Is Your Notice of Readiness Valid?

The English High Court recently held that a Master had not tendered the Notice of Readiness (“NOR”) within port limits despite the vessel being anchored in a location directed by the Port Authority.  Accordingly the NOR was invalid.

The consequences of tendering an invalid NOR can mean, in the case of a voyage charter, that the laytime provisions do not kick in. Ultimately this may mean the loss of a considerable amount of demurrage for an owner.

The Notice of Readiness

The form and content of a NOR will depend on the terms of the charter party. However, it must state that the vessel has arrived at the agreed destination where she may tender the NOR pursuant to the charter party. It must also state that she is ready to load/discharge.

A voyage charter will either be a berth charter or a port charter.  If the charter is a berth charter then, unless there is a clause in the charter party allowing the Master to tender the NOR earlier, the vessel must be securely moored at the berth before she can tender her NOR. If the charter is a port charter then, provided the ship has arrived at the port, she can tender her NOR.  It is not uncommon for berth charters to allow the NOR to be tendered when the vessel arrives at the port if the vessel cannot proceed to the berth, e.g. because the berth is congested.  
Most voyage charter parties start the running of laytime after a valid NOR has been tendered. Therefore, if an invalid NOR is given because the vessel is not at the agreed place, then laytime will not start to run.

Is the vessel within port limits?

Unless there is a “WIPON” (“whether in port or not”) clause in the charter party, allowing the NOR to be tendered outside the port (and, thus, meaning the NOR will be valid even if tendered outside port limits), it is extremely important to tender the NOR within the port limits. If the charter is a port charter and there is no WIPON clause then the vessel must be within the port limits to tender a valid NOR.

In the case of The MV Arundel Castle the fixture recap provided that the NOR was to be tendered within the port limits. The load port in question was Krishnapatnam, which was congested at the time. Due to the congestion the vessel was unable to proceed straight to the berth. Therefore, the vessel instead anchored at a location directed by the Port Authority. There the Master tendered the NOR.

The Charterers urged the court to hold that “Port Limits” means the geographical port limits as shown on the admiralty chart. The chart produced by the Charterers showed an area described as “Limit of Port of Krishnapatnam”.  In the instant case, the vessel was anchored outside this area at a distance of 1250 metres.

While the owners accepted that the vessel was outside the port limits by reference to the admiralty chart, they sought to argue either:

A. that the term “Port Limits” in the charter party included any area within which vessels are customarily asked to wait by the authority and over which the Port Authority exercises authority and control over the movement of shipping. On the basis of this definition, because the Port Authority at Krishnapatnam ordered the vessel to wait where she did, the owners argued, the vessel was within port limits; or

B. that by using the definition of “Port” in Laytime Definitions for Charterparties 2013 and The Baltic Code 2014, “Port Limits” includes any area where the vessels load or discharge cargo including berths, wharfs, 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. Again, because this vessel waited where she was ordered to wait by the Port Authority the owners claimed that she was within the port limits when the NOR was tendered.

The court followed the decision in The Joanna Oldendorff [1973] 2 Lloyds Rep 285. This case states that to be an arrived ship or vessel must have reached a position within the port where she is at the immediate and effective disposition of the charterer, with such position usually including the normal waiting place, although that will not always be the case. Relying on conclusions from the judges in The Joanna Oldendorff, the court in the present case held that:

(I) where there is a national or local law that defines the port limits, these are the limits that will apply;

(II) where there is no such law then a good indication of what the port limits are is given by the area of exercise by the Port Authority of its powers to regulate the movement and conduct of ships.

(III) In the present case, however, because the parties did not provide any evidence of local or national laws, or any information showing the area where the Port Authority can exercise its powers of vessel movement, the arbitrators were entitled to reach the conclusion that the vessel was not within the port limits by reference to the admiralty chart. It is interesting to note, however, that had the owners been able to provide evidence to show a national or local law defining the port limits differently, or evidence as to the port authority’s powers in a wider area, then the court may have decided the case differently.

The Golden Rules

1. Know whether or not you are within the port limits.

Just because the Port Authority has directed a vessel to wait for a berth at a particular place, this does not mean it is within the port limits. The Port Authority, agent or admiralty sailing directions may provide this information. If not, or if in any doubt, obtain advice as to whether there are any local or national laws defining the port limits. If there is no such law then obtain information about the area within which the Port Authority can exercise authority and control over the movement of ships.

2. An invalid NOR cannot become valid – keep tendering new NORs “without prejudice”

Once the ship gets to the correct position for the purpose of tendering a NOR then a new NOR must be tendered. If in doubt, or indeed in any event, when there is a change in the vessel’s position tender a new NOR “without prejudice” and keep issuing new NORs “without prejudice” to the earlier NORs. This should mean that, even if the first NOR is not valid, then one of the later ones will be. If no new NOR is given after an invalid NOR then it is likely that laytime will only start to run once the vessel starts loading/discharging.

3. Include a WIPON clause in the charter party

If the vessel is going to go to a port where it is possible it will be ordered to wait outside of the port limits then the owners should seek to include a WIPON clause in the charter party. As noted above, this should mean that the Master can validly tender NOR once at the waiting place even if this is outside the port limits and the NOR will be valid.

Case Title: Navalmar UK Limited v Kale Maden Hammaddeler Sanayi Ve Ticart AS [2017] EWHC 116 (Comm) (“The MV Arundel Castle”)

Image: By Nellore – Nellore, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=23580176