The majority of spills occure during operational procedures (loading/discharging tanker cargo and bunkering) in ports or at terminals. These spills are however often small. Accidents such as grounding, collision, hull failures and fire/explosions generally cause much larger spills. Pollution may also occur in connection with pumping of of bilges, discharge of garbage/sewage and ballast operations.

Facts and Findings

  • 85 % of all tanker spills involve quantities less than 7 tonnes.

  • The majority of operational spills are small, with some 92% involving quantities of less than 7 tonnes.

  • Nearly two-thirds of major incidents are caused by either grounding or collision.

    (Source: ITOPF)

  • A common cause of pollution is ruptured oil pipes in ballast tank.

Preventive measures

  • All personnel should be trained in the use of the oil-spill response equipment and have regular drills in implementing emergency clean-up plans.

  • There should be a system of record keeping of all cargo, bunkering, and tank cleaning operations.

  • Bunkering and loading/discharging operations require careful planning and vigilance during the entire operation:

    • agree on rate of loading cargo/bunkers,
    • check ullages during bunkering/loading,
    • fit scupper plugs,
    • maintain a deck watch keeper.

  • There should be procedures for safe transfer of oil onboard the vessel.

  • Sounding-, vent- and overflow pipes passing through ballast tanks should be inspected for wasting.

  • Careful disposal of contaminated ballast water.

  • Records of Garbage/sewage should be maintained. Instructions of disposal should be implemented.

  • The 15ppm bilge water separator and ODM sensors should be checked for functionality at regular intervals. Under no circumstances should this equipment be tampered with.

  • Reduce loading rate well before topping up tanks.


OW Bunker Bankruptcy

On 7 November 2014, OW Bunker & Trading A/S and OW Supply & Trading A/S filed for bankruptcy in the Danish court due to insolvency caused by, allegedly, speculative trading activities. Since then, a number of other Danish and overseas subsidiaries have also filed for bankruptcy proceedings. The OW Bunker Group was one of the world’s largest bunker suppliers, often acting as intermediary between owners and charterers purchasing bunkers, and physical suppliers.  The bankruptcy has given rise to several difficult legal questions, the most notable being whether purchasers should pay the physical supplier actually providing the bunkers to the vessel,  or the contractual supplier, OW Bunker, with whom the purchaser has a contract.

Generally, a purchaser is obliged in the first instance to pay any invoice issued by a contractual supplier unless it can be shown that the contractual supplier never had acquired title to the bunkers. On the other hand, physical suppliers may at the same time in certain jurisdiction be entitled to seek payment directly from the vessel/owners. Hence, the OW Bunker bankruptcy has had the awkward consequence that purchasers are facing competing claims for payment and that, effectively, purchasers are required to pay twice.

The duplicate claims are obviously resisted, which has resulted in hundreds of legal actions around the world. The legal systems have to date proven unable to provide satisfactory solutions to the dilemma. One complicating factor is that OW Bunker assigned most rights under its contracts to the Dutch financial institution ING Bank before the bankruptcy.

Claims by ING Bank

About one year before bankruptcy, OW Bunkers and some of its subsidiaries entered into an agreement with ING Bank who acted as agent for a syndicate of lenders to the OW Bunker Group. As part of that agreement, the OW Bunker companies assigned and charged to ING Bank all rights, title and interest in all its receivables, both current and future. On the basis of this assignment ING Bank now vigorously pursue owners and charterers for payment under OW Bunker’s invoices.

Whether ING Bank lawfully can claim the purchasers essentially depends on whether the bunker contract contains an assignment clause. If the contact does not contain an assignment clause the claim by ING Bank should be refuted. If the contract contains an assignment clause purchasers should nevertheless seek legal advice to investigate if the assignment is valid. Whether the assignment is valid will depend on the law which governs the contract. If the assignment is valid, ING Bank may have a legitimate claim for payment under an OW Bunker invoice.

It has recently (November 2015) been suggested that ING Bank has sold an OW Bunker debt of USD 700 million at a discount to a “mystery buyer”. Read more» 

It is understood that ING Bank is likely to remain as the named creditor in the ongoing legal action whilst the “mystery buyer” is expected to take on the claims against the owners and operators who have outstanding bunker bills from around the time of OW Bunker's collapse, assuming an assignment to the “mystery buyer” really exists. The information is yet to be confirmed and members are recommended to be even more careful in ascertaining that the correct party is claiming payment when facing a claim under a OW Bunker invoice.

