Americas News
U.S. Appeals Court: Bunker Suppliers Can Hold Valid Maritime Lien Despite "No Lien" Clause
The United States Court of Appeals for the Fourth Circuit has found that a bunker supplier may still hold a maritime lien on a vessel despite a "no lien" clause and stamp, writes Kaspar Kielland of Montgomery McCracken Walker & Rhoads LLP (Montgomery McCracken).
The deciding case, World Fuel Servs. Trading, DMCC v. Hebei Prince Shipping Co., 783 F.3d 507 (Fourth Cir. 2015), is said to examine the validity of a maritime lien on the M/V Hebei Prince, which was arrested by a bunker supplier while anchored at the port of Norfolk, Virginia over unpaid bunkers provided to the vessel in United Arab Emirates.
The charterer of the vessel had reportedly failed to pay for the delivered bunkers, leading the supplier to respond by arresting the vessel, demanding that the vessel owner pay the outstanding amount.
The bunker order confirmation is said to have stated that "any disclaimer stamps placed by vsl on the bunker will have no effect and do not waive the seller's lien."
When the vessel owner made an initial challenge to the arrest, the District Court "held that the supplier had a valid maritime lien under the U.S. Federal Maritime Lien Act (FMLA)," and noted proper notice of a U.S. Choice of Law provision had been given to both the vessel owner and charterer.
As a result, the "no-lien" disclaimer stamped on the bunker delivery receipt, was deemed to be not enforceable against the supplier.
Kielland explains that, "once a lien has been created, the supplier can arrest the vessel transiting in any U.S. port as security for a claim - in this case the amount owed by the charterer to the supplier for the bunker supply - even in absence of any other connections to the United States - like in the case at bar, where the bunker supply and the contract negotiation for such supply took place in foreign countries between foreign entities."
The US Court of Appeals for the Fourth Circuit held that the U.S. choice of law provision contained in the supplier's general terms and conditions were "sufficiently noticed and enforceable."
The court also noted that no objection was made to the bunker confirmation language protecting the supplier's lien, nor had the supplier been provided notice of the "no lien" clause.
Additionally, the court found that the "no lien" stamp was added to the bunker receipt after delivery, and that the supplier was not required to retrieve the bunkers after receiving the receipt's "no lien" stamp.
"World Fuel Servs. Trading, DMCC v. Hebei Prince Shipping Co. emphasises that proper notice of contractual provisions is essential," says Kielland.
"Thus, all players in the maritime industry must pay particular attention to how they incorporate, reference, and give notice of the various terms and conditions that are part of their maritime contracts, as their respective rights and liabilities can be greatly affected for the better or for the worst."
In July, Ship & Bunker reported that John Kissane, Partner at Watson Farley & Williams LLP, said that legal disputes resulting from the fallout from last year's OW Bunker bankruptcy could help clarify U.S. law as to whether it is the bunker broker or the physical supplier who has the maritime lien.
