, including for ship-owners involved in trade to and from West Africa.

The International Chamber of Shipping, International Maritime Employers’ Council and the International Transport Workers’ Federation issued guidance to their members in August including that all Masters should ensure that their crew are aware of the risk of the virus, follow procedures in respect of ensuring that unauthorised personnel do not board the vessel and avoid making crew changes in the ports of an affected country.

Affected countries have been asked to undertake exit screenings for those with unexplained illnesses resembling Ebola symptoms. Non-affected countries have been urged to strengthen their capacity to detect and immediately contain new cases whilst bearing in mind the need not to unnecessarily interfere with international travel or trade.

The World Health Organisation has not issued a travel ban to the affected countries. However, airports have tightened their control. Some countries have also imposed restrictions on ships and crew members who have called at affected areas. West African countries have seen road blocks, the suspension of flights and the closure of borders. This will no doubt affect global supply chains.

Shipping Contracts

How can Ebola impact your trade? If you are involved in trade with countries affected directly or indirectly by Ebola, there is a risk that travel restrictions or the general fear surrounding Ebola will have a detrimental impact on the movement of goods which are the subject matter of the contract. This could be in the form of delays to the delivery of the goods or an inability to find vessels that are prepared to call at affected countries. Further financial impact can be seen where goods perish as a result of delay.

Contractual terms will be all important. Does the delay fall under a contractual provision? Is the delay or non-performance of the contract a force majeure event, being effectively outside the control of the parties? The threat of the virus may cause parties trading in affected or near-by regions to renegotiate contractual terms in respect of pricing or delivery provisions. It may also result in parties introducing new terms into the contract to deal specifically with the crisis. In the event of disputes, parties will need to give due thought to whether the matter falls to be dealt with under English or local law.

The terms of a charterparty will also require careful consideration, for example if ports are closed or the vessel is refused entry. Important questions will require attention. Is a Master right to refuse to enter an “unsafe” port in an affected country contrary to the charterer’s instructions under a time charter? Can the charterer change a nominated port under a voyage charter without this constituting a breach of contract? Is it possible under the terms of the charterparty to avoid hire charges if the ship is quarantined?

Parties will similarly need to consider their obligations under Bills of Lading. Owners may face cargo liability claims as a result of delay to delivery of cargo or deviation. There could be defences under the Hague-Visby Rules for example for “quarantine restrictions” or “saving life or attempting to save life” although these may be challenged if, for example, a  charterer knew of the quarantine or risk at a port and still ordered the vessel to call there. It is recommended that parties check whether their bills of lading contain provisions to adequately deal with these circumstances or whether relevant terms are incorporated from the charterparty.

Insurance Claims

Aside from the life insurance claims, the virus may lead to numerous other insurance claims being made, some of which we note below:

  • Claims under cargo policies for loss of or delay to cargo as a result of the travel restrictions.
  • “Business Interruption” claims if operations are hindered or unfeasible due to the crisis.
  • Claims for loss of revenue arising if companies with bases in affected countries decide to suspend operations until the situation is contained.  Such companies could also be at risk of negligence claims for (allegedly) failing to protect customers from exposure.
  • Directors and Officers liability claims from shareholders alleging that directors failed to adequately deal with the virus resulting in economic loss.
  • Employer liability claims if employees become infected.

Insurers may seek to rely on exclusions such as failure to act as a prudent person in avoiding exposure to the virus or acting in breach of health and safety regulations. With regard to Directors and Officers liability, some policies may exclude liability arising from sickness and bodily injury although this should arguably be limited given that the claim itself would be based on economic loss. Insurers are also likely to consider business interruption claims in detail to assess whether each situation properly falls within such cover. It would be advisable for all companies to follow best procedure guidance and ensure that staff are also fully aware of the threat and how to minimise risk.

Effect on International Trade

The domino effect of the above is a decline in trade involving West African countries. Sierra Leone has already reported a 30% deflation in the economy as a result of the crisis, due to closures hindering agriculture and trade. At this stage, there has not been a huge impact on commodities trading. However, the impact could increase if the disease continues to spread. Neighbouring Ivory Coast and Ghana are part of the world’s largest producers of cocoa. The Ivory Coast has closed its borders with Liberia and Guinea. A reduction in crop or labour shortages could impact the world’s cocoa industry. Ghana is also one of the world’s top ten producers of gold which could be affected as a result.

There are also reports of impact on mining companies operating in West Africa, who may have restricted travel to affected areas or temporarily suspended operations. Other companies may see a delay in the arrival of important equipment or difficulties in shipping their products. Limited or restricted operations will lead to a lack of supply of commodities produced in West Africa, such as iron ore, leading to an increase in prices.

The virus has also impacted Nigeria, Africa’s biggest producer of oil. Although the number of people affected in Nigeria is currently small, there are concerns for the West African oil and gas industry if the spread of the virus widens, which will have a knock on effect on the global economy.

Recommendations

Parties are encouraged to keep abreast of updates on Ebola from key organisations and local agents, particularly as the virus is yet to be contained and the situation continues to change on a daily basis. Active steps can be taken to anticipate and make alternative arrangements such as deciding to call at substitute ports. Parties are also encouraged to review their contracts to minimise the risk of disputes by ensuring that provisions deal with situations that may arise as a result of the crisis or that such terms are negotiated into the contract.

For those who are concerned about the impact of Ebola to their trade or would like further information on the points discussed above, please contact Radhika Ruparelia or Jonathan Moss.  

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Jonathan Moss

Partner - Head of Transport Sector

I act for international traders, charterers, shipowners, insurers and reinsurers, handling commercial disputes. I also advise on day-to-day issues arising in the context of the sale of goods and their transportation.