Nominated Berth in Ship Chartering
Some charterparties stipulate that the Nominated Berth should be:
- Reachable on arrival
- Always accessible
- Always available
This places an obligation on the charterer to ensure that the vessel can proceed to the berth without delay. This means that, for example, if the berth is congested, or there are no tugs available causing a delay to berthing, the risk is the charterers.
In the Jasmine B case (1992) Judge Diamond summarised as follows: in the absence of any special provision in the charterparty the effect of the nomination of a loading or discharging port by the charterer is that the charterparty must thereafter be treated as if the nominated port had been originally written into the charterparty and the charterer has neither the right nor the obligation to change that nomination. The port or berth should be safe physically.
When considering whether a port is safe it is necessary to take into account the port’s location, size, layout and its features, which include the channels and areas which must be navigated to reach and leave the port. Access must be safe – the decision as to whether a port is safe or unsafe is a question of fact.
Physical safety does not have to mean that the port has to be safe for uninterrupted use but that, when danger arises, the port may be vacated safely. For example, when a ship is alongside an exposed berth which sometimes suffers from the effects of swell then she must be able to leave the berth/port safely, that is to say, the danger can be avoided by good navigation and seamanship.
With respect to the duration of the requirement of safety, although a port must be safe to reach, use and leave, temporary dangers or obstacles do not make the port unsafe. For example, the formation of ice may hinder but does not prevent navigation.
The port or berth must be safe politically. Presuming a port is physically safe there is also a requirement that it be politically safe, for example it must be a place where a vessel will not be at risk of being arrested or confiscated.
In Ogden v Graham (1861) a vessel was ordered to the Chilean port of Carrisale Bago, which, as the result of rebellion, had been declared closed by the Chilean government. The vessel required a permit to proceed there failing which it would be confiscated. Physically there was no reason that the vessel could not sail into it, ‘yet by reason of political or other causes she cannot enter without being confiscated by the government of the place, that is not a safe place within the meaning of the charterparty’.
Safety refers to a particular vessel at the time of her call to the port, so that what was safe on the last call may not be safe today. The time in question, the port’s location, size, layout, natural and artificial features all need to be taken into account.
When does the charterers’ obligation with respect to safety arise? One need to consider that, at the time of nomination, the port will, in the absence of some abnormal and unexpected future event, be safe for the vessel at the time when she is reasonably expected to approach the port, be at the port or be leaving it.
Abnormal occurrences: The vessel Evia arrived at Basrah to discharge cement during which time the Iran/Iraq war broke out so that the vessel could not transit the waterway to exit the port. The House of Lords did not agree with the owners that the port was unsafe because the outbreak of hostilities was abnormal; at the time Basrah was nominated it was prospectively safe, the danger arose after Evia’s arrival and was due to an unexpected and abnormal event; there was no breach at the time of nomination.
There may still be a question mark over the situation where an event is abnormal but not unexpected. For example an earthquake may be abnormal but, in certain areas of the world, say California, they are not unexpected.
The negligence of the master can influence a decision as to whether a port is unsafe. Dangers that are avoidable by ordinary good navigation and seamanship do not render a port unsafe. However if more than ordinary skill is required to avoid danger the port may be unsafe. English law has been very strict in its interpretation of safe to an extent that some major charterers in the oil trades, for example Shell, have for a number of years not agreed to the word safe being included in the description of ports in their fixtures.
Nominated Berth should be:
- Reachable on Arrival
- Always Accessible
- Always Available
Nominated Berth refers to a specific location within a port or harbor designated for a vessel to dock, load, or unload. It’s usually pre-arranged by the shipper or receiver of goods. For a Nominated Berth to be effective, it must have the following attributes:
Reachable on Arrival: This means that once a vessel arrives at the port or harbor, the Nominated Berth must be accessible immediately. The ship shouldn’t have to wait to access the berth due to logistical or operational issues. This helps prevent costly delays and ensures a smooth, efficient process for loading or unloading goods.
Always Accessible: This means that the Nominated Berth must be accessible at all times, regardless of environmental or other unforeseen factors. Factors such as tide levels, weather conditions, or other vessels should not restrict access to the berth. This feature ensures the berthing process can take place regardless of these external factors, maintaining efficiency and preventing unnecessary delays.
Always Available: This means that the Nominated Berth should be ready and available for the vessel’s usage whenever it arrives, regardless of the time or day. The berth shouldn’t be occupied by other vessels or be unavailable due to maintenance or other reasons when the ship arrives. Availability reduces waiting time and allows for a more efficient shipping process.
These three qualities of a Nominated Berth significantly contribute to the efficiency of maritime shipping operations, minimize waiting times, and thus lower the costs associated with delays.
Nominated Berth in Ship Chartering
A nominated berth in ship chartering refers to the specific location at a port where a chartered ship is designated to load or unload cargo.
