This circular is for the general information of the Association’s FD&D membership:

Bankruptcy proceedings were initiated against five Danish OW Bunker entities between the 7th and 10th November 2014. This has given rise to several complex practical and legal issues, in particular where the OW Bunker company acted as an intermediary. Members may be facing competing claims for the same stem; one under the OW Bunker invoice, and one from any unpaid physical bunker supplier.

The threat of arrest of the vessel and/or the bunkers is clear: an unpaid physical supplier, sub contracted to OW Bunker, may attempt to enforce a so called “retention of title clause”, or bring an action in tort for “conversion”. In some jurisdictions, a party who supplies bunkers is entitled to exercise a maritime 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 N.V, 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 N.V is referred to in the payment terms of some invoices issued by OW Bunker. The Bank is notifying members that they must pay money owed to OW Bunker, directly to the Bank.  At the time of writing, this does not appear to involve either OW Bunker USA Inc., OW Bunker Panama S.A. or OW Bunkers (UK) Ltd.

The situation is unclear and it is difficult to give any general advice since each situation will turn on its own facts and the terms of the relevant contract/s involved. However, the following general guidance should be noted.

Fuel which has already been supplied
This is a very problematic situation. The member is presumably obliged to pay any invoice issued by OW Bunker. On the other hand, the physical supplier may be entitled to seek payment directly from the vessel/owners. Members are advised to do the following:

• Members should firstly seek 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
• If an agreement cannot be reached, members should investigate if payment can be made to court or pursuant to an interim escrow arrangement, or if any other pre-emptive legal remedy is available  
• The last resort is for members to pay a second time and then seek recourse either from OW Bunker in the bankruptcy or from an intermediate time charterer responsible for providing fuel

Having said the above, the Association reiterates there is no general answer available but instead each situation has to be assessed individually. Hence,  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 for further analysis.

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 the Association has the following recommendations:

• If possible, Members should ensure that the physical bunker supplier has an appropriate credit insurance
• Members should ensure that the Master stamps the Bunker Delivery Receipts with an appropriate non-lien wording and also a notice that the stem is made solely for charterers’ account. The Association will be able to assist in drafting such a notice

Needless to say, members should exercise extreme caution before entering into any new contracts with any OW Bunker company.

The trustees of the bankruptcy estate
Two Danish law firms, namely Plesner (www.plesner.com) and Gorrissen Federspiel (www.gorrisenfederspiel.com), 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. 

The Association will continue to monitor closely the situation and developments. Requests for assistance and specific inquiries in relation to OW Bunker may be addressed with the Association’s FD&D lawyers.