Considering whether a vessel under arrest can give a valid Notice of Readiness
Demurrage claims often give rise to questions about the validity of Notices of Readiness. Although there is a wealth of reported cases, new questions continue to crop up. Skuld Defence Services recently handled a case on behalf of owner members which in a nutshell raised the question of whether a vessel under arrest can give a valid Notice of Readiness. The arrest order was at the suit of creditors of previous charterers who had gone out of business leaving a trail of unpaid suppliers. A NOR was tendered the following day after the holds passed cargo inspection.
It was material to the arbitrator’s decision that the arrest order specifically allowed the vessel to berth and carry out cargo operations provided it remained within the jurisdiction of the local Court. It was also clear to all concerned that the owners had no choice but to post security for the debts of the insolvent former charterers. They put arrangements in hand immediately and the arrest was lifted within three working days. Once the arrest order was lifted, the vessel remained at anchorage as no cargo was available to be loaded, and the vessel continued to wait. The arrest therefore had absolutely no effect on the length of time for which the vessel had to wait before commencing loading.
Most of the reported cases on determining vessel readiness concern factors which have a direct effect on the ability of the vessel to berth and carry out cargo operation (e.g. a crane is not operational or entry formalities have not been completed). In this case, the arrest did not present any obstacle to the vessel’s ability to berth and load. The only risk was that the arrest would not be lifted by the time the vessel was ready to sail. The risk was in this case remote.
The arbitration tribunal took a practical approach and accepted owners’ argument that the NOR was valid notwithstanding the arrest order. This commercial approach produced a sensible result. The result might be different in other circumstances if, for example, there was real doubt about whether the arrest would be lifted by the time loading was expected to be completed.
There are many legal traps for owners regarding the validity of Notices of Readiness. Owners will generally wish to tender NOR at the earliest opportunity in order to start the laytime clock running. This wish has to be balanced against the possibility that the vessel is not in fact physically and legally ready to load cargo. There remains a practical piece of advice which can always be given to Masters. If there is any doubt about the validity of a NOR, a second NOR should be tendered which is expressly given without prejudice to the validity of the first NOR. If it is subsequently found that the first NOR was not valid, Owners then have a fallback position.