Voyage Charters. Laytime. Arrived Ship. Last updated 25-Feb-2015

Within the port limits

The Johanna Oldendorff

On the whole matter I think that it ought to be made clear that the essential factor is that before a ship can be treated as an arrived ship she must be within the port and at the immediate and effective disposition of the charterer and that her geographical position is of secondary importance. But for practical purposes it is so much easier to establish that, if the ship is at a usual waiting place within the port, it can generally be presumed that she is there fully at the charterer’s disposal.
Per Lord Reid in E. L. Oldendorff & Co. G.M.B.H. Appellants v Tradax Export S.A. Respondents(The Johanna Oldendorff)[1974] A.C. 479 at p.535.

Application of principles stated in The Leonis raised in the Aello another question, what exactly those principles are? Whether port is a place where a ship can ultimately be loaded or discharged or it may encompass much wider waiting areas, sometimes located many miles away from the berths, where the owner effectively place his ship at the disposal of the charterer, as near as circumstances permit to the actual loading berth.

In E.L. Oldendorff & Co GmbH v Tradax Export SA (The Johanna Oldendorff) [1973] 3 All ER 148 the charterers, instructed The Johanna Oldendorff to proceed 'to the port of Liverpool/Birkenhead to discharge'. When she arrived at Mersey Bar anchorage at 17.00 hours on 2 January 1968, no berth was nominated by charterers, therefore vessel anchored there and the next day proceeded to Prince’s Pier landing stage, Liverpool, and cleared with the customs. She was then ordered by the port authority to leave and proceed to anchor at the Bar light vessel. The vessel lay at anchor at the Bar from 3rd to 20 January ready, so far as she was concerned, to discharge. Owners claimed demurrage on the footing that that The Johanna Oldendorff became an arrived ship when she anchored at the Bar anchorage because that is within the port of Liverpool. In reply charterers argued that anchorage is at least 17 miles from the dock area, or commercial area of the port, that arrival at that anchorage is not arrival at the port of Liverpool/Birkenhead and that the ship did not arrive until she proceeded to her unloading berth in the Birkenhead docks.

The House of Lords considered application of Parker LJ test pronounced and affirmed in The Aello and difficulties which it causes in cases where although the waiting area is located very close to loading berth, nevertheless arrival at such waiting area would not make vessel arrived just because it does not fit description of place "where a ship can be loaded when a berth is available". It was contemplated by their Lordships that there must be numerous cases where parties' advisers can only guess what line the court will take, accordingly the House ought to exercise its power to alter its previous decision.

Lord Reid recognised that the main idea behind definition of ‘arrived ship’ articulated by Lord Radcliffe in The Aello, was that the vessel’s location inseparably connected with her status of "immediate and effective availability for the services required":

[T}he essential factor is that before a ship can be treated as an arrived ship she must be within the port and at the immediate and effective disposition of the charterer and that her geographical position is of secondary importance. But for practical purposes it is so much easier to establish that, if the ship is at a usual waiting place within the port, it can generally be presumed that she is there fully at the charterer’s disposal.

Lord Reid formulated a convenient practical test whether a vessel has completed her loading or carrying voyage under a port charter:

Before a ship can be said to have arrived at a port she must, if she cannot proceed immediately to a berth, have reached a position within the port where she is at the immediate and effective disposition of the charterer. If she is at a place where waiting ships usually lie, she will be in such a position unless in some extraordinary circumstances proof of which would lie in the charterer.

It follows, that "arrived" vessel has to reach a usual or customary waiting position within the port, where she is at the immediate and effective disposition of the charterers. Exact geographical location within the port is considered to be of secondary importance so far as the owner can prove that the vessel was as fully at the disposition of the charterer as she would have been if in the vicinity of the berth for loading or discharging.


