Safe Berth, Always Afloat
Before the U.S. Supreme Court’s decision in CITGO Asphalt Refining Co. v. Frescati Shipping Co., Ltd. (“ATHOS I”), the federal circuit courts differed in their interpretation of whether certain language in a charterparty constituted a safe-berth warranty. The Second Circuit held that the words “safe berth, always afloat” impose a strict-liability warranty while the Fifth Circuit held that a safe-berth clause only imposed upon the charterer a duty of due diligence to select a safe berth.
In 2004, the tanker ATHOS I spilled 264,000 gallons of heavy Venezuela crude oil in the Delaware River after it struck a nine-ton anchor as it transited to Citgo’s asphalt refinery in Paulsboro, New Jersey. Citgo Asphalt Refining Co. (CARCO) sub-chartered the vessel from tanker operator Star Tankers, who chartered the vessel from Frescati Shipping Company (“Frescati”). The sub-charterparty included safe-berth language derived from the ASBATANKVOY (the Association of Ship Brokers & Agents (USA) Inc. Voyage Charter) charter form and said: “[t]he vessel shall load and discharge at any safe place or wharf … which shall be designated and procured by the Charterer, provided the Vessel can proceed thereto, lie at, and depart therefrom always safely afloat.” The sub-charterparty also required CARGO to direct the vessel to a “safe berth” along the U.S. Atlantic Coast. ATHOS I was approximately 900 feet away from the berth when it struck the anchor.
Under the Oil Pollution Act of 1990, Frescati was named the Responsible Party (“RP”) for this spill and required to undertake clean-up operations. OPA permits the RP to recover by way of contribution or indemnity against any third parties who may be responsible for causing the spill in whole or in part. Frescati sought recourse against CARCO for clean-up costs not reimbursed by the Oil Spill Liability Trust Fund (“Fund”), which is administered by the National Pollution Funds Center run by the U.S. Coast Guard. The United States also sought recourse against CARCO for monies paid out by the Fund. Both asserted that CARCO breached the safe-berth warranty in the sub-charterparty.
The Third Circuit held that Frescati was an implied third-party beneficiary of the sub-charterparty’s safe-berth clause, which permitted Frescati and the United states, as subrogee, to pursue breach of contract claims against CARCO. The court found that the clause imposed an express-warranty obligation upon CARCO to provide a safe berth, which CARCO breached, despite any diligence it exercised.
Despite the fact that the ASBATANKVOY safe-berth language does not use the word “warranty,” the Supreme Court held that CARCO’s “acknowledged duty is absolute,” that a “safe berth” “means a berth ‘free from harm or risk’” and “the berth must allow the vessel to come and go ‘always’ safely afloat: That means afloat ‘at all time’ and ‘in any event.’” The Court noted that “[i]t is well settled as a matter of maritime contracts that ‘[s]tatements of fact contained in a charter party agreement relating to some material matter are called warranties,’ regardless of the label ascribed in the charter party.” Nevertheless, the Court noted that parties are free to contract to limit the application of such language.
The rationale of the Court’s decision extends to contracts of sale that include safe-berth obligations. Thus, absent express-disclaimer language, safe-berth language will impose strict liability upon the terminal party in the event that the carrying vessel under the contract suffers a marine casualty relating to the water’s depth or underwater obstructions. Yet how far does such a warranty extend? For example, does it extend to waters beyond the berth, the approaches to the berth, the channel leading to the approaches, the height of bridges along the channel leading to the berth, the port? Does it encompass risks attendant to weather encountered at the berth?
Generally, a safe-berth warranty encompasses matters relating to water depth and underwater obstructions that prevent a vessel from reaching, remaining at and departing from a berth. The scope of the obligation depends upon the language employed, that is, does it extend to just the berth or does it encompass the port? If it encompasses the port, it circumscribes the approaches and channels leading to the berth, and seemingly it should also include the air drafts of intervening bridges. For example, during the spring-flood season, the Mississippi River typically runs high due to melting snow runoff in the north, which may prevent a vessel with a certain height from waterline to top of mast from passing safely under the Huey P. Long Bridge in New Orleans. If the charter includes a safe-port warranty, then the vessel should be able to safely reach the berth. If the river is too high to enable the vessel to pass safely under intervening bridges, presumably the port is not safe within the meaning of the warranty. Yet, there are no federal decisions squarely addressing this issue, and the two Society of Maritime Arbitrators (SMA) decisions that address air draft in the context of a safe-berth warranty did not reach the issue as to whether the warranty encompasses air draft. See In the Matter of Arbitration between Compagnie Nationale Algerienne de Navigation and Coscol Petroleum Corporation (finding Owners misrepresented the vessel’s air draft) and In the Matter of the Arbitration between National Shipping Agency Corp. and Kardamyla Maritime Inc. (finding air draft specification applied in concert with designated water depth at first berth). Thus, whether a safe-berth warranty extends to air drafts presently remains an open question.
As for weather, safe-berth obligations have not been construed to warrant the safety of the berth from abnormal weather events that occur after the vessel’s arrival in berth. Typically, conditions of tide, current and weather are within the vessel master’s purview. Yet safe-berth obligations have been extended to situations where the berth is not suitably equipped to prevent damage to vessels from expected variable weather events such as ground swells as addressed in Venore Transportation Company v. Oswego Shipping Corporation in the Southern District of New York, or from forecasted weather events such as “strong, shifting winds” discussed in the Second Circuit’s decision in Tanker Hygrade No. 2 v. Barge Lines, Inc. Parties may wish to consider whether safe-berth disclaimers should encompass weather events, given the ever increasing severity of storms and increasingly accurate weather forecasts. After all, what constitutes abnormal weather events these days?
Because Frescati has altered the safe-berth landscape, parties to maritime contracts should consider the implications of safe-berth language contained therein to understand and account for their respective liability-risk exposure.
Quirky Maritime Terms: “Charterparty” may sound like a good time afloat, but its origin actually derives from the Latin phrase “charter partita,” meaning a document that was literally cut in two with each party receiving half. Authenticity was verified by joining the two parts together.
“Safe Berth, Always Afloat,” by Keith Letourneau was published in the Texas Lawyer on February 24, 2022.
Reprinted with permission from the February 24, 2022, edition of Texas Lawyer © 2022 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.