Arrived Ship
A ship is said to be an arrived ship when the ship has arrived within the fiscal and geographical limits of the port. Ship Master is entitled to tender a Notice of Readiness (NOR) before the laytime starts to run against the charterers. Charterer has the option to choose whether to send the ship to a particular berth or to limit his instructions by nomination of a port only. Port or berth choice is expressed in the voyage charter party in the form of either a port or a berth charter. The time at which the ship arrives will depend on whether the contract is a berth charterparty or a port charterparty and on the terms of the Notice of Readiness (NOR) clause.
Under the terms of a berth charter party, the ship will only become an arrived ship once she has reached the particular berth that is expressly named in the charter party. Under a berth charter party, the risks of delay can be passed to the charterer by allowing earlier commencement of laytime by incorporation of the term WIBO (Whether in Berth or Not). Incorporation of the term WIBO (Whether in Berth or Not) to the charter-party would shift the risk of delay such as congestion to the charterer.
Under the terms of a port charter party, if the charter party indicates a particular port, then the ship becomes an arrived ship once she has reached a position within the legal, administrative and fiscal limits of the port, even if the ship cannot proceed immediately to a berth.
In 1973 Johanna Oldendorff case, Lord Reid described Arrived Ship:
“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. If she is at some other place in the port then it will be for the shipowner to prove that she is as fully at the disposition of the charterer as she would have been if in the vicinity of the berth for loading or discharge.”
In 1977, in The Maratha Envoy case, Arrived Ship:
“Where the waiting area of a port is outside its legal, administrative, and fiscal limits, a ship within this area does not become an arrived ship.”
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Arrived Ship in Ship Chartering
“Arrived Ship” is a term used in ship chartering that signifies a certain status of the vessel in relation to its cargo operation.
According to the standard chartering terms, a ship is considered an “arrived ship” when it has arrived at the port of loading or unloading, and has reached a place within the port where it is at the charterer’s disposal. This is usually the point where laytime, or the amount of time agreed upon in the charter party for loading and unloading cargo, begins to count.
However, for the ship to be deemed an “arrived ship”, it must meet certain conditions. Typically, these conditions might include:
- The ship must have arrived at the specified port.
- The ship must be within the geographical limits of the port.
- The ship must be ready in all respects to load or unload cargo.
- The ship must have given the Notice of Readiness (NOR) to the charterer, indicating it is ready to load or unload cargo.
Once all these conditions are met, the ship is considered an “arrived ship”, and the charterer must start cargo operations within the agreed laytime. If the charterer exceeds the laytime, then demurrage, or a fee for the delay, may be charged.
After the vessel becomes an “arrived ship”, the process of loading or unloading cargo starts. The charter party agreement usually specifies the laytime, or the allotted time for loading and/or unloading the cargo. If loading/unloading is completed within the laytime, there are no additional charges.
However, if the operations exceed the agreed laytime, the charterer may be liable to pay demurrage to the shipowner. Demurrage is a penalty for delay and serves to compensate the shipowner for the additional time the ship is kept waiting.
On the other hand, if the loading or unloading operations are completed before the laytime expires, the charterer might be entitled to a refund known as despatch. Despatch is usually calculated at half the rate of demurrage and acts as an incentive for the charterer to complete operations as quickly as possible.
The concept of an “arrived ship” is key to understanding how laytime, demurrage, and despatch work. It’s important to remember that the exact terms and conditions can vary from one charter party agreement to another. Therefore, it’s crucial for both shipowners and charterers to thoroughly understand the terms of their specific agreement.
In some cases, disputes may arise over whether a ship can be considered an “arrived ship”. These disputes can hinge on various factors, such as whether the ship was in the correct location, whether it was ready to load or unload cargo, and whether the Notice of Readiness was correctly issued. Such disputes might need to be resolved through negotiation, arbitration, or legal proceedings.
In 1973 Johanna Oldendorff case, Lord Reid described Arrived Ship
The Johanna Oldendorff case in 1973 was a landmark decision in the field of maritime law, specifically with regard to what constitutes an “arrived ship”. This case revolved around a dispute between the owners of the vessel Johanna Oldendorff and the charterers.