Claims by unpaid physical suppliers

In some jurisdictions bunker suppliers retain a right in the bunkers and/or the vessel until the supplier has been paid. Therefore, to the extent OW Bunkers has not paid physical suppliers, the suppliers may try to pursue the purchasers / vessel owners directly for the debt. The supplier may either try to enforce a so-called “retention of title clause”, or bring an action in tort for “conversion”. The physical supplier may also try to argue a maritime lien in the vessel.

Whether direct claims by the physical supplier will succeed will depend on the law in the country where the claim is pursued. As a first step, suppliers may try to arrest the vessel. An analysis of the risk of ship arrests for unpaid bunkers in England and Wales, Hong Kong, Singapore, US, Japan, China, Australia, South Africa and Italy can be read in the following document.

The risk of ship arrest for unpaid bunkers arising from the OW Bunker group collapse.pdf

Competing claims

Claims by ING Banks and physical suppliers against vessel owners and charterers are subject to numerous legal proceedings world-wide. Two decisions have received significant attention, both of which generally favor ING Bank’s position:

(The Res Cogitans) [2015] EWHC 2022 (Comm)

This is a decision by English High Court, following an appeal of an arbitration award. In late October 2014, the owner of the RES COGITANS contracted with OW Bunkers for the supply of US$443,800-worth of bunkers to the vessel. In turn OW Bunkers purchased the bunkers from Rosneft Ltd.   

The vessel owners had received competing claims from ING Bank and Rosnneft Ltd. Owners challenged ING Bank’s claim on the basis that only Rosneft Ltd. could claim payment because, according to the UK Sale of Goods Act, ING Bank had never had title to the bunkers since they never had paid Rosneft Ltd. The arbitration tribunal found the Sale of Goods Act did not apply and hence that ING Bank had a straightforward claim under the contract with the owners.

The decision whether the Sale of Goods Act applied was appealed as a preliminary point to High Court, which endorsed the decision. In November 2015, the Court of Appeal essentially confirmed the decision, as a preliminary point, (although with the caveat that the bunker contract was a hybrid and the Sale of Goods Act applied to any bunkers not consumed after the end of the credit period). The case will now be referred back to the Tribunal for resolution.

The preliminary point may at the same time be appealed to the Supreme Court. As a result, the final outcome of the case, and its implications, are still uncertain and it may take a long time until RES COGNITAS can be used as a helpful precedent for owners and charterers facing duplicate claims, if at all. Hence, refusing paying bunker invoices on the basis of an expectation that the RES COGNITAS sometime in the future may create a helpful precedent is generally not advisable.  

Precious Shipping Public Co Ltd and Others v OW Bunker Far East (Singapore) Pte Ltd and Others [2015] SGHC 187.

This is a decision by High Court in Singapore. The case was somewhat different, being 13 consolidated “interpleader” actions, with various vessel owners seeking the permission of the court to allow them to pay funds into court, and to compel both OW Bunkers and the physical suppliers to present their competing claims, ie so the court could determine which party should be paid, and relieve the vessel owners of the risk of “getting it wrong”.

To be granted interpleader relief, the court had to be satisfied that the physical suppliers had a prima facie case against the suppliers and whether the competing claims had an objective basis in law and fact. The court examined the various bases of the physical suppliers’ claims, whether based in bailment, retention of title, the unlawful conversion of property, collateral contract and unjust enrichment, dismissing such bases as variously “a non-starter” and “plainly unsustainable”. Accordingly, the court refused to grant interpleader relief because the physical suppliers’ claims simply did not raise any prima facie case against the vessel owners.

The judge commented: “This appeal to ‘fairness and justice’ rings hollow. The fact that the OW entities are now insolvent does not extinguish the physical suppliers’ contractual claims since their debts may still be provable in insolvency. What [counsel] is effectively seeking is for the physical suppliers to be allowed to side-step the insolvency process entirely and instead seek recovery of its claim directly from a third party. ... This, it seems to me, is both unfair and unjust.”