In a chartering contract, the charterer rents the vessel from the ship owner for a specific time period or for a specific voyage. The contract, known as a charter party, details all the terms and conditions, including the specific ports of loading and unloading, the cargo to be transported, the rates, and other important details.
A “berth” is a location within a port where a ship can be moored, typically to load or unload cargo. So, a nominated berth would be the specific location the charterer has designated for this purpose. It’s important to note that the nominated berth should be safe and accessible to avoid any damages to the ship.
There can be instances where the charterer might have the right to nominate more than one berth for loading or unloading. This term can be negotiated and is usually included in the charter party. The specific terms related to this aspect might differ from one charter party to another.
It’s also worth mentioning that the concept of a “nominated berth” also impacts “laytime,” which is the time agreed between the parties during which the owner will make and keep the vessel available for loading or discharging without payment additional to the freight. The laytime countdown typically begins when the vessel has arrived at the nominated berth and is ready to load or unload cargo.
Nominated Berth in Voyage Charterparty
When a ship is on voyage, time is a key factor affecting the cost. Delays in reaching the nominated berth or delays in loading/unloading at the berth can lead to demurrage charges. Demurrage refers to the compensation payable to the shipowner by the charterer, shipper, or receiver when the charterer fails to complete loading/unloading within the agreed time, known as the laytime.
Conversely, if the ship completes the loading/unloading process in less time than the laytime, the charterer may be entitled to despatch, which is a reward usually half of the demurrage rate paid by the shipowner to the charterer.
The berth nomination process is also crucial in terms of safety. The charterer should nominate a safe berth to ensure the vessel can safely reach, leave, and remain at the berth. If the ship is directed to a berth that is unsafe, causing damage to the vessel, the shipowner may have the right to claim damages from the charterer.
Moreover, it’s worth mentioning that a change in the nominated berth by the charterer could incur additional costs due to increased voyage distance or other logistical complexities. Such changes are typically subject to the agreement between the charterer and the ship owner.
Finally, it’s important to note that a ‘berth’ charter differs from a ‘port’ charter. In a berth charter, the cargo is considered as delivered when it passes the ship’s rail at the specific berth, while in a port charter, the delivery can occur anywhere within the port. Consequently, a nominated berth provides more precise delivery terms and reduces potential disputes.
In conclusion, the role of a nominated berth in ship chartering is multifaceted, involving operational, financial, and legal aspects that all parties in a chartering agreement need to consider carefully.
The Process of Nominating a Berth
The process of nominating a berth starts with the charterer who, under the charter party agreement, will nominate the designated berth for loading or discharging cargo. This is usually a strategic decision, influenced by factors such as the location of the cargo, the facilities available at the berth, the size of the vessel, among other considerations.
The charterer is required to provide a Notice of Readiness (NOR) to the shipowner once the ship has arrived at the nominated berth and is ready to load or unload cargo. Only then does the laytime commence, as previously mentioned.
It’s also important to note that in some charter parties, the charterer has the right to shift the vessel from one berth to another, usually referred to as the “shifting clause”. However, the cost and time spent in shifting are generally for the charterer’s account unless otherwise agreed upon in the contract.
From a legal standpoint, any deviation from the nominated berth without the shipowner’s consent could lead to potential disputes. A shipowner has the right to refuse to go to a new berth if it’s not safe or it’s outside the range of the port specified in the charter party. Any change in the nominated berth without the shipowner’s consent may be treated as a breach of the charter party and could potentially give the shipowner the right to claim damages.
Furthermore, the insurance implications should not be overlooked. A change in the nominated berth could impact the vessel’s insurance coverage, especially if the new berth poses greater risks or is in a region that wasn’t included in the original insurance agreement.
The complexity of nominated berths in ship chartering means it’s a topic that requires careful negotiation and understanding from both parties in the agreement. Both the charterer and shipowner need to be aware of their rights, obligations, and the potential implications of nominated berths to ensure a smooth chartering process.
Kodros Shipping Corporation v Empresa Cubana De Fletes (The “Evia” 2) (1981)
The pertinent details are as follows:
The vessel was chartered using the Baltime Form and was instructed by the charterers to load a cargo of cement in Cuba for transportation to Basrah, an Iraqi port located on the western shore of the Shatt-al-Arab waterway. Subsequent to unloading the cargo, a war erupted between Iran and Iraq, resulting in the vessel being trapped in the waterway. The majority of the crew were repatriated, leaving only the master and a minimal crew on board. The vessel experienced a delay exceeding six months.
The arbitration addressed three key issues:
- Whether clause 21 of the contract, which acknowledged the hazardous nature of the employed area, excluded the application of the frustration doctrine.
- If clause 21 did not exclude it, whether the frustration of the contract was caused by the charterers’ breach of the safe port warranty, thus rendering it an inadmissible defense for the charterers.
