When a ship is an ‘arrived ship’

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Alex G. BUABENG

The basic problem of an “arrived ship” is economic.  The day-to-day running cost of a large vessel are extremely high.  If, therefore a ship is kept waiting in an area of a port named as the destination in a voyage charterparty because of congestion in the port, it becomes a matter of contention whether the cost should be borne by the shipowner or the charterer.

The respective arguments of the shipowner and the charterer were expounded by Scrutton LJ, arguably one of the finest commercial judges ever to adorn the English Bench in Van Nievet Goudrian and Co’s Stoomart Maatschappij v. Forslind and Son (1925) 22 LILR 49, 51 where he stated:

“On the other hand, the charterer has said “How ridiculous it is that my time for loading or discharging should begin before I have got into a berth where I can load or discharge, and until my ship gets into the place where I can load and discharge it is absurd to make payment for time waiting to get there”.  On the other hand, the shipowner has said. “You have got the cargo at the port; you have to make arrangements for the berth and if you cannot get a berth, why should my ship be waiting around at my expense when it is due to the fault of your arrangements that you cannot get there”.

Almost invariably, modern voyage charterparties provide a specified number of days called lay days or lay time during which the vessel must load or unload.

Days spent in these operations in excess of the lay days are charged to the charterer at a daily rate, representing liquidated damages to the shipowner and known as demurrage.  This may amount to a four-figure sum per day.

The most authoritative statement of law on the commencement of lay days was succinctly expounded by Kennedy LJ. In Leonis Steamship Co. Ltd. v. Rank Ltd. [1908] 1 K.B. at pp 517-518 where he said:

“The ship’s obligations therefore under such a charterparty, the performances of which must precede the commencement of the lay days – are these.  First, the ship must have arrived at her destination, and so be within the designation of an “arrived ship”.  Till then she is not entitled to give notice of readiness to load.  Thirdly, she must in fact be, so far as she is concerned, ready to load”.

It must be appreciated that the question of whether a this is an “arrived ship” is of fundamental importance.  It is a problem of global character.  For the problem is more than fundamental since the commencement of lay days usually hangs on whether first and foremost the ship is an “arrived ship”.

To appreciate the problem in its right perspective, it must be observed that it is important to recognise that voyage charters are of three types, depending on whether the loading and discharging point is specified as berth, dock, or port.  The position with regard to berth and dock charters is relatively straightforward. It has been established that the vessel becomes an “arrived ship” when it enters the specified berth.  Vide Stag Line v. Board of Trade [1950] 2 KB 194.  See also the Isabelle [1984]1 Lloyd’s Rep. 366 on dock Thorman v. Dougate SS Co. [1910] 1 KB respectively.

In both cases the risk of delay in reaching the specified berth or dock must be borne by the shipowner.

The same rule also applies in cases where the charterer, having an express right to nominate the berth or dock, nominates a busy one, with the result that delay inevitably occurs.  The courts have taken the view that there would be little value to the charterer in having such an option if he was obliged to consult the convenience of the shipowner before exercising it.  Vide Reardon Smith Line v. Ministry of Agriculture [1963] AC 691.

It is however a case of port charterparty which raises a number of problems on the issue of an “arrived ship”.  The present writer, after a very diligent research in the Ghana Law Reports, Supreme Court Ghana Law Reports and the Ghana Bar Reports did not come across a single law reported case in which the issue of an “arrived ship” in a port charter-party has been considered by the Courts.  This is hardly surprising since invariably voyage charterparties have a foreign jurisdiction clause for the resolution of issues arising out of or in connection with such charterparties.

In the absence of decided Ghanaian cases; in what constitutes an “arrived ship” to enable lay time or lay days to commence provided the other two preconditions referred to earlier in this article are satisfied, the present writer, regrettably though it is, may refer to cases decided in foreign jurisdictions especially in England for the elucidation of what is meant by an “arrived ship”.  In doing so, the present writer will discuss the earlier authorities on the issue and the first case which readily comes to mind is the locus classicus of Leonis v. SS Rank Ltd. [1908] I KB 499 where a ship was chartered to load at Bahia Blarea.  When she arrived, the port was crowded with vessels and she could not get to a berth, so anchored in the river in the port.  There she remained for about five weeks before a berth was available.  It was held that she was an “arrived ship” when she anchored in the river.