In addition to the above decisions, 24 Interpleader actions have been commenced in New York and 11 in the U.S. outside New York. The 24 cases include a successful claim for a Restraining Order whereby, in exchange for a purchaser paying the approximately US$1m bunker invoice value into court, other creditors/claimants are prevented from arresting the vessel or taking other steps in relation to their claims for unpaid bunkers. Notably, however, US Interpleader actions only prevents arrests in relation to bunker stems supplied in the US because, where the bunker stem is made in another jurisdiction which accepts jurisdiction to hear the claim, that other jurisdiction may not follow the terms of any New York Restraining Order.


Several of the Club’s members are involved in disputes concerning competing claims under OW Bunker invoices. Who should be paid for the stem is, as noted above, a complex legal issue. There is no general answer but instead each situation has to be assessed in the light of the particular circumstances and terms of the relevant contract/s. Members who are faced with competing claims are recommended to seek legal advice. Notably, disputes arising out of these types of situations are generally covered by the FD&D insurance.  
Some general recommendations may be provided:

  • Thoroughly analyse the claims and identify all parties involved in the sale and physical supply chain to see whether any agreement can be reached which will avoid a double payment having to be made
  • If an agreement cannot be reached, purchasers should investigate if payment can be made to a court or pursuant to an interim escrow arrangement, or if any other pre-emptive legal remedy is available (e.g. inter pleader actions). The costs for interpleader actions, that can be significant, should be considered
  • In the event duplicate payment has to be made, investigate available resource actions  against e.g. the bankruptcy estate or any charterer

The OW Bunker collapse has generated important lessons for the future. The following steps may be taken by owners and charterers in order to bring contractual clarity in relation to the supply of bunkers, as well as mitigate the risk for competing claims: 

Take note that we, (Charterers: Name, address and contact details) are today (date) ordering (specification of) bunkers for supply at (port or place) on or about (date) on our account and our credit to MV/MT………… on charter to us and that the bunkers to be supplied to the Vessel are solely for our account as Charterers and that neither the Vessel, the Owners nor the Master is a party to the bunker supply contract and no lien, encumbrance or any rights shall arise on the Vessel.

Yours faithfully                    

Charterers of MV/MT………. 

  • Avoid any reference on the Bunker Delivery Receipt to the physical supplier’s own Terms and Conditions in order to avoid creating a direct contract between the vessel owner and the supplier   
  • Stamp and sign the Bunker Delivery Receipt with the following wording:


This bunker supply is for account of vessel’s time charterers, Messrs………………

I herewith declare that neither owners / bareboat charterers nor the vessel are responsible for payment of this supply and no lien or other claim against the vessel can therefore arise. 

Master / Chief Engineer 

  • Explore possibilities to take out insurance to protect against the risk of charterer (or bunker intermediary) insolvency

The use of a bunker intermediary will entail an enhanced risk in relation to the supply of bunkers. Members may therefore consider agreeing to only deal with physical bunker suppliers directly and, if so, a provision to that effect should be inserted in any time charterparty. 

In the event an intermediary is used the following precautionary steps can be taken: 

  • Endeavour to ensure that the intermediary has an appropriate credit insurance
  • Endeavour to agree to pay the intermediary the profit element only by way of paying the physical supplier separately, or by way of making one payment to the intermediary which is split into two; the intermediary receives the profit element as principal and the substantive sum as agent for the physical supplier. At least the first alternative needs to be expressed in the contract with the intermediary
  • Endeavour to ensure that the ultimate buyer has the longest credit period in the contractual chain by way of a term in the contract with the intermediary that the intermediary has to first pay their supplier in full for the bunkers before the ultimate buyer is obliged to pay them

Finally, a word of caution. There is no magic answer which will eliminate all legal risks in relation to the supply of bunkers. All situations differ and there are different parties involved in supply chains. However, the above constitute steps that owners and charterers can take to try to mitigate those risks as much as possible, in appropriate circumstances. It is acknowledged that the steps may be difficult to take in practice.  


Court of Appeal decides OW Bunker claim against the owners

Anders Leissner
Corporate Legal & FD&D

ON 22 OCTOBER 2015, the English Court of Appeal handed down an eagerly awaited decision on a preliminary issue. The court had been charged with the task of deciding whether an OW Bunker contract – in line with most standard type of bunker supply contracts – is a contract within the meaning of the UK Sale of Goods Act (SOGA). The question may seem academic but has great practical importance. The owners of the Res Cogitans were namely faced by duplicate claims for the same bunker stem; one from OW Bunker, including its assignees ING Bank, and one from the physical suppliers, who had not been paid by OW Bunker.

