Safe Berth Clause

By Jordan G. McFaull

In In re Frescati Shipping Co. LTD v. Citgo, the Third Circuit addressed the extent of liability under a safe-berth clause in a charter party. At all times Frescati owned the oil tanker, M/V Athos I. Frescati time chartered the vessel to Star Tankers, Inc., and Star Tankers subsequently voyage chartered the vessel to sub-charter CARCO, a set of oil affiliates. The voyage charter between Star Tankers and CARCO, without explicitly naming a particular port, stated that:”the vessel shall load and discharge at any safe place or wharf…” Four days before the M/V Athos I arrived at the port, CARCO altered its maximum draft regulations from 38 feet to 36 feet without informing the master of the vessel. While the Athos I was nearing an inshore port on the Delaware River it struck a submerged anchor that punctured the vessel’s hull, releasing approximately 263,000 gallons of crude oil into the river. As the ‘Responsible Party,’ Frescati paid out 188 million in cleanup costs and was reimbursed 88 million by the U.S. Government pursuant to the Oil Pollution Act of 1990, 33 U.S.C. § 2701. Attempting to try and recoup the unreimbursed clean up costs, Frescati filed suit against third party CARCO.Frescati, as owner, was an implied beneficiary of the voyage charterThe Third Circuit found that Frescati was an implied beneficiary to the voyage charter between Star Tankers and CARCO, even though Frescati was not a party to that agreement.A safe berth warranty is an express assurance of safety regardless of the amount of due diligence performed by the chartererThe court observed that a port is safe if “…the particular chartered vessel can proceed to it, use it, and depart from it without, in the absence of abnormal weather or other occurrences, being exposed to dangers which cannot be avoided by good navigation and seamanship.” What this means is that a port is safe if the chartered vessel can reach it without harm, absent abnormal conditions or poor seamanship. Thecourt rejected the Fifth Circuit’s rule from Orduna which absolved the charterer of liability if it performs due diligence in selecting a safe port. Instead, the court adopted the Second Circuit’s longstanding rule that a charterer has a non-delegable duty to provide a safe berth and is liable for any damages that results to a vessel entering or leaving an unsafe berth.Factual questions remained as to whether or not the port was actually safe for a vessel with the same dimensions of the Athos IWhile the district court found that the port was safe based on the volume of vessels that had safely passed over the anchor in the past, the Third Circuit disagreed with this conclusion and noted that the determination of whether or not a port was safe must be based on the facts particular to the Athos I at its arrival. According to the record, CARCO understood that the Athos I would have a draft of as much as 37 feet upon arrival. Thus, CARCO would be in breach of the warranty, if the vessel’s draft at the time of the incident was less than 37 feet, because the vessel sustained damage within the draft parameters that CARCO had assured would be safe. If the draft cannot be determined or if it is found that the draft was more than 37 feet, then it must be established whether the vessel was actually provided with at least 37 feet of clearance at the time of the accident.The named port exception does not apply to hazards that are unknown to the parties and are not reasonably foreseeableWhen charter party selects an unsafe port and the master proceeds to that port with full knowledge of port’s hazards without any protest, the charterer may be relieved of liability for any resulting damages because the master, as agent of the owner, has effectively waived the safe berth warranty. CARCO argued that because the master had knowledge that the vessel would be directed to the port in this case at least two weeks prior to the accident, this notice provided the master with knowledge of the port’s hazards. However, as in this case, when the particular hazard is unknown to the parties and is not reasonably foreseeable, then there is no way for the owner, via the master, to knowingly accept the particular hazards of the named port.CARCO, as wharfinger, had a duty to remove or warn of obstacles located in the vessel’s approach to the port, even if the area where the obstacle was located was not under CARCO’s direct control Confronting an issue that has been largely unaddressed, the district court limited the geographic scope of the vessel’s approach to the area immediately adjacent to the berth. The Third Circuit disagreed and held that the scope of the approach should be derived from the custom and practice of the particular port in question. Specifically, the approach begins where the vessel departs the channel on a direct course to a receiving dock via the path that is normally used by vessels for docking. Because the Athos I was following the usual path normally taken by vessels of that size when docking at the port, the anchor fell within CARCO’s duty to maintain a safe berth for the Athos I.The Third Circuit remanded the case to the district court to determine the extent of CARCO’s duty and whether or not CARCO breached this duty, as well as whether or not CARCO’s breach was the proximate cause of the injury.