Americas News
More Bad News for Physical Suppliers Pursuing Claims for Unpaid Bunkers
A U.S. court order related to the ongoing O.W. Bunker litigation saga has dealt a second blow to the ability of physical suppliers to recover monies for unpaid bunkers following the bankruptcy of the former bunker giant.
The case before the United States District Court for the Southern District of New York was O'Rourke Marine Services versus M/V Cosco Haifa and M/V Cosco Venice.
As in the recent Valero case, Judge Shira Scheindlin found that as the vessel operator - and ultimate end user of the bunkers - had not specifically selected the physical supplier and held no contract directly with them, the physical supplier did not hold a maritime lien.
However, ING Bank, as OW Bunker's assignee, did.
The case stemmed from China Ocean Shipping Company (Cosco) purchasing bunkers from O.W. Far East for delivery to the two vessels in question.
O'Rourke, who was the physical supplier, was found to have never had contact with Cosco but rather separate contracts with O.W. USA, and delivered the bunkers to Cosco's vessels accordingly.
O.W. USA then became insolvent and did not pay O'Rourke, so O'Rourke moved to arrest Cosco's vessels and enforce maritime liens under the U.S. Commercial Instruments and Maritime Lien Act (CIMLA).
As highlighted in the Valero case, there are three requirements for a valid maritime lien:
- the party provided the necessaries, in this case, the bunkers, as defined by the Commercial Instruments and Maritime Liens Act (CIMLA) and related jurisprudence,
- the necessaries were provided to a vessel, and that
- the claimant provided the necessaries on the order of the owner or a person authorised by the owner.
The court found that Cosco neither selected O'Rourke, or instructed O.W. to select O'Rourke, it "simply contracted with O.W. Far East for the provision of bunkers."
As such, the third criteria for the lien - the bunkers had to be provided on the order of the owner or a person authorised by the owner - was not met, so the physical supplier's lien was not enforceable.
However, as O.W. Far East took orders for the bunkers directly from Cosco, ING Bank, as its assignee, did meet the criteria for a lien.
The fact OW did not physically deliver the bunkers was irrelevant.
O'Rourke's lawyers did not agree with this logic.
"Physical suppliers should be paid for what they've supplied, and OW is the first of any major occurrence in the bunker market where there has been a claim for a maritime lien where suppliers are unpaid," Stephen Simms of Simms Showers was quoted by Tradewinds as saying.
"[Not providing a lien] does not fit with maritime law, which ultimately requires equity, that is, the right thing to be done".
Scheindlin's decision is not binding, and O'Rourke is expected to follow Valero with an appeal.
"Although the Valero orders are being appealed and the O'Rourke opinion and order will likely be appealed, the message in the U.S. is clear: unless a physical supplier of bunkers had a direct contract with a vessel or O.W. Bunker acted as an agent for the vessel when it subcontracted to the physical supplier, the physical supplier does not have an enforceable maritime lien against the vessel," law firm Montgomery McCracken said in a note on the case Tuesday.
"In such circumstances, CIMLA provides that O.W. Bunker and/or its assignee have an enforceable maritime lien against the vessels regardless of O.W. Bunker's insolvency."
