Notice of readiness – Wait or take on bunkers?

Notice of Readiness (“NOR”) is a well-known document in the shipping industry. In a nutshell, its tendering means that the vessel is at the charterer’s disposal and ready in all respects to start loading or discharging operations, commencing therefore the running of laytime; i.e. the time contractually allowed to the charterer for those operations.

A NOR is considered valid when the vessel is: (i) an “arrived ship”, in other words, when she has reached the agreed place; (ii) when she is “physically ready”, for example, having all cargo-spaces clean and ready to receive the cargo; and (iii) when she is “legally ready”, which means having all papers necessary for the loading or discharging. If the vessel is not ready at the time of tendering the NOR, then the NOR is invalid.

In principle, the NOR process may appear straightforward, but in practice, disputes often arise in relation to the validity of the NOR and, as a result, the counting of laytime.

In this article, we consider a situation frequently experienced by vessel owners, which is to wait for the availability of a berth after the NOR is tendered. What can they do during the waiting time? Should they sit idle and wait until the berth is available or could they perform other activities, such as bunkering, tank cleaning and even engaging in other cargo operations?

There is no debate that vessel owners may not deprive the charterers of the use of the vessel. She must be at the charterer’s disposal, but the question is what that means when it comes to her use while waiting for the berth.

In that respect, in London Arbitration 8/08 748 LMLN, the charterers were held liable to pay for the time the vessel was taking on bunkers while waiting for a berth. The arbitrator understood that the vessel had followed charterers’ orders to wait until it was called to berth and that the vessel was kept on commercial readiness, being able to move to the berth whenever required by the charterers. Therefore, the bunkering operations would not stop laytime running.

Following that reasoning, Cantiere Navale Triestina v. Handelsvertretung der Russe Soviet Republik Naphtha Export (1925) 21 Ll.L.Rep. 204 stated:

”if one comes to think of it, there can be no reason why the absence of the ship from the harbour, once the lay days have begun to run, without any fault on the part of the owner, should prevent the lay days from continuing to run and the ship going on demurrage. A ship may be prevented from loading by causes quite outside the will of either the ship owner or the charterer and yet the charterer is liable for demurrage. It appears to me to make no difference whether the vessel is in harbour fifty yards away from a berth and cannot get to it or whether she is fifty miles away. In either case the charterer has undertaken to load and is liable for the delay because he has entered into a contract to load the ship within a certain time, and if he does not do so he pays a fixed sum for the delay.”

However, the exact limitations on what you can do during the waiting time are still unclear, as we can see from the ruling Stolt Tankers Inc v Landmark Chemicals SA [2001] EWHC 522 (Comm).

In that case, after tendering NOR, and aware that no berth was available for the next fifteen days due to a queue in the port, the owners employed the vessel to load and discharge cargoes for another two charterers and also performed tank cleaning, returning afterwards to await the berth to commence discharge. The owners claimed laytime and demurrage for all the waiting time, without any interruption, counted from the NOR until the completion of discharge. The arbitrators decided that the vessel was not at the charterers’ disposal and was instead being used for the owners’ own purposes. Therefore laytime should not be counted and no compensation was payable to the owners.

It would be interesting to know if the decision would have been the same if the owners had only performed tank cleaning. Would such usual activity be treated similarly to bunkering under London Arbitration 8/08 748 LMLN?

In Ropner Shipping Co Ltd v Cleeves Western Valleys Anthracite Collieries Ltd (The Ropner) (1927) 27 Ll.L.Rep. 317, the owner’s decision to take on bunkers prior to the end of loading and after the vessel was already on demurrage clearly caused loss of time to charterers. As a result, it was held that demurrage was suspended during the period, as charterers had been deprived of the use of the vessel. However, the decision made an important distinction, stressing that time would have continued to run without suspension if the vessel had bunkered before or after the commencement of demurrage and if no cargo was available for loading.

From a commercial perspective, it is reasonable to assume that, if there is no fault on the part of the owners, and provided no time is lost for the charterer, laytime or demurrage should continue to run, but the cases available on this point do leave some room for doubt.

At this stage, it remains uncertain if owners can optimize the waiting time to take on bunkers without having to deduct it from the time. Until the courts further clarify this question, the best approach is to include a provision in the charter party to deal with bunkering or other use of the vessel after the NOR is tendered and before a berth becomes available.