The owners disputed that OW Bunker had a valid claim on the basis that OW Bunker had never paid the physical suppliers and therefore had never obtained title to the bunkers. In essence, the owners’ argument was that OW Bunker could not claim payment under the OW Bunker contract since the bunkers had never belonged to OW Bunker. The legal basis for the argument was that SOGA applied to the OW Bunker contract and, as such, the seller (OW Bunker) must have title to the goods in order to sell them to owners.  

The bunker contract was a hybrid  

The Tribunal and Commercial Court had held that the OW Bunker contract was not subject to SOGA, and that therefore passing of title was not a condition for OW Bunker to claim payment under the contract.  

However, the Court of Appeal adopted a more refined approach, concluding that the contract was a hybrid under which bunkers are to be delivered to the owners as bailees with a license to use them for the propulsion of the vessel, coupled with an agreement to sell any bunkers remaining at the date of payment after the expiry of the credit period, in return for a monetary consideration, which in commercial terms can be properly described as the price.

As a result, SOGA did not apply to the bunkers consumed during the credit period, but it supposedly applied to any bunkers that remained after the credit period. The rationale is that the Court of Appeal, for all practical purposes, confirmed the previous decisions regarding this issue whether SOGA applied.

A delicate issue for the Court of Appeal

At a first glance, the decision is hard to digest since it leaves the door open for both OW Bunkers (their assignees ING Bank), and the physical bunker suppliers, to pursue the vessel owners for unpaid bunkers. Hav
ing said this, it is difficult to fully grasp the consequences had the Court of Appeal followed the owners’ argumentation. After all, the owners contracted with, and received bunkers from, OW Bunkers.

Credit sales are common in modern business life and the Court of Appeal might have opened up Pandora’s Box if they had undermined the right to claim payment under similar contracts involving a credit sale. In addition, the bunker stem involved three sub-suppliers and in total four contracts, and the Court of Appeal was charged to decide a specific, preliminary issue pertaining to only one of the contracts involved.

A long way to go

It should be noted that that decision by the Court of Appeal is not the end of the Res Cogitans case. It was essentially only the “SOGA argument” that was on appeal. The case is expected to be referred back to the arbitration tribunal where the parties are at liberty to elaborate on other arguments, inviting the arbitrators to adopt a more holistic approach taking the practical consequences of the duplicate claims into consideration. In addition, the “SOGA argument” may be appealed to the Supreme Court.

Hence, there is long way to final determination of the Res Cogitans and the important points of principle involved. In the interim, owners and charterers are regretfully left to fight off duplicate claims in the best way they can using whatever remedies there are at hand, such as making deposits in courts and commencing interpleader action

The situation is very unsatisfactory since such remedies have proven to be very expensive and not providing full protection; the prospects to pursue claims vary in the world’s jurisdictions and a decision in one country may not be recognized in other countries. In addition, facts and contract terms may materially differ, rendering a decision in one case inapplicable to other OW Bunker cases.  

The contractual chain

It is easy to solely blame OW Bunker and ING Bank for all the problems caused to owners and charterers receiving duplicate claims. However, from the perspective of the innocent owner or charterer, the problem actually manifests itself when a different party not being the contractual counterparty – the physical supplier – pursues a claim against the vessel despite the fact that the contractual supplier has been paid. 

Admittedly, the ancient right for a bunker supplier to have a lien in the vessel for unpaid bunkers may not sit very well with an arrangement involving an intermediary since, as the Court of Appeal has suggested, owners’ obligation to pay the intermediary is absolute. 

After all, the physical supplier has contracted with OW Bunker, and has agreed to receive payment form OW Bunker. If the contractual chain was to be honoured, which would seem reasonable, the physical supplier should submit a claim against OW Bunker’s bankrupt estate to the extent the bunkers are not paid. 

Be that as it may, the Res Cogitans decision – so far – illustrates that there is a fundamental risk for owners and charterers when purchasing bunkers through intermediaries. 


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