Safety Warranty Prevails: US Supreme Court Rules that Owners can Rely on Absolute Warranty in Frequently Used Safe Berth Clauses

BIMCO, INTERCARGO and INTERTANKO welcome the ruling by the highest court in the United States on 30 March 2020 concluding that the plain meaning of the safe-berth clause in the Athos I dispute includes an unambiguous warranty of safety.

“The US Supreme Court has made a sound and robust decision consistent with the shipping industry’s long held understanding of risk allocation in safe port and safe berth clauses. A different result would have compromised the essential clarity and certainty provided by standard charter parties on which our industry depends,” said Søren Larsen, Deputy Secretary General of BIMCO.

Michele White, General Counsel at INTERTANKO added: “This has been a remarkable case that INTERTANKO has charted throughout, supporting the Athos I owners in their lengthy legal journey. The US Supreme Court has given us a clear ruling that supports the industry view. A contractual unconditional safe port warranty is just that – no contest. No amount of due diligence from charterers can change that.”

Background and legacy

The Athos I case raises an important issue for the industry, since the verdict establishes who takes the responsibility for the safety of a visiting ship to a berth. Shipowners should be able to rely on those conversant with local conditions in ports, including charterers who provide contractual warranties of safety. This is particularly so where there is a threat of pollution as vessels approach their loading or discharge place.

At the heart of the dispute is the following safe berth clause under the widely used ASBATANKVOY charterparty form: ‘the 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, any lighterage being at the expense, risk and peril of the Charterer….’

This is commonly understood to be an absolute warranty. Similar provisions appear in other forms used in the dry bulk trades, including the NYPE form, so this issue goes beyond the tanker trade. With that in mind, INTERTANKO, BIMCO and INTERCARGO filed an Amicus Curiae brief in the Supreme Court, following on from a similar brief filed by the industry at the Appellate Court in 2011.

The purpose of having standard industry forms is to create certainty for owners and charterers alike. The court’s ruling today relies heavily on the parties having selected a safe berth clause that was based on a standard industry form contract. Just as important, while the Supreme Court recognised that the ASBA safe berth clause in Athos I is warranty, it provided a silver lining for future charterer concerns.  It referenced a charterer-friendly selection of a berth clause found in the INTERTANKVOY form which specifies that “[c]harterers shall exercise due diligence to ascertain that any places to which they order the vessel are safe for the vessel and that she will lie there always afloat”.

For our members worldwide, the Supreme Court’s statement that the majority ruling “interpretation provides a clear background rule for the maritime industry to contract against”, is crucial for the industry.  The purpose of the Associations’ joint Amicus Brief was to support certainty and clarity on safe berth and safe port issues. Members can now revisit agreed contracts or enter into new contracts with more certainty than they had before this landmark verdict.