ING Getting 100% of OW's Bunker Bills Should Not Be Seen as a "Windfall" - ING Lawyer

Bruce G. Paulsen, a partner at law firm Seward & Kissel, is acting on behalf of ING in the U.S.

Following a number of recent court decisions, ING Bank looks set to receive 100 percent of OW Bunker's outstanding invoices, even though the former bunker giant would have only ever realised a small percentage of that had it not gone bankrupt.

However, contrary to what some have argued, this should not be seen as a "windfall" for the bank, Bruce G. Paulsen, a partner at law firm Seward & Kissel acting on behalf of ING in the U.S., told Ship & Bunker.

The issue, as highlighted by Jonathan Crow QC in the recent "Res Cogitans" OW Bunker UK Test Case, is that without bankruptcy, the bunker buyer would have paid OW, and OW would have paid the physical supplier less its trader margin, and ended up netting "perhaps 1 percent" of the total bunker bill.

With the UK Supreme Court having ruled that ING was indeed entitled to 100 percent of the bunker bill, the matter has come up once again as part of Clearlake Shipping Pte Ltd. v. O.W. Bunker (Switzerland) SA et al - one of several claims being brought under a large OW Bunker interpleader action in the New York Southern District Court.

Rulings in two U.S. cases earlier this year have already found that ING should be paid, and this, Paulsen explained to Ship & Bunker, was the right decision and should not be seen as ING getting monies to which it is not entitled.

ING, on behalf of a syndicate of lenders, extended a $700 million facility to OW Bunker, of which about $647 million had been drawn down at the time of its collapse.

In exchange for that lending, Paulsen says that OW's various global entities assigned to ING all "rights, title, and interest" to its bunker invoices - that is, the $700 million credit facility was at all times secured against the invoice totals, not OW's eventual trader margin.

"ING is seeking to recover on the receivables that secured the credit extended by the lending syndicate to the OW Bunker group prior to its collapse. There is no windfall here," he said.

"The physical suppliers have argued otherwise, but they too extended credit, like ING would have done their due diligence with respect to that credit, and they have then sold to OW based on that credit. That is the deal they made."

For physical suppliers, the presumption has always been that if the buyer doesn't pay, they can arrest the vessel and recover costs.

While the UK decision still leaves the door open for physical suppliers to do that, and thus ship owners potentially paying twice for the same bunker bill, in the U.S. things are not shaping up the same way.

The two rulings on the matter to date have found that as the physical supplier went through the intermediary of OW Bunker, rather than dealing directly with the buyers, they are not entitled to a Lien under the U.S. Commercial Instruments and Maritime Lien Act (CIMLA) which requires that "the claimant provided the necessaries on the order of the owner or a person authorised by the owner."

If that position is upheld, it would mean physical suppliers in the U.S. would not be able to recover their outstanding OW Bunker related costs.