The U.S. Supreme Court ruled Monday that CITGO is responsible and must pay back cleanup costs for the 2004 oil spill on the Delaware River after CITGO-charted tanker Athos I struck a submerged anchor while docking.
The Supreme Court decision ultimately puts to rest the interpretation of the “safe berth” warranty under U.S. law.
The Tsakos-managed oil tanker Athos I was chartered by CITGO when it struck a uncharted nine-ton anchor while docking at CITGO facility in Paulsboro, New Jersey, puncturing the tanker’s hull and spilling approximately 263,000 gallons of crude oil into the river.
Some hundreds of miles of shoreline were impacted.
Cleanup costs amounting to $133 million was paid by the ship owner, Frescati Shipping Company, under their OPA obligations, of which $88 million was reimbursed by the U.S. Oil Spill Liability Trust Fund.
The U.S. Coast Guard concluded in its Marine Casualty Investigation Report that the cause of the incident was the abandoned anchor lying on the seabed, and there was no negligence or violation on the part of the ship’s crew or embarked pilot. No fines or penalties were ever issued.
Frescati and the U.S. eventually sued CITGO and others (collectively CARCO) to recoup the costs, arguing that CARCO had breached the safe-berth clause by failing to designate a safe berth, and therefore was at fault for the spill.
Justice Sotomayor delivered the 7-2 majority opinion of the Court.
“According to Frescati and the United States, CARCO had breached a contractual “safe-berth clause” obligating CARCO to select a “safe” berth that would allow the Athos I to come and go “always safely afloat.”
“The question before us is whether the safe-berth clause is a warranty of safety, imposing liability for an unsafe berth regardless of CARCO’s diligence in selecting the berth. We hold that it is,” wrote Justice Sotomayor.
“The many years of effort, which have culminated in the decision, underscore our confidence in the rule of law while the Supreme Court’s decision underlines the importance and significance of safe, well respected, understood and applied marine navigation practices, which have, for decades, safeguarded human life at sea, the protection and preservation of the marine environment as well as property,” a statement from the ship owner said.
Law firm Holland & Knight said the landmark ruling reaffirms popular form safe berth/safe port clause.
“In Citgo Asphalt Refining Co. v. Frescati Shipping Co., Ltd., the U.S. Supreme Court has provided a roadmap for interpreting safe berth / safe port clauses, ruling that the form clause commonly used in the industry must be construed as an express warranty of safety and imposes on the charterer an absolute duty to select and provide safe berth,” Holland & Knight wrote in an analysis of the case.
“In a 7-2 opinion, the Supreme Court considered the key terms in the agreement consistent with the intent of the parties as is necessary in any contract dispute. Because the safe berth clause was clear and unambiguous, the majority found that the analysis began and ended with a plain-meaning reading of the key terms in the clause itself.”