To date, the well-publicised bankruptcy fof marine fuel supplier OW Bunker has spawned an estimated $1.5 billion worth of claims worldwide. These involve a variety of claimants, including ING Bank as assignee of OW Bunker claims and suppliers instructed by OW Bunker to deliver bunkers which have not been paid and have subsequently sought recourse.
These claims are treated differently in different jurisdictions. In the Netherlands, several cases are pending between owners or charterers, physical suppliers and ING Bank which, one year before the bankruptcy proceedings, had entered into an agreement with OW Bunker and certain of its subsidiaries to act as agent for a syndicate of lenders to the OW Bunker Group. It remains to be seen whether recent judgments in other jurisdictions – in particular, in the United Kingdom and Canada – will influence the outcome of the disputes before the Dutch courts.
In the case before the UK Court of Appeal (2015 EWCA Civ 1058) OW Bunker had contracted with the owner of the Res Cogitans for delivery of bunkers, instructing a supplier to deliver them. After OW Bunker's bankruptcy, both ING and the supplier claimed payment from the owner. No payment was made and ING commenced proceedings against the owner in the United Kingdom. The owner argued that its contract with OW Bunker was a contract for the sale of goods to which the Sale of Goods Act applied. Since title to the bunkers had not passed to the owner because of a retention of title clause, the owner argued that under the act it was not obliged to pay OW Bunker.
The Court of Appeal confirmed the Commercial Court's earlier decision that the bunker supply contract was not a contract for the sale of goods because such contract contained a retention of title clause, according to which property in the bunkers remained with OW Bunker until payment had been made, and the owner also had permission to consume the bunkers while payment was pending. Therefore, OW Bunker/ING could enforce the right to payment.
The question of whether the owner could also be held liable to pay the supplier was not dealt with in these proceedings. However, in Canada this question arose in so-called 'interpleader' proceedings, which were deemed able to take place because the court held that the claims from the supplier and OW Bunker/ING were basically the same. The court held that OW Bunker and the charterer which had ordered the bunkers were jointly and severally liable to the supplier for its claim. Because OW Bunker had not paid the supplier, ING was no longer entitled to payment from the charterer. In the end, ING did receive the margin between the purchase price agreed between OW Bunker and the charterer and OW Bunker and the supplier.
It seems unlikely that the decisions in the UK and Canadian courts will influence the outcome of the proceedings now pending in the Netherlands. According to Dutch law, an obligation to pay can be suspended (as in interpleader proceedings) in the event that it is uncertain to whom payment must be made. The funds will then be paid into a deposit fund. However, in the case of OW Bunker there seems to be no doubt about who must be paid because there is a contractual claim (OW Bunker/ING) which will certainly have to be paid, and the supplier may have a right of recourse against the vessel.
Moreover, in the Netherlands the bunker supply contract is definitely considered a purchase agreement. The buyer's obligation to pay for the goods received does not depend on the question of whether the seller has paid its contractual counterparty (the supplier).
According to Dutch law, there is unlikely to be joint and several liability of OW Bunker and the owner against suppliers because the claims are different. An outcome such as that reached in Canada is therefore unlikely.
It is probable – although based on different reasoning – that the outcome will be along the lines of the UK judgment. Based on the contract, the owner is obliged to pay OW Bunker/ING. At the same time, it is still possible that the supplier – depending on the applicable law – will have a right of recourse against the vessel. According to Dutch law, such right of recourse exists when bunkers have been ordered by the owner or bareboat charterer of the vessel, but also when there is a right of recourse both under the law of the contract and under the law of the flag of the vessel. Therefore, in such cases it might be possible that the owner must pay twice. Even though that seems unreasonable, it is no more reasonable that a supplier be left unpaid.
For further information on this topic, please contact Hannah Verhoeven at AKD by telephone (+31 88 253 50 00) or email ([email protected]). The AKD website can be accessed at www.akd.nl.
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