In the judgment, Lord Reid defined an “arrived ship” in the following way:
“A vessel is an arrived ship when she is at the immediate and effective disposition of the charterer at the destination to which she has been ordered.”
In the context of the case, the Johanna Oldendorff had been ordered to a port where there was no room for her to berth. She had to wait at anchorage until space became available. The key question was whether the vessel could be considered an “arrived ship” while she was waiting at anchorage.
Lord Reid held that the ship was indeed an “arrived ship” from the moment she reached the anchorage, even though she could not berth. This was because she was within the geographical limits of the port and was ready to unload her cargo as soon as a berth became available. In other words, she was at the immediate and effective disposition of the charterer.
This decision has had a significant impact on how the concept of an “arrived ship” is interpreted in maritime law. It underscores the principle that a ship can be an “arrived ship” even if it is not berthed, as long as it is within the port limits and ready to load or unload cargo. This case continues to be cited in legal disputes and academic discussions concerning ship chartering and maritime law.
In 1977, in The Maratha Envoy case, Arrived Ship
The Maratha Envoy case of 1977 is another important case in maritime law, further refining the understanding of what constitutes an “arrived ship” in certain circumstances.
In this case, The Maratha Envoy, a bulk carrier, was ordered to discharge her cargo at a port where there were no berths available. The vessel had to anchor outside the port limits while waiting for a berth to become available. The question was whether the vessel could be considered an “arrived ship” while she was waiting at anchorage outside the port limits.
In the judgment, the court held that a ship can become an “arrived ship” before it has reached its berth, but there are conditions. The court laid down a test for whether a ship can be considered an “arrived ship” when it has to wait at anchorage outside the port limits.
The test is as follows:
- The ship must have arrived at the customary anchorage for that port.
- The ship must have arrived at a position where it can wait for a berth to become available.
In the specific case of The Maratha Envoy, the court held that the ship was indeed an “arrived ship” even though she was anchored outside the port limits. The court reasoned that since the vessel had arrived at the customary anchorage for that port and was waiting for a berth to become available, she was at the immediate and effective disposition of the charterer.
This case clarified that the definition of an “arrived ship” can extend to a ship waiting at a customary anchorage outside the port limits. However, the key is that the ship must be at the place where it can wait for a berth to become available. It further emphasized that the particular customs and practices of the port in question are important factors to consider.
In 2017, in The Arundel Castle case, Arrived Ship
Following the decisions rendered by The Johanna Oldendorff and The Maratha Envoy, arbitration Tribunals and Courts have consistently encountered a range of cases necessitating the application of the criteria stipulated in the Reid Test. Additionally, these cases have demanded a comprehensive examination of various matters, including the interpretation of the phrase “immediate and effective disposition of the charterers.”
In 2017, the Commercial Court was presented with a case that once again required an assessment of the conditions for a vessel to be deemed an arrived ship for the purpose of initiating laytime under a voyage charterparty. The case of Arundel Castle5 prompted the Court to revisit the fundamental principles established in The Johanna Oldendorff and reevaluate the significance of the term “port limits.”
The Owners, Navalmar UK Limited, entered into a voyage charter with the Charterers, Kale Made Hammadeeler Sanayi Ve Ticart AS, concerning the MV “Arundel Castle.” The designated load port was Krishnapatnam, India. Upon arrival at Krishnapatnam, the vessel encountered congestion, preventing it from proceeding directly to the berth. Consequently, it anchored at a location instructed by the port authority. Once securely anchored, the Owners issued a notice of readiness. However, the Charterers rejected the demurrage claim, leading to a dispute regarding the validity of the notice of readiness. Subsequently, the Owners initiated arbitration proceedings.
Clause 15 of the fixture recap stipulated that: “The notification of readiness is to be tendered at both ends, even by cable/telex/telefax upon the vessel’s arrival at the load/dish ports within the confines of the port. The notice of readiness must not be tendered prior to the commencement of laydays.”
