The Supreme Court recently heard oral arguments in the case of CITGO Asphalt Refining Co. v. Frescati Shipping Co., which centers around the interpretation of a safe-berth clause in a voyage charter under federal maritime law.
The case involves a circuit split between the U.S. Courts of Appeals for the 2nd and 3rd Circuits, which treat safe-berth clauses as warranties guaranteeing a ship’s safety, and the 5th Circuit, which applies a due-diligence requirement.
The key question is whether the clause guarantees the ship’s safety or is satisfied by the charterer’s due diligence.
Carter Phillips, representing the charterer, argued that the 3rd Circuit erred in imposing strict liability on the charterer for an accident that was unknown and unknowable. He maintained that the clause, in the context of the charter, suggests that the parties did not intend for the charterer to be strictly liable.
Assistant to the Solicitor General Erica Ross, representing the United States, countered that the commercial entities involved chose a safe-berth clause that has long been interpreted as imposing a warranty, not a due-diligence obligation.
The respondents, including the vessel owner and manager, argued that the parties chose a form that required the charterer to provide a safe berth, indicating an industry understanding that the provision is a warranty. They contended that when loss results from a condition of the port, the charterer is responsible because it chose the port. They rejected the idea that strict liability is problematic and argued that the risk should be allocated to the charterer rather than the vessel owner.
Overall, the case revolves around the interpretation of the safe-berth clause and whether it guarantees the ship’s safety or is fulfilled by the charterer’s due diligence. The Supreme Court’s decision will resolve the circuit split and provide clarity on the default rule under federal maritime law.
View source version on SCOTUSblog.
