Safe Ports, Safe Berths

Safe ports, safe berths Professor Martin Davies Director, Tulane Maritime Law Center, New Orleans Intertanko Tanker Chartering Seminar Athens, 11 May 2011

Standard charterer’s promise y

Trading limits in a time charter: charterer to send the ship only to safe ports ◦ NYPE 93, cl. 5 line 71: “between safe ports and safe places”

y

Destination in a voyage charter, particularly if stated as a range ◦ “One safe berth, one safe port, East Coast United States” ◦ Asbatankvoy, cl. 9: “The vessel shall load and discharge at any safe place…which shall be designated and procured by the Charterer…” 2

Definition of safety y

Leeds Shipping Co v Société Française Bunge (The Eastern City) [1958] 2 Lloyd’s Rep 127 at 131 per Sellers LJ: ◦ “[A] port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship.”

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A relative term y y y

Safe for this ship carrying this cargo Port or berth can be safe for some ships but not others Axel Brostrom & Son v Louis Dreyfus & Co (1932) 44 Ll.L.Rep. 136 at per Roche J:

◦ “The conclusion at which the learned umpire arrived was that the Port of Londonderry in Northern Ireland was not a safe port within the meaning of the charter-party for the particular ship which was the subject of the charter-party. Let not the finding of the umpire be misunderstood. It was not a finding that the Port of Londonderry was not an entirely safe port for 99 out of 100 or an even larger proportion of the ships which may seek to resort thereto, but merely that it was not a safe part for the ship in question the Sagoland, which was a ship of large dimensions…” 4

In English law, an absolute warranty Any unsafety is a breach giving rise to damages, regardless of fault y Unless the charterparty creates a due diligence obligation y

◦ E.g. Shelltime 4, cl. 4(c): “Charterers shall use due diligence to ensure that the vessel is only employed between and at safe places (which expression when used in this charter shall include ports, berths, wharves, docks, anchorages, submarine lines, alongside vessels or lighters and other locations including locations at sea” ◦ See also Shellvoy 5 and 6, Pt II, cl. 4: “Charterers shall exercise due diligence to order the vessel only to ports and berths which are safe for the vessel…” 5

A trap for charterers using Shelltime 4 (or Shellvoy 5 or 6) y

Ullises Shipping Corp. v. Fal Shipping Co. Ltd (The Greek Fighter) [2006] 1 Lloyd’s Rep. Plus 99 ◦ Shelltime 4 form; fixture fax stated: “TRADING AREA: TRADING ALWAYS AFLOAT WITHIN IWL VIA SAFE PORTS/ANCHORAGES ARABIAN GULF/CHINA RANGE EXCLUDING IRAQ AS LONG AS SANCTIONS IN FORCE, INCLUDING RED SEA ALWAYS EXCLUDING AUSTRALIA AND NEW ZEALAND.”

y

Held: an absolute warranty of safety, not a due diligence obligation 6

A trap for charterers using Shelltime 4 (or Shellvoy 5 or 6) y

y

Colman J (para [315]): “The qualified safe port obligation in Clause 4, second paragraph, being to the extent of the due diligence qualification, inconsistent with the express warranty in the fixture fax, must yield to it. The attributes of safety identified in clause 4 are thus subsumed in the express safe port warranty.” So don’t refer to “safe ports/anchorages” in your recap when using Shelltime 4 ◦ Same is probably true of Shellvoy 5 and 6 7

American law y

In the U.S., there is a circuit split ◦ Venore Transp. Co. v. Oswego Shipping Corp., 498 F.2d 469 (2d Cir. 1974)(warranty) ◦ Orduna, S.A. v. Zen-Noh Grain Corp., 913 F.2d 1149 (5th Cir. 1990)(due diligence obligation only) x In re Petition of Frescati Shipping Co. Ltd, as owner of the M/T Athos 1 (E.D. Pa. 2011)

y

In practice, New York arbitrators take a warranty approach, too ◦ E.g., M/V Atlantic Bulker, SMA No. 3938 (N.Y. Arb. 2006) ◦ E.g., M/V Bahama Spirit, SMA No. 3849 (N.Y. Arb. 2004) ◦ T. Klaveness Shipping A/S/Duferco Int’l Steel Trading, SMA No. 3686, 2001 AMC 1954 (N.Y. Arb. 2001)(majority)(explicitly rejecting Orduna re a CP for delivery in New Orleans 8

Named port? y y y

y

What if the charter both names the port and imposes a “safe port” obligation? (A voyage CP question) Is it a promise that the named port is safe? Or does the shipowner’s agreement to go to the named port constitute prior acceptance of any risks that may arise in that port? Two English cases have recently held (for shipowner) that “safe port” is a promise that the named port is safe ◦ AIC Ltd v. Marine Pilot Ltd (The Archimidis) [2008] 1 Lloyd’s Rep. 597 (“one safe port Ventspils”) ◦ STX Pan Ocean Ltd v. Ugland Bulk Transport, A.S., (The Livanita) [2008] 1 Lloyd’s Rep. 86 (St Petersburg named; general clause “trading to be…between safe ports”)

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Named port New York arbitrators generally take the opposite view y E.g. M/V Bahama Spirit, SMA No. 3849 (N.Y. Arb. 2004): y

◦ “In general, the purpose of a charter party safe port warranty is to afford a ship owner some protection where a charter has the contractual right to order the vessel to load or discharge at ports/berths within a broad geographic area or range containing ports/berths that may or may not be safe or appropriate for the subject vessel. However, when the parties agree to name specific load and/or discharge ports/berths, the considerations, and consequently the rules change dramatically. The rationale for the safe port/berth warranty is simply no longer pertinent.” y