Clause 35 of the fixture recap incorporated the GENCON 94 form of charterparty in the following manner: “Otherwise, the Gencon 94 printed form charterparty, with logical amendments, shall serve as the basis for the terms as stated in the fixture recap.”
The GENCON 94 form included the following provision in clause 6(c): “If the loading/discharging berth is unavailable upon the vessel’s arrival at or off the port of loading/discharging, the vessel shall be entitled to provide notice of readiness during regular office hours upon arrival there… Laytime or time on demurrage shall then be counted as if the vessel were in berth.”
The arbitrators supported the Charterers’ position and determined that the notice of readiness was invalid due to its submission outside the port limits, as required by the charterparty’s terms. Instead, it was tendered while the vessel was outside the port limits. Consequently, the Owners’ demurrage claim was unsuccessful.
The arbitrators made a distinction between clause 6(c) of GENCON 94, which referred to the vessel’s arrival at or off the port of loading/discharging, and the language used in the recap, which specified that the notice of readiness should be tendered upon the vessel’s arrival at the load/discharge ports within the port limits. The inclusion of “at or off the port” in the former clause would have implied that the vessel’s location outside the port limits was irrelevant, and in such a case, time would still have commenced.
The reference in the fixture recap to being “within port limits” held precedence over the terms of the GENCON charter. The arbitrators applied the principle of construction, which dictates that agreed-upon terms, such as those outlined in a fixture recap, take priority over inconsistent terms found in incorporated standard forms. Consequently, the notice of readiness was deemed invalid because it was tendered outside the agreed-upon location, as stipulated by clause 15 of the fixture recap, namely within the port limits.
However, the dispute extended beyond a mere conflict between clauses within a contract and the determination of which clause should prevail. It can be assumed that Counsel for the Owners anticipated that the arbitrators would find the language of the fixture recap to be dominant and would seek to uphold the parties’ intentions. Therefore, the Owners also attempted to argue for a broad interpretation of the term “port limits.”
The Owners contended that “port limits” could encompass areas where vessels are customarily instructed to wait by port authorities and/or areas beyond the legal, fiscal, or administrative boundaries where vessels are instructed to wait for their turn, regardless of the distance from that area. Alternatively, the Owners referenced the Laytime Definitions for Charterparties 2013, which defines the term “port” as follows: “PORT shall denote any region where vessels load or discharge cargo and shall encompass, but not be limited to, berths, wharves, anchorages, buoys, and offshore facilities, as well as locations outside the legal, fiscal, or administrative area where vessels are ordered to wait for their turn, regardless of the distance from that area.”
During the arbitration proceedings, there was a dearth of relevant information presented by both parties to the arbitrators regarding the local or national laws delineating the boundaries of the port. As a result, the arbitrators were compelled to rely on Admiralty charts pertaining to Krishnapatnam in order to establish the port limits and ascertain whether the vessel had indeed anchored outside these limits. It was mutually acknowledged by the parties that the vessel had indeed anchored beyond the geographical confines of Krishnapatnam port, as clearly depicted on the charts.
Subsequently, the Owners lodged an appeal against the arbitration award. Upon considering the appeal brought forth by the Owners to the Commercial Court, it became evident that the presiding judge, Mr Justice Knowles, had the option to confine his decision to the application of the express terms stated in the fixture recap. However, he chose to reaffirm the rationale set forth by the House of Lords in The Joanna Oldendorff, which stipulated that for a vessel to be considered an arrived ship and for a notice of readiness to be deemed valid, the vessel must be within the port limits at the time the notice is given, unless there exists a contrary provision in the charterparty.
Mr Justice Knowles proceeded to expound upon the common law test, commonly known as the Reid Test, elucidated in The Johanna Oldendorff, which determines when a vessel has arrived under a port charterparty. This test necessitates that the vessel has reached a position within the port where it is under the immediate and effective control of the charterer, in cases where it cannot proceed immediately to a berth.
In The Johanna Oldendorff, Lord Reid stated that the determination of whether the customary waiting area lies within or outside the port can be determined by the applicable national or local laws defining the port limits. In the absence of such laws, it can be ascertained by the area in which the port authority exercises its jurisdiction over the movement and conduct of ships.