- The specific date when the frustration of the contract occurred.
The arbitrator, Basil Eckersley (counsel in the Sussex Oak), ruled in favor of the charterers regarding the initial two aspects. He determined that frustration arose a fortnight after the outbreak of war.
The owners lodged an appeal with the Commercial Court and achieved success before Robert Goff J. Grounding his rationale on Mustill J’s elucidation of the safe port warranty in the case of Mary Lou, he concluded that the safe port warranty was almost absolute, and the exception for abnormal circumstances applied to situations completely unrelated to the port’s conditions, such as arson. Both charterers and owners argued that the arbitrator erred in identifying the inception of frustration, with the owners advocating for a later date and the charterers for an earlier one. Robert Goff J upheld the arbitrator’s decision on this matter.
The Court of Appeal (Lord Denning MR and Sir Sebag Shaw – Ackner LJ dissenting) upheld the charterers’ position on appeal, asserting that the war constituted an abnormal event. Consequently, they did not breach the safe port warranty and could invoke frustration. The Court of Appeal declined to interfere with the arbitrator’s determination of the frustration’s inception date.
The House of Lords (Lords Diplock, Elwyn-Jones, Keith of Kinkel, Roskill, and Brandon of Oakbrook – with Lord Roskill delivering the primary speech) upheld the majority verdict of the Court of Appeal. Lord Roskill dismissed the formulation of the safe port warranty put forth by Mustill J in the Mary Lou, which had gained favor with Robert Goff J at the trial level.
The challenge lies in defining the scope of the “abnormal circumstances” exception. If we were to attribute the natural and comprehensive meaning to “abnormal circumstances,” both parties would ultimately reach the same outcome from opposing perspectives: by definition, a port that is initially deemed safe could only become unsafe if unforeseen conditions emerged, which were not within the parties’ contemplation at the time of nomination. Conversely, if abnormal circumstances were identified as the cause of the damage, they could not have been anticipated when the port was nominated. It is uncertain whether the hostilities can be considered abnormal circumstances in this context.
The House of Lords highlighted two crucial points. Firstly, the charterers cannot be held liable for unsafety that occurs after issuing orders to the port. Secondly, there is no basis for Mustill J’s conclusion that the charterers remain responsible for supervening danger. These points find support in leading cases, particularly the Stork. Although Lord Denning MR did not reject Mustill J’s reasoning, he based his decision on the notion that the hostilities which inflicted damage upon the ship were an abnormal circumstance.
Both Lord Denning MR and Sir Sebag Shaw believed that clause 21, which allows the owners to seek compensation from their insurers in the event of war, also excuses the charterers. The House of Lords supported their perspective on this matter.
Lord Brandon received assistance in preparing his speech from Lord Eustace Roskill (not Ashton Roskill, who was Lord Hobhouse’s father-in-law and counsel in the Sussex Oak case). Lord Roskill argued that the safe port clause did not constitute a “warranty.”
Arguably, the owners suffered defeat because they consented to trading the vessel in a war zone (as stipulated in clause 21).
The finding that the port was safe when the orders were issued raises doubts, as the arbitrators determined that the general area was already unsafe prior to the issuance of the orders. Lord Roskill provided one of the reasons for not adopting the potentially more reasonable approach of Mustill, citing a precedent spanning 25 years. The Privy Council in Houston City and Devlin J in the Sussex Oak case also left the same question unanswered.
Implied Safe Berth Warranties
In the recent case of The REBORN1, the English Court of Appeal rendered a decision stating that there was no implicit assurance of safety at the designated berth chosen by a charterer for an expressly named port in a voyage charter, when neither the port nor the berth had any explicit warranty of safety. This ruling stemmed from alleged damages to the vessel during the loading process at the charterer’s chosen berth in the port of Chekka, Lebanon. The decision reaffirms the findings of both the arbitrators and the Commercial Court.
The charterparty, documented on a modified Gencon Form (1994 edition), included the following provisions, among others:
- “Box 10: Loading port or place (Cl.1) 1 Berth Chekka – 27ft SW Permissible draft.”
- “Clause 1: The aforementioned vessel shall… proceed to the loading port(s) or place(s) indicated in Box 10 or as close thereto as possible, always remaining afloat.”
- “Clause 20: Owners guarantee and warrant that upon the vessel’s arrival at, and/or prior to its departure from, the loading or discharging ports (either in ballast condition before loading or laden before discharging), the vessel, including its draft, shall fully comply with all the applicable restrictions of said ports at the relevant time, encompassing their anchorages, berths, and approaches. Furthermore, the owners confirm their complete satisfaction regarding the ports’ specifications and restrictions prior to entering into this charterparty.