Kennedy LJ. defined the shipowner’s obligation as being to bring his ship into the port in the commercial sense of the word as opposed to the geographical, administrative or other senses.  This area, he dubbed perhaps unfortunately as the “commercial area” and defined that by saying:

“”…. the commercial area of a port, arrival within which makes the ship an “arrived ship” and as such entitled to give notice of readiness to load, and at the expiration of the notice begin to count lay days, ought, I think be that area of the named port of destination on arrival within which the master can effectively place his ship at the disposal of the charterer, the vessel herself being, then, so far as she is concerned, ready to load, and as near circumstances permit to the actual loading “spot”………. where ship waiting for access to that spot usually lie”.

The term “commercial area” was seized upon by the House of Lords and applied in far more restricted manner in Sociedad Financiera de Bienes Raices S. A. v. Agrimpex Hungarian Trading Company for Agricultural Products.  The Aello 1961 AC 135.  The vessel in this case arrived at Buenos Aires to load maize. Owing to the fact that ………… too many ships were chasing too little grain ……. the harbour authorities had decided that vessels should not enter the dock area, where they usually waited, until a cargo was ready for them, but should wait at an anchorage twenty-two miles downstream in an open roadstead.  At the time, many vessels were waiting there owing to the acute congestion in the docks.  The House of Lords, by a bare majority, held that the Aello was not an “arrived ship”, as she was not within the commercial area of the port.  It is extremely difficult to distil from judgement in The Aello the exact ratio in relation to the commercial area.

The only judgement which attempts to expand the definition is the dissenting judgment of Lord Radclife…  He rejected the test of the part of the port where commercial operations are carried on as too indefinite as “commercial operations embrace a great variety of different activities, many of which are properly carried on in different parts of the port ……… and also rejected the test adopted by the Court of Appeal, namely “that part of the port where a ship can be loaded when a berth is available albeit she cannot be loaded until a berth is available…….”.

He added that “commercial area” as applied to ships waiting for cargo is more accurately understood as defining a set of circumstances relevant to the voyage and the port than as delimiting “part of the port where a ship can be loaded”

Lord Jenkins thought the commercial area was …the area in which the actual loading spot is to be found and to which vessels seeking to load cargo of the relevant description usually go, and in which the business of loading such cargo is usually carried out”

Lord Morris emphasised the need for the vessel to arrive within the area which contained the places where the loading would take place and approved the Court of Appeal’s definition.

The commercial area, therefore, where it is featured, clearly encompass a far narrow area than that conceived by Kennedy and Buckley L. JJ.  Its further divorce from the other limits with which a port may be bound, although it enabled the bold and progressive approach in The Delian Spirit 1971 Lloyds Rep 506 to the effect that the commercial area could extend beyond the physical or geographical area of the port albeit this involved distinguishing The Aello generally operated in the charterers favour.

This apparent inconsistency gave rise to dissent as to whether the law had been changed by the Aello.

A change, however, was definitely seen in the Johanna Oldendorff.  In this case, E. L. Oldendorff and Co. Gmbt v. Tradax Export SA the facts of which are these:  In December, 1967 Johanna Oldendorff was chartered o load a bulk cargo of gain in the USA and deliver it to a port in the United Kingdom named by the charterer out of a range of Avonmouth, Hull, Glasgow and Liverpool / Birkehead (the two to count as one port).  In the case of first three mentioned ports the charterer specifically provided that the vessel should be treated as an “arrived ship” when she was at one of the usual anchorages for vessels waiting to enter these ports viz Walton Bay, Spurn Head and Tail o’ the Bank respectively.  The charterparty was silent as to the position at Liverpool.  The charterer nominated Liverpool as the port of discharge.  The Johanna Oldendorff arrived at the Mersey Bar Light on January 2, 1968.  The port was congested and there was no berth immediately available.  The following day she proceeded to Princess Wharf, within the dock area of the port, and cleared customs.  She was then ordered by the Port Authorities to return to the Bar Light Vessel some seventeen miles from the dock area and anchor whilst awaiting a berth, this being the usual waiting area in the circumstances.  Shortly after from departure from Princess Wharf, the ship’s agents gave notice of readiness to discharge.

