Pushing the (port) limits

How to decide what are the "port limits" in a charterparty?

The recent case of Navalmar UK Ltd v Kale Maden Hammaddeler Sanayi ve Ticaret AS [2017] EWHC 116 (Comm) essentially re-affirmed the principles set out in the well know case of The Joanna Oldendorff [1973] 2 Lloyd’s Rep 285, dealing with when a vessel was an arrived ship and what must be considered in deciding the limits of the port. However, as this case demonstrates, it remains a matter of fact as to whether a vessel is within the port limits or not.

The "Arundel Castle" was chartered on the terms of a fixture recap (Recap) based on the Gencon 94 form. The vessel proceeded to the load port of Krishnapatnam. The port was congested and the vessel was unable to proceed straight to the berth. She anchored at a location directed by the port authority which was 1.25km outside the port limits marked on the Admiralty chart. The shipowners gave Notice of Readiness (NOR) at that location and, later, a demurrage claim was made.

Liability for the demurrage was disputed and the dispute referred to arbitration. The Tribunal found that there was a requirement in the Recap (clause 15) that the NOR be tendered within "port limits", which they concluded was defined by the limits marked on the Admiralty chart; this notwithstanding clause 6(c) of Gencon 94 which permitted tender of the NOR "off the port" if a berth was not available. Consequently, the Tribunal found that the NOR was invalid and the demurrage claim failed.

The shipowners appealed to the Commercial Court on the basis that the Tribunal had made a mistake in law in finding the vessel was outside port limits when it tendered NOR.

Shipowners made two main points on the appeal:

• That "port limits" included any area within which vessels were customarily asked to wait by the port authorities and over which the port authorities exercised authority or control over the movement of shipping.

• Alternatively, the wide definition of "port" in the well-known industry publications of Laytime Definitions for Charterparties 2013 and The Baltic Code 2014 should be used as an aid to construction in deciding what should be considered as the "port limits".

The Court held that:

• The test at common law for when a vessel had arrived under a port charterparty was whether she was at a position within the limits of the port where she was at the immediate and effective disposition of the charterer. If she was at a place where waiting ships usually lay she would be in such a position (unless exceptionally it could be shown otherwise by charterers). Where there was a national or local law that defined the limits of the port in question, those were the limits that would apply in the case of that port. Where there was no such law then a good indication of what the port limits were was given by the area of exercise by the port authority of its powers to regulate the movements and conduct of ships (applying the The Joanna Oldendorff).

• On the limited material available to the Tribunal (essentially just the Admiralty chart) the Tribunal were entitled to find as they did: that is that the vessel was outside the port limits when the NOR was tendered. Importantly, the Court said that this decision did not mean that in another case, if the evidence presented was different, a Court or Tribunal might reasonably come to a different conclusion as to the port limits of Krishnapatnam.

• As for the definition of "port" in the Laytime Definitions/Baltic Code those did not reflect the definition of "port" as explained in The Joanna Oldendorff or provide a definition of "port limits" save where the parties chose it as their definition. The parties had not chosen to do so in this case and so they did not apply.

It would be understandable if commercial parties considering the above would be surprised that shipowners did not recover demurrage where:

• The sea voyage had ended and the vessel had proceeded to a point directed by the port authorities to await their turn to berth in light of congestion; and

• The Recap, arguably, provided (per clause 6(c) of Gencon 94) that NOR could be tendered outside "port limits".

Commercial parties may also be surprised by the very narrow definition applied by the Tribunal to the meaning of "port limits" in circumstances where, as the Judge highlighted, "…a good indication of what the port limits were is given by the area of exercise by the port authority of its powers to regulate the movements and conduct of ships": which it did by directing the vessel to wait at the place it did.

Perhaps the moral of the story, particularly for shipowners, is to be very clear in any recap or charterparty about what is being agreed about the place of tender of NOR and to ensure, if reference is made to that being within "port limits", to define the port limits as widely as possible.