The charterers contended that there was no explicit assurance regarding the safety of either the port or the berth. Given these circumstances, they argued that the responsibility for the loss should lie with the owners. On the other hand, the owners argued that it was the charterers’ responsibility to designate a berth (in fact, there was no actual dispute on this point). Since no specific berth was mentioned in the charterparty and there were multiple berths available, it was necessary for the designated berth to be inherently safe.
The decision of the Court of Appeal The leading judgment was delivered by the Master of the Rolls, Lord Clarke. He examined the key authorities used to determine the implication of terms and concluded that the test lay in the necessity of implying the term to ensure the contract’s functionality. He stated, “In my view, it depends on the circumstances and, particularly, whether, considering the terms of the specific charterparty, it is necessary to imply the warranty.”
Based on the facts of the case, Lord Clarke held that the charterers’ responsibility to nominate the berth did not imply a warranty of safety for that berth. Furthermore, he expressed, “When read together [Box 10 and Clause 20] suggest that the owners agreed to either investigate Chekka, which refers to the berths at Chekka, or assume the risk associated with any potential hazards while approaching the designated berth.”
The concurring judgment of Rix L.J. summarized the decision as follows: “It is widely accepted that a warranty of safety concerning a port encompasses a warranty of safety regarding its berths (…). It seems logical to assume that the opposite is also true: where there is no warranty of safety concerning the port, there is unlikely to be any warranty of safety concerning the berths in the absence of an explicit warranty. Whether this holds true in all cases, such as in a vast port like Rotterdam, is not necessary to decide. However, in the present case, it appears impossible to imply any residual term advocated by the owners.”
Consequently, the shipowners’ appeal was unsuccessful.
The court has exercised substantial diligence in reaching this decision and has conducted a comprehensive examination of the legal aspects pertaining to implied terms and warranties of safety in charterparties. Nevertheless, the outcome of the case primarily hinges on specific details related to both factual circumstances and charterparty provisions, such as:
- It is noteworthy that the deliberate exclusion of the term “safely” from Clause 1 was merely indicative (as described by the Master of the Rolls).
- The court explicitly clarifies that a different conclusion might have been reached if the port had been extensive and comprised multiple berths, making it impractical to investigate the safety of each individual berth.
Despite these considerations, the case holds significant implications for both ship owners and charterers.
Safe Berth Warranties
The judgment in the MV APJ Priti case highlights the key distinctions between a safe port warranty and a safe berth warranty.
1- Approach to and Departure from the Berth
In the MV APJ Priti case, the vessel was contracted to transport cargo to “one/two safe berths Bandar Abbas, one/two safe berths Bandar Bushire, one/two safe berths Bandar Khomeini at the charterers’ discretion.” While en route to Bandar Bushire, the vessel sustained damage from an Iraqi missile. The owners contended that this constituted a violation of the safe berth warranty. The Court of Appeal determined that the only explicit commitment in the charter terms was that the nominated berth, when instructed to proceed to a specific location, would be prospectively safe. This promise did not encompass the approach voyage to the port. In the words of Lord Justice Bingham:
“The charterers’ subsequent obligation was to designate a berth or berths within the designated port for the vessel. It is evident, based on the explicit wording of this charter, that the charterers assured that the nominated berth or berths would be prospectively safe for the vessel…. Since, based on my preferred interpretation, the charterers did not guarantee the safety of the declared port, I cannot accept that the vessel’s journey to and from a nominated berth should be considered part of the voyage to or from the port. It should only encompass movements within the port to and from the nominated berth.”
2- Risks affecting the port as a whole or all the berths within it
The Court of Appeal in the MV APJ Priti case, also established that a safe berth warranty is confined to a commitment that the nominated berth will be prospectively safe from risks that do not impact the port as a whole or all its berths. Therefore, there would be no breach of a safe berth warranty by the charterers if every berth or the entire port was prospectively unsafe in the same manner and to the same extent. The Court of Appeal expounded on the rationale behind this determination as follows:
“In my opinion, the charterers’ commitment should be understood as limited to a guarantee that the nominated berth or berths will be prospectively safe from risks that do not affect the port as a whole or all its berths. To interpret it differently would undermine the intended meaningful distinction between berths and ports. I cannot shake the feeling that the promise primarily aims to ensure that the nominated berth or berths (including the passages to and from within the port) are free from foreseeable marine hazards that pose a danger to the vessel…. Hence, I am convinced that the charterers’ commitment must be regarded as applicable to physical and political unsafety. However, I concur with the charterers’ argument that the unsafety referred to must be specific to the nominated berth or berths and not encompass the general unsafety of the entire port or all its berths. Even if a nominated berth is prospectively unsafe, there would be no breach by the charterers if every berth or the entire port is prospectively unsafe in the same manner and to the same extent. If all berths or the entire port are prospectively unsafe, the owners should not have agreed to the discharging port in the first place….”