A number of OW Bunker group companies filed for bankruptcy in Denmark on 7th November 2014. Creditors are now scrambling to secure payment of debts. 

Members’ exposure to competing claims

Members – either in their capacity as ship owner or charterer – should be wary of paying OW Bunker where it was not the physical supplier.  However, the threat of arrest of the vessel and / or the bunkers is clear: an unpaid physical supplier, sub contracted to OW Bunker, is likely to attempt to enforce a retention of title clause against the member, or bring an action in tort for ‘conversion’. In some jurisdictions, a party who supplies bunkers is entitled to exercise a lien, with the vessel being bound to pay directly for the fuel supplied. 

Therefore members can expect to receive competing demands for payment: from the trustees in the bankruptcy; from the physical suppliers as well as from banks. The Association is aware that at least one bank, ING Bank, holds an assignment from O.W. Bunkering & Trading A/S and certain of its subsidiaries of the proceeds from bunker sales. The assignment to ING Bank is even highlighted in the payment terms shown on invoices issued by OW Bunker. The Bank is notifying members that they must pay money owed to OW Bunker, directly to the Bank. This does not appear to involve either OW Bunker USA Inc. or OW Bunker Panama S.A.

Fuel which has already been supplied

Members will want to avoid having to pay for the same bunkers, twice. Unfortunately, whilst the contractual chain may clearly identify who ought to be at risk – in all probability the physical supplier – a number of jurisdictions recognise the physical supplier’s right to proceed directly against the vessel and/or the bunkers supplied, irrespective of the contractual position. 

The Club recommends members firstly to identify all of the 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. Whether the parties involved will accept a member’s willingness to pay into an escrow account or court, as an interim measure, remains to be seen. It seems unlikely though, where the physical supplier is entitled to proceed directly against the vessel or the bunkers. The alternative will be for members to pay a second time and then seek recourse either from OW in the bankruptcy or from an intermediate time charterer responsible for providing fuel.

In order for the Association to provide further assistance on a case-by-case basis, members affected by the bankruptcy are advised to collect all relevant papers, including bunker supply contracts, invoices, charterparties and related correspondence, so that it can be provided to the Association immediately. 

Fuel which is yet to be supplied

If existing contracts with OW Bunker are yet to be performed (i.e. in terms of the physical supply) then the question of cancelling the stem arises. Besides the financial risk and possible disputes arising from refusal to follow the charterers’ orders to load the fuel, the legal status of the seller is at issue: not all OW Bunker companies are in bankruptcy at this time and cancellation may attract claims against a member for wrongful termination. Advice should be taken from the Association on the status of the contract and whether it has, amongst other things, become ‘frustrated’. The bankruptcy trustees may be willing to confirm OW Bunker is not in any position to proceed with the supply, permitting members to proceed either with the physical suppliers directly or with an alternative stem.

If the stem does go ahead (and assuming the fuel is for the account of the charterer) then a suitable notice should be given both to OW Bunker and the physical supplier to say that the supply is for the charterer’s sole account, and that they must look solely to the charterer in the event of non-payment. The Association will be able to assist in drafting such a notice.

The trustees of the bankruptcy estate

Two Danish law firms, namely Plesner and Gorrissen Federspiel, have been appointed as trustees of the bankruptcy.  Following our approach to them, Plesner has verbally advised the Association that all amounts outstanding to OW Bunker must be paid in accordance with invoices, failing which the bankruptcy estate will take legal action to enforce payment.  Secondly, that the physical suppliers must file claims in the bankruptcy as unsecured creditors. This is the position the trustees were expected to take. 

Specific inquiries about OW Bunker should be taken up with claims managers at the Association. This circular is for the general information of the Association’s FD&D membership.

Member Alert is published by The Swedish Club as a service to members. While the information is believed correct, the Club cannot assume responsibility for completeness or accuracy.