The Johanna Oldendorff remained at the Bar Light Vessel for seventeen days until a berth was available.  The shipowners claimed demurrage on the basis she was “arrived ship” on January 3 and that the date from which the lay days are to be computed.

Donaldson J (as he then was) at first instance reported in 1971 2 Llyod’s Report 96 and the majority of the Court of Appeal reported in 1972 3 ALL ER 420 (Buckley & Roskill LJJ Denning MR dissenting reluctantly considered themselves to be bound by the much criticised decision of the House of Lords in the Aello supra and to hold that the Johanna Oldendorff was not  an “arrived ship” when she anchored at the Mersey Bar seventeen miles from Liverpool, after being ordered by the authority and notice of readiness to discharge having been given to the charterers.  On appeal to the House of Lords, the Law Lords however availed itself of its power to decline to follow its own previous decisions in accordance with the Practice Statement of July 26 1966 which is reported in 1966 1 WLR 324.

Lord Reid, Viscont Dilhorne, Lord Diplock and Lord Simon of Glaisdale all considered the majority decision in the Aello to be inappropriate and were therefore able to accept the shipowner’s contention that the Johanna Oldendorff was an “arrived ship” when at the Bar anchorage.  The test which will now govern future cases in the commencement of lay time in respect of port charterparties is in issue is that formulated by Lord Reid in the Oldendorff case as follows:

“The essential and effective 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 …”  Before a ship can be said to have arrived at a port she must is she cannot proceed immediately, to berth, have reached a position within 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 in such position unless some extraordinary circumstances proof of which would lie on the charterer”.

This test was accepted by Lord Diplock and Lord Simon of Gilaisdale. The House of Lords accordingly, by a majority overruled the Aello.

Within four years after their Lordships have overruled the Aello, they were provided with yet another opportunity to consider the issue of “arrived ship” in the Martha Envoy, 1977 to ALL ER 849 in the Martha Envoy, the charterer nominated Brake, a river port on the Weser as the port of loading but no berths were available there, the vessel had been instructed not to proceed upstream but to wait at the Weser Light.  The lightship was stationed in the Weser estuary at a point some 25 miles downstream from Blake, and was the normal waiting place at that port for vessels of the size of Martha Envoy, since there were no suitable anchorages on the river within the port itself at which vessels could lie while waiting for a vacant berth.  In reviewing the criteria for an “arrived ship” expounded in the Johanna Oldendorff, the Court of Appeal took the view that the decisive factor was whether or not the vessel was immediately and effectively at the disposal of the charterer.  There was no reason why a vessel should not be an “arrived ship” merely because she was outside the strict port limits provided that she had reached the normal waiting place for that port and was effectively at the disposal of the charterer.  It is pertinent to observe that the Court of Appeal in reaching this conclusion followed an Amerian arbitration award in Maritime Bulk Carriers v. Garmac GrainCo. [1975]. AMC 1826.

Lord Denning in the English Court of Appeal, in following the New York decision said “The merchants and shipping men on both sides of the Atlantic used the same standard form of contract, and the same words or phrases.  There should be interpreted in the same way in whichever place they came up for decision.  No matter whether in London or New York, the result should be the same”,

On appeal, the House of Lords had no difficulty in rejecting this hearsay and restoring the position established in the Johanna Oldendorff.

The Martha Envoy was not an “arrived ship” while anchored at the Weser Light, since she was not within the limits of the port of Blake.

So the attempt to bring consistency to English and American Law on this point failed.  As stated by Benedict on Admiralty 3rd Edition at p. 231 “American authorities have generally adopted a test of commercial good sense regarding the vessel’s anchorage location, geographical considerations are only of minimal importance and a vessel can be considered an “arrived ship” while waiting at a customary anchorage site outside the geographical  and physical limits of the port, especially if the vessel’s movements are still subject to some control by the local authorities as e.g. through the assignment of berth station.  Recent English authority, however, more deferential to precedent than practicality, insists that a vessel is not arrived – if it drops anchor of the designated, ports legal, fiscal and administrative limits”.

So far, the present writer has considered the position at common law in respect of “arrived ship” but this common law position may be varied by a contractual provision in a voyage charterparty.

For instance, the Baltic and International Maritime Council (BIMCO) publishes a number of standard voyages charterparties covering a wide variety of commodities and situations which may have provisions shifting risk of delay.

