A Charterer’s legal standing when nominating an Unsafe Port

Under most charterparties it is highly likely that the charterer will be responsible for nominating a safe port or berth at both load and discharge port. Where a port or berth is deemed unsafe, a charterer will then be liable for the consequences of giving instructions for a vessel to load or discharge cargo there i.e. a breach of the unsafe berth or port warranty.

The legal definition of an unsafe port was decided in the case of the Eastern City:

A port will not be safe unless, in the relevant period of time, a 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.

The port must therefore be prospectively safe for the time the vessel is due to arrive – unless due to abnormal occurrence which could not have been foreseen for example a freak storm

The same definition has been held to apply to the safety of a berth, although it must be specific to the characteristics of the berth rather than the port as a whole.

The Consequences of nominating an Unsafe Port

The consequences for a charterer nominating an unsafe port can be extensive, the most likely being damage to the vessel arising from grounding or even sinking – this can have serious knock on effects with regards liability for pollution and wreck removal where claims may run into USD 100,000,000s.

In such circumstances the charterer will face claims from the vessels owner either from their Hull and Machinery underwriters or more likely the vessels International Group (IG) P&I Club who will seek to recover the costs of the unsafe berth claims from charterers.

Depending on the charter party form, the onerous warranty of providing a port of safety can be mitigated –in some instances the test is one of due diligence on the charterers part rather than to one of absolute obligation.

Even defending an unsafe port claim can be exceptionally costly for the charterer and it is becoming an increasingly litigious issue. The most famous case is probably the Ocean Victory – the vessel ran aground, and later broke apart, on leaving Kashima port. In the first instance a judge found the charterer liable, given that gales and long waves were not uncommon for the port area and therefore could not be put down to an abnormal occurrence.   However the Court of Appeal overturned this decision (and this was later upheld by the Supreme Court) finding that it was the combination of the different weather forces that had caused the loss and that this combination of events did amount to an abnormal occurrence. An IG P&I Club spent millions pursing this claim and another IG Club spent millions defending, both unsuccessfully at one point.

Claims

The Charterers P&I Club receives many claims notifications relating to unsafe ports, some which turn out to be spurious claims from ship owners, others that result in millions of dollars being spent in investigative and litigation work to defend or protect the charterers position. Of relevance is the MV Smart which sank off Richards Bay in South Africa, the Club are in the process of defending Owners 150M unsafe port claim.

Charterers should have Charterers Liability cover with a provider that is independent from an owners grouping such as the IG and that is able to respond to a claims and has excellent financial security.