P&I Club

Update Volume 2020/18 Corona and the risks of a changing market

Published on 28 may 2020

The coronavirus outbreak is leading to challenging times in the maritime industry. The availability of cargoes is decreasing on certain existing routes and markets and many parties are finding themselves looking for alternatives beyond their usual trade. 

As a result, we have noticed that there is an increase in transits to and from destinations that pose a higher risk than the trades usually performed by our members, in particular with regards to:

  • Sanctions: Certain countries, parties and cargoes pose an elevated risk of being subject to international sanctions. In order to properly identify and control these risks, we recommend that our members obtain the full cargo specification, details of all parties involved and relevant documentation such as export licenses in advance. These particulars should be checked against the list of the Office of Foreign Assets Control ("OFAC") and the Consolidated Sanctions List of the European Union as part of your sanctions check;
  • Piracy: Currently there is an increased risk of piracy, particularly in West Africa, but also still in the Gulf of Aden. Transiting these areas will likely require additional insurance policies and shipowners should take into account "Best Management Practices to deter piracy" (BMP) to be applied in such breach areas. This can lead to additional costs and delays.
  • Operational matters: In the case of known markets and parties, operational matters have often become routine. This changes if the market and parties are unknown. For example, there is often an increased risk of shortages, congestion and stevedoring damages in North and West African ports. We advise you to take this into account as far as possible by ensuring that the charterparty agreements contact appropriate provisions which ensure that the responsibility for these matters lie with the charterer and the contract caters for the associated time-related risks.
  • Identity of the parties: Often these trips are performed on behalf of  unknown charterers and cargo interests. This often leads to an increased risk of cargo claims, such as shortages and quality disputes, but also to charterparty disputes and unpaid bills. The enforcement of outstanding claims can be jeopardised as a result.

An additional insurance may be appropriate for some risks (see, for example, our circular year 2020/9 on K&R insurance and the possible obligation to report). Of course, we are also available to advise on how to formulate your agreements or to provide specific advice on a new destination or cargo. 

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