The OW Bunker collapse – An update seen from Norway

| Innsikt

Following the OW Bunker collapse in the end of 2014 hundreds of ship operators have been billed twice for the same delivery of bunker, both from OW Bunker companies (claims invoked to have been assigned to ING Bank N.V.) and the physical supplier.

Introduction

In Norway ship operators that purchased bunker from the OW Bunker subsidiary Bergen Bunkers AS, have even a third party to consider. The trustee of the bankruptcy estate Bergen Bunkers AS does not accept that the claim for the purchase amount have been lawfully assigned to ING Bank N.V. Thus, both of them have contacted the buyers of bunker and claimed to be the right owner of the claim for payment of the bunker.

To limit the risk of having to pay twice, or even three times, for the same bunker delivery, several ship operators have put off their payments awaiting a legal clarification of whom to be the right claimant.

Simonsen Vogt Wiig has been instructed by and has been advising ship owners and charterers from the early beginning of this complicated matter, handling inter alia arrest, guarantee and payment issues both in Europe and Asia.

We will here present a short update.

The Supreme Court in UK has given its judgment in the test case Res Cogitans. The winner takes it all?

Proceedings are underway in numerous courts and many have been waiting for the Supreme Court’s decision in the Res Cogitans test case.

The Supreme Court handed down its awaited judgment 11 May 2016. The content of the conclusion may be expressed in one sentence:

The buyers of the bunker have no defense to ING Bank/OW Bunker’s claim to the agreed price.

However, it is important to emphasize that the Res Cogitans decision will not necessarily affect all OW Bunker/Bergen Bunkers/ING claims. Each case has to be considered on its individual merits, taking into consideration, inter alia, local law and parties involved. Still, the judgment, as it is formulated, is assumed to be decisive in most of the similar cases.

Claim for interest – The next battle in the courts?

The Supreme Court’s decision will hardly be the end of the story.

ING Bank/OW Bunker and Bergen Bunkers, its estate, are now expected to put forward claims for a high amount of interest on the unpaid bunker claims.

Bergen Bunkers, its bankrupt estate, has until recently been soft on the claim for interest. A letter sent to all customers of Bergen Bunkers dated 11 May 2016 ended that policy, and the trustee made it clear that the estate will demand payment of interest on all unpaid claims.

Many ship operators, being the innocent party in this unfortunate situation, are expected to reject to pay such interest.

It is too early to conclude, but the next fight in the courts may well be a dispute over high amounts of interest claimed by ING/OW Bunker and/or Bergen Bunker.

The legal dispute between ING Bank N.V. and the bankrupt estate Bergen Bunkers AS (Norway) is still pending. The bankrupt estate a small step ahead?

In respect of bunker supplies purchased from Bergen Bunkers AS, Norway, there is another problem to be solved.

Both the trustee of the bankruptcy estate Bergen Bunkers and ING Bank claim to be the owner of the claims for payment against the buyers of the bunker supplies. They have not (yet) agreed upon a joint collection of the debt.

ING Bank argues that the claims are assigned to ING Bank by way of security in respect of a credit granted by ING Bank on behalf of a syndicate before the opening of the bankruptcy proceedings.

The Oslo City Court decided 24 February 2016 that Norwegian law shall apply assessing the matter in question and that Oslo City Court is the correct legal venue.

This decision is in accordance with the estate’s statement of claim and may put the estate a small step ahead.

However, ING Bank has appealed the decision to the Court of Appeal.

These basic and partly procedural questions alone may still take several months to finally clarify if the parties choose to and thereafter appeal to the Norwegian Supreme Court.

Do the physical suppliers have an independent right of payment from the vessel?

The Supreme Court’s decision in the Res Cogitans test case concluded that the buyers of bunker have an obligation to pay the contractual party, the seller, OW Bunker, even if OW Bunker did not pay the physical supplier.

The Supreme Court decision does not exclude that the physical suppliers may have an independent right for payment from the vessel involved.

In fact physical suppliers in some jurisdictions do have an independent right to claim the vessel for unpaid bunkers. In such cases the interests related to the vessel have to pay twice for the same delivery of the vessel.

We see court decisions in different directions. However, even in jurisdictions known to accept such independent right, the courts may have a restricted attitude to the physical supplier’s alleged independent claim, if the physical supplier is being a sub-contractor.

In the so called M/V Almi Sun judgment of 28 December 2015 (United States District Court Eastern District of Louisiana) the court stated that the physical supplier may not claim a lien by contract or by law (maritime lien) in the vessel, in respect of bunkers purchased from O.W. Bunker USA, as the contracting party in between.

The physical supplier was Valero Marketing and Supply Co.  The court concluded that the physical supplier was acting as a sub-contractor and therefore he did not obtain a maritime lien in the vessel.  The maritime lien was reserved for the direct contractual party (OW Bunker), but the court opened for an exception in favor of the physical supplier if «the Vessel’s owners directed the selection of Valero or otherwise retained sufficient control over the subcontractor’s performance».

Lessons learned

The OW Bunker collapse has shown that there are significant risks for ship operators in using intermediaries for the supply of bunkers. The collapse has resulted in disputes between inter alia ship operators, the sellers of bunker as contractual parties and physical suppliers. It has even resulted in disputes between ship owners and charterers.

It is not possible to eliminate all legal risks in relation to the supply of bunkers. All situations differ and there are different parties and different jurisdictions involved. However, steps may be taken by ship operators, ship owners and time charterers to limit the risks involved.

Maritime law experts around the world now gives advice on inter alia:

  • Non-lien clauses in the charter party
  • The wording of notices to the supplier prior to ordering bunkers
  • The wording when signing the Bunker Delivery Receipt
  • Exploring possibilities to take out insurance to protect against the risk of insolvency