The Maratha Envoy

By making this dramatic trip up river and back, the shipowners have exposed the law to ridicule. For, although the charter was a port charter - and although it contained an express stipulation that the shipowners could give notice of readiness "whether in berth or not" - nevertheless the law says that the shipowners cannot give notice of readiness until she has actually reached a berth. So by a process of interpretation, the law has turned this port charter into a berth charter: and altered the whole incidence of waiting time.
Per Lord Denning M.R. in Federal Commerce and Navigation Co Ltd v Tradax Export SA( The Maratha Envoy) [1977] QB 324 at p.336.

In The Maratha Envoy case the vessel arrived at the Weser Lightship on 7 December 1970, but no berths were available at Brake or any of three others German ports on the River Weser. Waiting place where the ship was to stay at anchor was 25 miles seaward from the mouth of the River Weser and outside the legal, fiscal and administrative limits of the port of Brake and was not regarded by charterers and shipowners using the Weser ports as forming part of any of those ports. Moreover, the charterparty did not incorporate the standard Weser Lightship clause, which, when invoked, provided that a vessel waiting at the lightship for a berth could tender notice of readiness as if she were an arrived ship. The trial judge held that the Maratha Envoy was not an arrived ship when anchored at the Weser Lightship. The Court of Appeal allowed the owners’ appeal stating that the vessel became an arrived ship when she anchored at the lightship even though this place was outside the commercial limits of the port of Brake, because the lightship was the usual waiting place for the port of Brake and the vessel was at the Charterers’ disposition when anchored there.

In the House of Lords, Lord Diplock, with whom the other members of the House agreed, stressed that the Reid test expressly stipulates that the vessel must be waiting within the port to be an arrived ship.

The Reid test applies to a port charter in which there is no express provision dealing with how the misfortune risk of delay through congestion at the loading or discharging port is to be allocated between charterer and shipowner. In such a case it allocates the risk to the charterer when the waiting place lies within the limits of the port; but to the shipowner when it lies outside those limits.
Per Lord Diplock at p.10.

Thus, when vessel ordered to wait outside the port she fails to meet requirements of the Reid test, in which case the owners free to protect themselves against misfortune risk by incorporating ‘time lost’ kind of clauses in the charterparty.

His Lordship confessed that he was unable to "swallow" departure of Lord Denning M.R. and Shaw L.J in the Court of Appeal from strict compliance with the concept of Reid’s test and disapproved reliance of Lords of Appeal on New York’s arbitrators decision. Lord Diplock stated at the end of his judgment:

[T]he law as to the meaning and effect of the phrase "whether in berth or not" in a charterparty of which the proper law is English law is not in doubt. The Court of Appeal in the instant case were bound to follow it. They were wrong to depart from it.
Per Lord Diplock at p.10

Certain criticism of Lord Diplock approach and the Reid test asserts that it failed to clearly define the precise point at which the risk of time lost is transferred from shipowner to charterer and that it would be easier to identify the usual waiting place at a particular port rather than the precise limits of the port itself.

As it happened, contrary to the words of Lord Reid that only in few rare cases there would "be any real difficulty in deciding whether at any particular port the usual waiting place was or was not within the port", in years following decision in The Johanna Oldendorff there were many doubts concerning the exact legal limits of the port and the extent of regulation of ships by port authorities.


Reid’s Test. Analysis

Your Lordships would be doing a disservice to the shipping community if, so shortly after the Reid test had been laid down by this House in The Johanna Oldendorff, you did not reaffirm it and insist upon its application to the instant case.
Per Lord Diplock in Federal Commerce and Navigation Co Ltd v Tradax Export SA( The Maratha Envoy) [1978] AC 1 at p.14.

It is sometimes said that Reid’s test did not go sufficiently far in order to simplify the application of the "arrived ship" concept as, for example, New York arbitrators in The Polyfreedom did when the tribunal held that the physical and geographical location of the waiting point (provided it is within the usual waiting area) is of no importance as long as vessel has reached a point as close as she may reasonably arrive to the designated discharging berth, and can prove that it was not possible or practical to get nearer.

