New York, Singapore Courts Disagree on Validity of Interpleader Applications Following OW Bunker Bankruptcy

New York and Singapore courts have disagreed on the validity of interpleader applications

New York's Federal District Court and the High Court of Singapore have arrived at opposite conclusions regarding the validity of interpleader applications in the fallout of the 2014 bankruptcy case of marine fuel giant OW Bunker, global law firm Read Smith has noted.

Vessel owners and charterers brought about protective interpleader proceedings in the U.S. and Singapore after becoming the target of competing claims by third-party suppliers of fuel, OW entities, and ING.

Some suppliers had tried to enforce maritime liens directly against vessels, whether or not the vessel owners or charterers had settled their accounts with the OW Bunker entities.

In New York, the suppliers argued that the Court lacked jurisdiction to adjudicate on the maritime lien claims.

In drawing on U.S. legal precedent, the court on July 2 called the contractual and vessel claims "alternative procedural devices to obtain the same relief."

It also found that the claims had the same obligation for the payment of fuel and were "inextricably interrelated."

ReadSmith notes that "the judge emphasized that the third-party suppliers were effectively attempting to jump the queue of OW creditors by proceeding directly against the vessel to collect the amounts owed, even though there were claims by other creditors directly competing on the very same legal basis."

But on April 25, the Singapore court, which focused more on the technical equivalence of the claims, concluded that ING's claim for payment and the third-party supplier claims were different, "did not concern the same debt and, as such, could not be the subject of an interpleader application," according to ReadSmith.

ReadSmith says the conflicting decisions "illustrate the difficulty that comes from a bankruptcy in which contractual claims and maritime lien claims interact."

It also acknowledged "the added complexity that comes from differences in the governing laws of different jurisdictions hearing similar proceedings."

Earlier this month, John Kissane, partner at Watson Farley & Williams LLP (WFW), wrote that legal disputes resulting from OW bankruptcy could help clarify U.S. law as to whether it is the bunker broker or the physical supplier who has the maritime lien.