"Growing Consensus" Over Who Should Be Paid Disputed OW Bunker Bills

by Ship & Bunker News Team
Wednesday January 25, 2017

An order and opinion by United States District Judge Valerie E. Caproni earlier this month has added to a "growing consensus" that ING Bank (ING), and not the physical suppliers, should be paid any disputed bunker bills following the 2014 collapse of OW Bunker, writes Robert E. O'Connor, a member of Montgomery McCracken Walker & Rhoads LLP's Maritime and Transportation practice group.

As Ship & Bunker previously reported, in what was the latest development among several OW Bunker-related interpleader cases, Caproni found once again that the physical suppliers were not entitled to a maritime lien as they did not provide the bunkers to the vessel on the order of the vessel owner - one of the requirements of a lien under the U.S. Commercial Instruments and Maritime Lien Act (CIMLA).

Perhaps more critically, Caproni also found ING, as OW Bunker's assignee, was entitled to a lien.

This was particularly important given Judge Forrest of the Southern District of New York's decision last October in the so-called "Temarra II" case, which stands alone in finding that OW Bunker also did not provide the necessaries, so it too was not entitled to a lien.

This was primarily down to Forrest's opinion that OW Bunker did not take on any risk, financially or in goods provided, with regard to the provision of bunkers.

"On a full evidentiary record, however, Judge Caproni concluded that O.W. Bunker did have a real risk of financial loss on the transaction, providing O.W. Bunker with maritime liens in the 'test' cases, consistent with Judge Forest's decision. Judge Caproni recognized that a party may 'provide' necessaries to a vessel indirectly through a subcontractor," writes O'Connor.

"Judge Caproni further recognized that all of O.W. Bunker's back-to-back contractual arrangements imposed significant financial risk on O.W. Bunker – the risk of providing bunkers to vessels even if the physical suppliers failed to deliver and the risk of paying the physical suppliers even if the vessels failed to pay. As such, Judge Caproni held that O.W. Bunker 'provided' bunkers to vessels and, therefore, had maritime liens."

Bruce G. Paulsen, a partner at law firm Seward & Kissel and acting on behalf of ING, earlier this month said "Temara II was limited to its facts" and was "distinguishable" from the other test cases, as the full contract chain was not before the court.