Mr Justice Knowles acknowledged that, in the present case, the arbitrators were presented with limited evidence by the parties and were thus justified in relying on the Admiralty chart, which designated an area as the “Limit of Port of Krishnapatnam.” This limited information, without any additional supporting evidence, led to the inference that the vessel was outside the port limits, or at the very least, the Owners had not established otherwise. The vessel was positioned approximately 1,250 meters beyond the port limits as depicted on the Admiralty charts. The parties also neglected to address the extent of the port authorities’ powers.
Moreover, Mr Justice Knowles emphasized that in a different scenario, where more comprehensive information is provided, a different conclusion may be reached, even pertaining to the same port, i.e., Krishnapatnam.
Regarding the definition of “port” as outlined in the Laytime Definitions for Charterparties 2013, if the parties had explicitly incorporated these terms into the charterparty, then any location where the vessel was directed to wait by the relevant authority would be considered within the port, thereby rendering the vessel an arrived ship. However, the judge declined to consider these terms as part of the assessment of the extent of the port limits. The Court maintained that including places outside the legal, fiscal, or administrative area where vessels are instructed to await their turn would introduce significant uncertainty, particularly with the reference to “no matter the distance.” It would be difficult to determine any limits if all that was required was a location where vessels are ordered to wait, especially if the reference to “that area” denotes the legal, fiscal, or administrative jurisdiction.
The purpose behind the decision in The Johanna Oldendorff was to establish legal certainty regarding the allocation of the risk of delays resulting from port congestion between a charterer and a ship
As the parties had not consciously elected to incorporate these definitions in their charterparty, the inclusion of the port limits definition would not be applicable to the present case. Mr. Justice Knowles emphasized that a strong indication of the parties’ lack of intention for the Laytime Definitions of “port” to apply was supported by their decision to modify the GENCON wording of “at or off…port.”
Interestingly, the Charterers contended that the Court should firmly establish port limits based solely on the geographical boundaries depicted in an Admiralty chart. They argued that adopting this approach would enhance certainty. However, this argument was dismissed on the grounds that the physical limits of a port may extend well beyond what those utilizing it would consider as the port.
The Commercial Court rejected the Appeal
It is evident that the ruling in The Arundel Castle serves as a reminder to the parties that the starting point for determining the meaning of an arrived ship and the determination of port limits remains the test established more than 40 years ago in The Johanna Oldendorff.
The Arundel Castle does not necessarily represent a significant development in the law. It is intriguing that the owners initiated the appeal under section 69 of the Arbitration Act 1996, claiming it to be a matter of general public importance. One may question whether the case indeed warranted an appeal, particularly considering the existing case law, which clearly states that if a vessel is instructed to wait in a customary waiting place designated by the port authority, even if that area happens to be outside the port limits, a notice of readiness tendered there would be invalid. Consequently, the owners would not have the right to assert that laytime has commenced and that demurrage is accruing while the vessel is waiting in that location (unless the charterparty explicitly permits the notice of readiness to be tendered outside port limits).
The judge declined the opportunity to expand the definition of port limits to align with the broader definition found in the Laytime Definitions for Charterparties, instead favoring the formulation by Lord Reid. Essentially, port limits will depend on the unique characteristics of each port, but the following considerations should be taken into account in the specified order: (a) national or local laws, (b) the jurisdiction within which the port authority exercises control, and (c) geographical limits indicated on Admiralty charts.
Effectively, this case highlighted that each situation may entail additional circumstances and evidence that must be taken into consideration when addressing the question of port limits, which may lead to different conclusions. This raises curiosity regarding Lord Reid’s remarks in The Johanna Oldendorff, where he stated that, except in rare cases, determining whether the usual waiting place falls within or outside the port would not present any real difficulty.
Given that numerous ports worldwide have customary waiting places located outside the port limits, it follows that merely reaching that customary waiting place is not necessarily sufficient to allow the tendering of a valid notice of readiness and the commencement of laytime. However, perhaps it is now time to contemplate whether the significance of being within port limits is indeed paramount.