It is also pertinent to observe that decisions of other common law jurisdictions are only of persuasive authority in Ghana.  In the light of the above, the courts in Ghana in determining what constitutes an “arrived ship” are not bound to follow the English authorities which have been analysed above.

As already indicated, there may be provisions in voyage Charterparties which will vary the common law position already discussed in this paper.  Such provisions will place the risk of berthing delays on the charterer.

The most common provisions are considered briefly by the present writer and as follows:

  • “Whether in berth or not”.

This phrase, intended for use in berth charterparties justifies the giving of notice of readiness before the vessel’s berths, so long as she is within the port.

  • “Whether in port or not”.

This phrase justifies the giving of notice outside port limits, so long as the ship is at a usual waiting area, for the port.  It has been said to justify the giving of the notice when 200 miles from the port, so long as the vessel was at a usual waiting area for the port.  It did not justify the giving of notice when 400 miles from the port, where the vessel ha to wait to join a convoy to protect her from enemy attack.

  • “Always accessible”.

Where the charterer undertakes that the berth shall be always accessible, he is responsible for delays caused by congestion or by physical obstructions but not for delays caused by bad weather Vide Seacrystal Shipping Ltd. v. Bulk Transport Group Shipping Co. Ltd. The Kyzikos [1989] I Lloyds Rep. I HL.  It does not render the charterer liable for delays in leaving the berth caused by e.g., tidal conditions Vide London Arbitration 1/197 (L.M N 463).

(IV)     “Time lost waiting for a berth clause”

Perhaps, the most common of these clauses designed to shift the risk of delay is the Gencon clause which provides that “Time lost in waiting for berth” to count as loading (or discharging time”).  The object of this clause if to shift the risk before the vessel becomes an “arrived ship” i.e., from the time when it           could have entered a berth had one been available.  Thus, in the case of a berth charter, it will cover the period while the vessel is waiting in port until a berth is available.  Alternatively, in the case of the port charter it will apply while the vessel is waiting outside the port and even while it is waiting inside the port in     circumstances where according to the Johanna Oldendorff criteria it is not “immediately and effectively” at the disposal of the charterer.  The crucial question in each case is whether the basic reason for the delay is the unavailability of a berth.

(V)       “Reachable on arrival”

The warranty applies to any place, whether a berth, wharf, sea terminal, vessel or lighter where the ship is to load or discharge Vide the Laura Prima 1982 I Lloyds’s Rep I at p 6.  The word “arrival” does not have its technical meaning   referring to the place where notice of arrival can be tendered and the charter’s obligation arises as soon as the vessel has arrived in the popular or business sense and has reached the place where, if no reachable berth is designated, she will be held up Vide (The Angelos Lusis) 1964 2 Lloyd’s Rep 28.  The obligation of the charterer is to designate and procure a place where the vessel       is able to reach on her arrival.  The cause of any unreachability is immaterial and no distinction is drawn between commercial congestion and navigational obstacles.

(VI)     “Whether in free pratique or not”

Provision in a voyage charter that once the ship has arrived at the port and tendered notice of readiness, if required, lay time will count in accordance with the charter-party whether or not free pratique has been granted by the authorities.

It is pertinent to observe that when a ship arrives at a port from foreign country, the authorities need to satisfy themselves as to the state of health of those on board and will the grant of free pratique, that is, official permission for them to make physical contact with the shore.

As can be gleaned from the above, the common law cases on when the ship is “arrived ship” an be altered by clauses in Gencon form and Asbatanky form.

As already indicated by the present writer, the question of arrived ship is        economic and very fundamental.

If a ship is not “an arrived ship’’, at common law no notice of readiness to load            or discharge if the charterparty so stipulates can be given even if the ship is         ready to load or discharge.

It is the present writer’s hope in the not-too-distant future, while shipping      continues to be the major artery of international trade, the courts in Ghana will       have the opportunity to determine the vexed issue of when a ship becomes an      “arrived ship”.

When this is done, it will surely advance our maritime jurisprudence which is            still in its infancy.

The Writer is a Legal Practitioner who was called to the Bar in October 1969.  He holds a Master of Laws Degree from University of London having attended London School of Economics and Political Science. His areas of specialization are Maritime Law and Insurance Law. Currently, he lectures in Company and Commercial Practice at the GIMPA campus of the Ghana Law School.

Email: [email protected].

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