However, some jurists consider such extension of The Oldendorff’s ratio incorrect. For example Asdem News Update - No. 51: January 2013, which reminds that there are two different principles recognised by the English Courts, (a) commercial and (b) legal. Commercial approach may be wide enough to encompass vessel’s arrival inside the port or is just outside or “off the port”, e.g. waiting at an outer anchorage and permits tender of NOR at particular place outside the port such as, for example, The Wesser Light Clause and the Chinese River Ports clause. Legal approach, on the other hand, says that the vessel must be within port limits to be an Arrived Ship under a port charter with the result that arbitrations that have reached decisions to the contrary appear, from ASDEM point of view, to be wrongly decided.

Earlier Asdem News Update - No. 45: Jan-11, considered 19/10 806 LMLN1 3(2) London Arbitration related to the perennial argument as to where the ship should be when tendering its Notice of Readiness. The vessel was chartered on the Vegoil form to load at either Dumai or Lubuk Guang, two ports which are close to each other in Indonesia. The vessel tendered NOR at the Morong pilot station where a "sea" pilot boarded for the river passage to the Dumai port area. Two days later, a "harbour" pilot boarded and took the vessel to the loading berth at Dumai. The charterers claimed that the NOR tendered at the pilot station was invalid as it was not within the official area of the port. The owners, on the other hand, claimed that the pilot station was controlled by the Dumai harbour authority and was where ships would normally wait. The charterers contended that the harbour authority did not have control of the pilot station and any connection was only in an administrative role. It was simply the place where ships would pick up the pilot before being taken up river to either Dumai port (5 hours sailing time) or Lubuk Guang port (8 hours sailing time).

Summarizing, it should be noted, however, that nowadays, as a result of The Johanna Oldendorff and The Maratha Envoy and subsequent litigations, in the majority of ports, commercial, fiscal and legal borders of port limits became to be well drawn and unquestionably known to both the charterers and the owners, with waiting areas located within such limits. That removes much of controversy from the matter whether vessel become an arrived ship. In isolated, peculiar instances, parties can always fine-tune their respective obligations by way of incorporation of special provisions into the charterparty.

Moreover definition of port in last edition of Laytime Definitions published by BIMCO in 2013 embraces any waiting area irrespective the distance.

PORT shall mean any area where vessels load or discharge cargo and shall include, but not be limited to, berths, wharves, anchorages, buoys and offshore facilities as well as places outside the legal, fiscal or administrative area where vessels are ordered to wait for their turn no matter the distance from that area.

Incorporation of The Laytime Definitions for Charter Parties 2013 is deemed to allow tendering of NOR in a port charterparty even when vessel is not "within port".

Another thing to be remembered is that, unless charterparty provides otherwise, when vessel can proceed directly to a berth, under a port charterparty, such vessel is considered to be arrived when she has arrived there, i.e. at berth or dock. It follows that for NOR to be valid when vessel under a port charter goes directly to the berth without delays, she should tender it in the same way as under a berth charter, namely, when she is well moored alongside. This is a general rule and in each particular case reference shall be made to the requirements of charterparty in question. (See also River Port Clause)


Bibliography

Commencement of laytime, D. Davies, 4th edt. 2006

On foreseeability in construction of contracts in laytime matters – a comparison between English and Scandinavian law, Professor Trond Solvang.

Web sources

ASDEM

BIMCO

INTERTANKO

Case-law

Bulk Transport Group Shipping Co. Ltd v Seacrystal Shipping Ltd. (The Kyzikos) [1987] 1 W.L.R. 1565

EL Oldendorff & Co GMBH v Tradax Export SA (The Johanna Oldendorff) [1974] AC 479

Leonis Steamship Company, Ltd v Rank, Ltd [1908] 1 K.B. 499

Federal Commerce and Navigation Co Ltd v Tradax Export SA(The Maratha Envoy) [1978] AC 1

Wilson’s Carriage of Goods by Sea

The Adolf Leonhardt [1986] 2 Lloyd’s Rep. 395

The Aello [1961] A.C. 135

The Delian Spirit [1971] 2 All ER 1060


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