Does it truly matter whether the customary waiting location lies within the confines of the port? Given the advancements in radio communication and the enhanced velocity of modern vessels, a ship could fulfill the remaining requirements of the test even if it were anchored at a considerable distance from the designated berth and outside the port area. This is due to the fact that the ship would typically receive advance notice of the anticipated availability of the berth.
Furthermore, one might argue that the determination and demarcation of port limits is somewhat arbitrary. In the case of The Arundel Castle, the port limits were established based on Admiralty charts, and it was discovered that the vessel had been anchored approximately 1,250 meters beyond those limits. However, what if the vessel had been merely 50 meters outside the port limits, or even closer, at 10 or 5 meters away? Could it still be claimed that a ship had not arrived simply because it was anchored on the incorrect side of that figurative line?
Nevertheless, this decision serves to emphasize to charterers and ship owners the importance of considering the terms under which they charter vessels. If either party requires a broader or narrower definition to be applied, it should be explicitly stated in the charter agreement. Certain charterparty forms include provisions to circumvent the consequences of The Maratha Envoy by allowing a notice of readiness to be given once the vessel has reached the customary anchorage, if immediate berthing is not feasible.
In 2013, INTERTANKO introduced the Model River Ports Clause to regulate a vessel’s arrival at locations situated away from its final destination, particularly river ports. The clause states the following:
“Notwithstanding any other terms in this charter party, if the vessel is to load or discharge at any river port or place, the Notice of Readiness (NOR) may be tendered at or when passing the first inbound pilot station. Laytime or time on demurrage shall commence 6 hours thereafter and shall cease at or when passing the last outbound pilot station, subtracting the estimated travel time based on the vessel’s service speed for the inbound and outbound passages.”
Clauses such as this can be advantageous for shipowners calling at ports where piloting up the river can take several hours, as it allows laytime to begin counting 6 hours after the notice of readiness is tendered upon passing the first pilot boarding station.
When considering additional provisions, the parties involved should ensure that any specific intentions are clearly stated in the contract, and that the provisions in the fixture recap do not inadvertently lead to unfavorable interpretations when combined with all the other provisions and additional clauses, ultimately achieving the desired outcome.
In the present context, it is also important to remember that while a prematurely tendered notice of readiness can subsequently become valid, a notice of readiness tendered prior to the vessel becoming an arrived ship cannot be perfected and will not become valid upon arrival. Therefore, shipowners must be particularly mindful of the requirements for tendering a notice of readiness as outlined in their charterparty, and if uncertain, they should seek legal counsel to ensure a valid tender and avoid any disputes that could potentially result in the loss of demurrage.
What are the conditions for an Arrived Ship?
An “arrived ship” in maritime law generally refers to a vessel that has reached its destination and is ready to carry out its purpose, whether that be loading, unloading, or otherwise servicing its cargo. The exact legal definitions can vary by jurisdiction and by the specific terms of the contract of carriage, but in general, a ship can be considered “arrived” when it fulfills certain conditions:
- Reach the Destination: The ship must have reached its intended port or berth. This doesn’t necessarily mean it’s docked; in many cases, a ship might have to anchor offshore and wait for a berth to become available.
- Readiness to Load/Unload: The ship should be in a state where it can begin operations as soon as berth or port space is available. This can include factors like the readiness of the crew, the condition of the ship, and the status of any necessary paperwork.
- Notification: In many cases, the ship’s master has to formally declare that the ship has arrived and is ready to load or unload. This is often done by issuing a “Notice of Readiness” (NOR) to the charterer or the port authorities.
- Free Pratique: This is the license given by a port’s health authorities to a ship to have access to the port after quarantine and compliance with health regulations. Depending on the port and the current health regulations, this might be a necessary condition for the ship to be considered “arrived.”
- Legal and Custom Formalities: The ship must have cleared all necessary legal and custom formalities, which can include things like customs inspections, immigration controls, and other types of regulatory compliance.
These are general conditions and the specifics can vary significantly depending on the jurisdiction, the terms of the contract of carriage, the nature of the cargo, and other factors.