Klaveness Shipping A/S/Duferco Int’l Steel Trading, SMA No. 3686, 2001 AMC 1954, 1961 (N.Y. Arb. 2001) ◦ “In a named-port charter, on the other hand, the issue is different because the owner makes its own decision on the safety of the port when it agrees to that port.”

y

Also, In re Petition of Frescati Shipping Co. Ltd, as owner of the M/T Athos 1 (E.D. Pa. 2011) 10

Prospective safety y

Test is “prospective safety” at the time the charterer gives the order ◦ Kodros Shipping Corp of Monrovia v Empresa Cubana de Fletes The Evia (No 2) [1983] 1 AC 736 (TCPs) ◦ Motor Oil Hellas (Corinth) Refineries SA v Shipping Corp of India (The Kanchenjunga) [1990] 1 Lloyd’s Rep 391 (VCPs)

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The Evia (No 2) y y

In mid-March 1980, charterer ordered ship to carry cement from Cuba to Basrah Long wait for berth in Shatt-al-Arab ◦ Arrived 1 July 1980; berthed 20 August 1980

y

Slow discharge ◦ Discharge completed 22 September1980

y y y

On that day, Iraq invaded Iran Evia trapped in Shatt-al-Arab for six months Held: charterer not in breach of safe port warranty 12

The Evia (No 2) y

Lord Roskill (at 763): “[S]ince Basrah was prospectively safe at the time of nomination, and since the unsafety arose after her arrival and was due to an unexpected and abnormal event, there was at the former time no breach of cl. 2 by the respondents.”

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The Kanchenjunga y

y

Voyage charter, of a VLCC to load at “1/2 safe ports Arabian Gulf excluding Iran and Iraq but including Kharg, Lavan and Sirri Islands” Charterer ordered loading of cargo of crude oil at Kharg Island ◦ Order given on 20 November 1980

y y y y y y y y

Vessel arrived and gave NOR on 23 November 1980 Waiting for berth Kharg Island bombed by Iraqis on 1 December 1980 Master sailed away 25 miles Owners asked for substitute order Charterers repeated order for Kharg Island Owners instructed master to go to Kharg Island Master refused 14

The Kanchenjunga y y y y y y

Owners said charterers had repudiated contract by not nominating substitute for Kharg Island Charterers said owners had repudiated by not loading at Kharg Island Held: (1) Kharg Island was prospectively unsafe (adopting Evia (No 2) test) (2) Owners were therefore entitled to reject the nomination (3) By arriving and giving NOR, the ship had waived the right to reject the nomination (4) By refusing to load, owners had breached the charter (but were protected by an exclusion clause) 15

Claiming damages y y

Owners waive the right to reject the nomination but not the right to claim damages Lord Goff (at 397):

◦ “[T]he nomination was a tender of performance which did not conform to the terms of the contract; as such, the owners were entitled to reject it. Even so, by their nomination of Kharg Island the charterers impliedly promised that that port was prospectively safe for the vessel to get to, stay at, so far as necessary, and in due course, leave…Accordingly if the owners, notwithstanding their right to reject the nomination, complied with it and their ship suffered loss or damage in consequence, they would be entitled to recover damages from the charterers for breach of contract, though the ordinary principles of remoteness of damage and causation would apply to any such claim.” 16

Political unsafety y y

Guerrilla/terrorist activity can make a port unsafe for purposes of safe port warranty K/S Penta Shipping A/S v Ethiopian Shipping Lines Corp (The Saga Cob) [1992] 2 Lloyd’s Rep 545 (CA) ◦ Must be sufficiently likely to constitute “normal characteristic of the port” ◦ Only prospectively unsafe if the political risk is sufficient that a reasonable shipowner or master would decline to send or sail the vessel there

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Getting in and out y

Independent Petroleum Group Ltd v. Seacarriers Count Pte Ltd (The Count), [2008] 1 Lloyd’s Rep. 72 ◦ “1, 2 or 3 safe ports East Africa Mombasa/Beira range”

y y y y y y

Charterers nominated Beira as discharge port Vessel delayed entering Beira because of a grounding in the channel but proceeded to berth Vessel unable to leave after discharge because another ship had grounded in the channel Eventually left safely – no physical problems for ship itself Held: by London arbitrators, affirmed by QBD, Beira was an unsafe port Prospectively unsafe when nominated because of condition of channel

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Berth not port y

y

y

y

Atkins International H.A. v. Islamic Republic of Iran Shipping Lines (The A P J Priti) [1987] 2 Lloyd’s Rep. 37 Voyage charter from Dammam for discharge at “1/2 safe berths Bandar Abbas, 1/2 safe berths Bandar Bushire, 1/2 safe berths Bandar Khomeini in charterers’ option” Vessel struck by a missile while proceeding in convoy between Bandar Bushire and Bandar Khomeini Owners said Bandar Khomeini an unsafe port 19

Berth not port – The A P J Priti No express safe port warranty y No safe port warranty to be implied from safe berth warranty y Only a promise that the nominated berth would be safe, not the port as a whole (or the approach voyage) y

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Port not berth? Opposite situation to The A P J Priti impossible y If charterer promises that the port is safe, that promise must include a promise that the berth is safe y

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Practice tips If you are an owner, include reference to safety or you will be taken to have accepted the risks posed by the port or berth y If you are a charterer, don’t include reference to safety in your recap if using Shelltime 4 (or other due diligence form) y If you are an owner and you accept an order to go to an unsafe port/berth, reserve your right to claim damages y

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