First come, first served: how does it work in Ukrainian ports?

• Ports and Terminals

The ship has arrived, the notice has been tendered and the berthing queue has been agreed, but instead of berthing, the vessel remains on roads due to an unexpected change in berthing line-up – such a scenario could end in a serious financial dispute between the parties involved, especially in circumstances where the laycan window is narrow, daily cargo loading rates are low and the demurrage rate is high.

Priority of berthing and loading or discharging of a vessel is a significant issue, as it directly concerns matters of laytime and demurrage. The first come, first served principle is commonly known in shipping and port practice when it comes to berthing and loading or discharging of vessels. However, sometimes even an agreed berthing line-up cannot guarantee timely berthing.

Several recent court cases have involved parties that suffered damages from an unexpected change of berthing line-up and subsequently attempted to recover their losses. In one such case, bulk carrier A arrived at the port to load grain cargo at a multi-purpose cargo terminal and tendered its notice of readiness. The ship agent notified all involved parties of the official berthing line-up, informing them that the loading of the vessel would take 24 hours. The next day the ship agent informed them that the berthing of the vessel would be postponed for one day due to the absence of the port's updated cargo transshipment plan, but confirmed once again that the loading would take 24 hours. However, it became known that vessel B, which had arrived at the port later, was berthed on this day to load a cargo of billets – in breach of the first come, first served principle. Billets have a low daily loading rate and loading of vessel B thus continued for four days. The subsequent loading of vessel A with grain actually took 24 hours, but during the time spent on roads vessel A went on demurrage. The charterers claimed against the ship agent and freight forwarding company for the losses. In a similar case, the shipowner claimed against the ship agent for additional expenses (eg, fuel and crew wages) that it had incurred during the ship's idle period due to a breach of the berthing queue.

In an earlier version of the Merchant Shipping Code, the first come, first served principle was stipulated as follows: "The sea port provides the loading, discharging and attendance of the Vessels in the order of their arrival at the port." After the Law on Sea Ports entered into the force, this wording was omitted from the code, but was not transferred to the text of the law. Thus, the principle of priority of berthing is no longer formally reflected in Ukrainian law.

In the absence of statutory regulation, the most important documents that must be considered are the codes of customs of ports and the specific contracts concluded between shipowners, charterers, freight forwarders and ship agents. A port's code of customs is the document which, on the basis of long-established local customs, regulates (among other things):

- the sea port's services;
- attendance of ships and passengers;
- load rates for different types of cargo;
- the method of calculating laytime (where it is not contractually agreed by the parties);
- cargo rules; and
- other operations within the port.

The code of customs may be directly applied where:

- the contract of carriage by sea stipulates the application of port customs;
- the contract of carriage does not contain provisions that override port customs; and
- the contract of carriage contains provisions that contradict port customs.

The specific contracts between the participants of the logistic chain provide for contractual liabilities, events of default and remedies for parties affected by such a default.

In practice, the priority of berthing and sailing ships at a particular port is determined in accordance with the port's daily transshipment plan, which in turn depends on several factors, including:

- the vessel's dates of laycan, as confirmed by the port;
- the queue of vessels according to the notices of readiness tendered; and
- the availability of free berths at the cargo terminal, the readiness of storage facilities and the presence of full shiploads.

The information required for the daily transshipment plan is circulated among all parties of the logistic chain – shippers, charterers, shipowners, freight forwarders, stevedores, ship agents and port authorities – and therefore failure to provide timely and precise information at any point in the chain may result in berthing delays.

Practice shows that the weakest links of the chain are often freight forwarders and shipping agencies. Freight forwarders are involved in the preparation of the port's daily transshipment plan and are responsible for the provision of shiploads of cargo (or the readiness of storage facilities), the availability of free berth at cargo terminals and the presence of necessary loading documents. Shipping agencies are responsible for the timely obtainment of the port's daily transshipment plan, circulating it among involved parties and protecting the interests of their principals.

Ukrainian law allows parties suffering damages arising from neglect of the first come, first served principle to recover their losses through commercial litigation. Therefore, it is crucial to scrutinise carefully both the codes of customs of ports and contracts with freight forwarders and ship agents to check whether the respective principle is reflected there.

Specially for www.internationallawoffice.com

Nikolay Melnykov

melnykov@interlegal.com.ua