Adapting to the new environment is essential to ensure a smooth delivery

Covid-19 and its impact on shipping #4: Vessel deliveries and crew change

| Innsikt

Vessel deliveries are time-sensitive and logistically challenging even in normal circumstances. The current rules in respect of testing, quarantine and travel restrictions for the crew only add to this.

Covid-19 has made crew change a very complex process. This is especially evident when the crew change is taking place in connection with a sale of the vessel. It bears emphasizing that a failure to take over the vessel after a valid Notice of Readiness is tendered is a default under the purchase agreement, and the buyers will risk losing their deposit if they are not able to do so.

At the onset of the pandemic, several vessel deliveries were delayed by many months due to an initial refusal by crew to sail to China, followed later by closed borders in numerous countries. In recent months we have nevertheless seen an uptick in transactions with an increased willingness to get deals done.

Vessel deliveries are extremely time-sensitive endeavors which need careful co-ordination between buyers and sellers. Unfortunately, not all parties are equally co-operative and mindful of the challenges of their counterparty. We have for instance seen cases where buyers’ crew have been standing for prolonged periods at the quayside waiting to board the vessel, at the risk of being sent out of the country due to Covid-19 regulations which mandate that the crew shall go directly from the airport to the vessel. In other instances embarking crew members have tested positive for Covid-19, often with little opportunity to find replacement crew on short notice.

On the other hand sellers have also been put in extremely difficult positions with buyers dragging their feet whilst the sellers’ crew have flights booked without any opportunity to stay overnight in a hotel in the event of delays. Moreover, all crew must typically submit their itineraries well in advance to the relevant authorities and have considerable difficulties in changing flight tickets on short notice.

In adapting to the new reality we have been several cases where the parties have changed the delivery port to be able to facilitate the necessary crew change. Indonesian buyers have for instance been able to successfully carry out deliveries in Batam, Indonesia which but for Covid-19 would have been completed in Singapore. Other parties have deviated vessels to Hong Kong to be able to carry out delivery. In one case buyers were not able to get permission for their crew to fly into Singapore and instead ended up negotiating a single voyage ship management agreement with the sellers in order to bring the vessel from Singapore to Norway after delivery.

Buyers and sellers of vessels need to closely co-ordinate the transaction with a high degree of co-operation. Now more than ever is it important who your counterparty is. From a legal perspective such commercial considerations should also be accompanied by appropriate contractual clauses that address the specifics of the situation. This includes for instance provisions making the delivery port subject to crew change feasibility, taking due account of local regulations regarding Covid-19, and allowing for delays caused by Covid-19. In short, adapting to the new environment is essential to ensure a smooth delivery.

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