Major U-Turn for U.S. OW Bunker Cases as ING Bank is Denied Maritime Liens

Monday October 24, 2016

Physical bunker suppliers in the U.S. struggling to recover outstanding OW Bunker related debts were given a glimmer of hope Friday from a ruling by Judge Forrest of the Southern District of New York.

In her decision, Judge Forrest ruled that OW Bunker, and therefore also its assignee ING Bank (ING), did not meet the criteria for a maritime lien for bunkers provided to five vessels - a major u-turn on the direction indicated from previous rulings in similar OW Bunker related cases.

Currently, there are some 50 cases underway in the US where bunkers were supplied using OW Bunker as an intermediary around the time it went bankrupt, and as a result bunker buyers are seeking clarification on who they should pay - the relevant physical supplier, or ING as OW Bunker's assignee.

So far this year, decisions made in six of the cases have all found that the physical suppliers were not entitled to a maritime lien (and thus can not pursue the outstanding bunker bill) and one of those cases specifically finding that ING is entitled to a lien, and therefore is entitled to pursue payment.

Friday's decision came after ING moved for summary judgment on five cases involving the vessels M/V Temara, M/V Voge Fiesta, M/V Ocean Harmony, M/V Maritime King, and M/V Jawor.

Provision of the Necessaries

In each of the instances, Judge Forrest ruled that O.W. Bunker / ING does not have an enforceable maritime lien because OW Bunker had not "provided" the bunkers, which is one of the requirements for a valid maritime lien under the U.S. Commercial Instruments and Maritime Lien Act (CIMLA).

As Ship & Bunker has previously discussed, CIMLA has three requirements that must all be met for a valid maritime lien:

  1. the party provided the necessaries, in this case, the bunkers, as defined by CIMLA and related jurisprudence,
  2. the necessaries were provided to a vessel, and that
  3. the claimant provided the necessaries on the order of the owner or a person authorised by the owner.

In the previous cases, physical suppliers were denied a maritime lien as they were deemed to have failed to meet the third criteria; that is, because they dealt with OW Bunker as an intermediary, they did not not provide the bunkers on the order of the owner.

In Friday's ruling, Judge Forrest said that ING is not entitled to the maritime lien because the first requirement was met, that is, OW Bunker did not provide the necessaries - i.e. bunkers.

For each of the five vessels, Judge Forrest wrote that: "At no time did [OW Bunker] take on any risk (financially or in goods provided) with regard to the provision of bunkers to the [vessel]. It never assumed title or possession of the bunkers, it never obligated itself to pay the actual physical supplier, and it never supplied the bunkers. At most, O.W. Bunker's risk was a theoretical risk of a failure to deliver on its contract to the charterer; no exposure from this risk ever materialized."

Also of note is that Judge Forrest wrote that: "Had O.W. Bunker paid the physical suppliers, the outcome might be different."

Expanding on her rational over the decision, Judge Forrest said: "In terms of statutory intent and relevant case law, the term "provided" clearly embodies a concept of payment protection for an entity that has put itself at financial or other risk in providing necessaries to vessels.

"To find that O.W. Bunker has a maritime lien would be to move away from the most basic purpose of CIMLA of insuring that those who provide necessaries to ships in truth and in fact are not left without recourse.

"CIMLA is not a complex financial instrument - nor is it a contractual right. In the context of this complicated world, its purposes and meaning are simple. Applied to the undisputed facts here, it is clear that O.W. Bunker lacks a maritime lien."

Hope for Suppliers, or a Boon for Buyers?

While the decision clearly offers a glimmer of hope for physical suppliers, the winners here could arguably turn out to be the bunker buyers, as it may be that no-one is eligible to collect the outstanding bunker bill.

"The question naturally arises whether some entity will always have a maritime lien if necessaries are provided to a vessel. The answer is no," Judge Forrest wrote.

"The provision of necessaries does not always give rise to a maritime lien. For instance, as the litigants before this Court have themselves witnessed in their own cases, a physical supplier who does not provide necessaries "on the order of" the owner or one authorized by the owner, lacks a maritime lien."

For clarity, Judge Forrest's decision does not say ING, or for that matter, the physical suppliers, are not entitled to be paid; the suggestion that no party is entitled to a lien simply means the legal options to enforce payment are significantly reduced.

Lawyers acting on behalf of ING Bank in the U.S. have told Ship & Bunker that the bank is now considering its options.