IBIA Calls on Bunker Industry to "Think Innovatively " to Overcome OW Bunker Double Payment Situations

IBIA says the industry players must "think innovatively" to avoid

Following this week's UK Supreme Court verdict in the so-called "Res Cogitans" OW Bunker UK test case going in favour of ING Bank / OW Bunker, the International Bunker Industry Association (IBIA) today issued a call for the industry to "think innovatively" to prevent buyers having to pay twice for the same bunkers.

"The Res Cogitans ruling in the UK, along with rulings emerging from other countries in connection with the OW insolvency, highlights the need for continued, effective industry-wide cooperation to develop sales terms which are fair and fully understood by each participant in the fuel sale process," IBIA said.

Although the case did not directly address whether the physical supplier has the right to payment as well as OW Bunker assignee ING, the decision means ING is to be paid the entire bunker bill amount under a contractual debt, leaving the physical supplier to claim for the actual bunkers, and the buyer open to paying for the same stem twice.

A multitude of similar unresolved cases exist around the globe, and in terms of what would be a fair outcome moving forwards, IBIA's legal working group points to a decision (pending appeal) by the Federal Court of Canada.

"In the Canpotex case, the current ruling suggests all parties in the sales chain should get only what they originally bargained to get, meaning OW would only be entitled to its trader margin with the rest of the payment going directly to the physical suppliers. Crucially, the ultimate buyer would only make one payment corresponding to the sum contracted for the fuel supplied," IBIA said.

"Effective cooperation would result in suppliers being paid for their supply, traders being paid where they take title, brokers being paid their commission, and lenders being assured of their security for loans to suppliers and traders. Overall, when a customer makes payment, that customer must be assured that it will not have to make the payment more than once."

IBIA also notes that the legal framework the bunker industry operates within has always been uncertain due to the international nature of bunker supply and shipping, and as such, the outcome for buyers, traders, brokers, and suppliers involved in the cases will be different in legal regimes.

Indeed, two recent court decisions in separate OW Bunker cases in the U.S. both found that the physical supplier was not eligible for a maritime lien, and thus have no route to claim for the unpaid bunkers. 

Read More: What is the "Res Cogitans" OW Bunker UK Test Case and Why is it Important