In this recent arbitration appeal to the High Court, the Court was asked to determine the meaning of ‘port limits’ in a charterparty.

Factual background

Navalmar UK Limited (owners), as owners of the “MV ARUNDEL CASTLE” (the vessel) entered into a voyage charter with Kale Made Hammadeeler Sanayi Ve Ticart AS (charterers) with loading to commence at the port of Krishnapatnam. In accordance with common practice the charter was concluded by way of a ‘fixture recap’. Clause 35 of the fixture recap provided ‘otherwise Gencon 94 printed form charter-party with logical amendments on the terms as per fixture recap.’

Clause 15 of the fixture recap provided that ‘Notice of readiness to be tendered at both ends… on vessel’s arrival at load/disch ports within port limits. The notice of readiness not to be tendered before commencement of laydays.’

Due to port congestion the vessel was unable to proceed straight to berth and was instead anchored at a location as directed by the port authority. Notice of readiness was given but a demurrage claim subsequently followed.

The arbitrators held that the notice of readiness was invalid on the grounds that the vessel was outside port limits. Limited relevant material evidence was made available to the arbitrators and therefore they determined ‘port limits’ by reference to the relevant admiralty chart. It was accepted by both parties that the vessel had anchored outside the port limits shown on the chart.

However, the owners contended that ‘port limits’ include any area within which vessels are customarily asked to wait by the port authorities and over which the port authorities exercise authority or control over the movement of shipping. They also argued, in the alternative, that ‘port limits’ include any area where vessels load or discharge cargo including berths, wharves, anchorage, 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.

Legal issues

A distinction was immediately drawn between clause 6(c) of Gencon which refers to ‘the vessel’s arrival at or off the port of loading/discharging’, and the wording under the fixture recap which provides for notice of readiness to be tendered ‘on vessel’s arrival at load/disch ports within port limits’. The arbitrators concluded that the fixture recap wording prevailed.

Mr Justice Knowles proceeded to set out the test at common law for when a vessel has arrived under a port charterparty as established in The “JOHANNA OLDENDORFF”. In this case the House of Lords determined that, ‘before a ship can be said to have arrived at a port she must, if she cannot proceed immediately to a berth, have reached a position within the port where she is at the immediate and effective disposition of the charterer.’ Her geographical position is of secondary importance.

Lord Reid, in The “JOHANNA OLDENDORFF”, highlighted that a good indication of port limits could be gleaned from the various powers of a port authority to regulate the movement and conduct of ships there. In essence, where national or local law defines the limits of the port in question then those are the limits that will apply in the case of that port. Where no such law applies, port limits can be taken to be given by the area of exercise by the port authority of its powers to regulate the movement and conduct of ships.

In the present case, the parties provided little relevant material to the arbitrators. No evidence was put forward regarding national or local laws and no evidence was given in relation to the area of exercise by the port authority.

The owners argued an alternative meaning of ‘port limits’ based on the definition of ‘port’ in the Laytime Definitions for Charterparties 2013, which is also included in the Baltic Code 2014: ‘Port shall mean any area where vessels load or discharge cargo and shall include, but not be limited to, berths, wharves, 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.’

The Court held that the step to include ‘places outside the legal, fiscal or administrative area where vessels are ordered to wait for their turn’ is a large and uncertain one. The formulation in The “JOHANNA OLDENDORFF”, by contrast, was provided to give legal certainty to the way in which the risk of delay from congestion at the port was allocated between charterer and shipowner in the absence of an express clause. Accordingly, Mr Justice Knowles did not consider that the definition of ‘port’ in the Laytime Definitions could be taken to provide a definition of ‘port limits’ save where the parties deliberately choose it as their definition.

The charterers argued that there would be greater certainty if the Court was to hold that “port limits” means “geographical” port limits, as shown by an admiralty chart. Whilst the Court held it was not wrong to do so in this case – due to the fact the admiralty chart was the only evidence put forward - the meaning could not be so narrowly defined in all cases.

The Court dismissed the appeal.

The formulation in The “JOHANNA OLDENDORFF” remains the principal guide when considering the meaning of ‘port limits’ and this should be borne in mind when parties are agreeing and amending the terms of their charters. If either party requires a wider - or indeed more limited - definition to apply, this should be expressly reflected in the charter.