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OW Bunker – last stand in the United States for owners and charterers?

News & Insights 9 August 2016

The OW Bunker bankruptcy has had ramifications worldwide. This article looks at the United States and how interpleader actions there have, for the time being at least, been protecting debtors from paying twice.



The OW Bunker bankruptcy has had ramifications worldwide. This article looks at the United States and how interpleader actions there have, for the time being at least, been protecting debtors from paying twice.


In our October 2015 Defence Special Edition we provided an update on the cases in the United States (as well as in Singapore and the United Kingdom) arising out of the spectacular demise of OW Bunker and its affiliates around the world at the end of 2014.

Owners and time charterers have always been prepared to pay for the bunkers consumed by their ships. However, they are only prepared to pay once for those bunkers. Unfortunately, legal decisions in England and in other jurisdictions have resulted in the real possibility that owners and time charterers may have to pay twice for the same bunker supply. In the United States, however, owners and time charterers have had more success in lessening that risk, although it is still too early to say whether they will ultimately succeed.

Interpleader actions

As we reported in October 2015, Judge Caproni in New York has held that the procedural device of ‘interpleader’ actions can be used to protect owners and time charterers from the risk of double payment. An interpleader action allows a person faced with more than one person demanding payment for the same debt to pay the disputed amount due into court and leave it to the court to decide which of the competing claimants should be paid. If the court finds that the interpleader action is proper, it may also stop the persons before it from attempting to collect the debt by filing actions elsewhere.

The cases as they stand

More than 25 such interpleader actions have been filed in New York and consolidated before Judge Caproni. Judge Caproni has held that these actions are proper and the United States Court of Appeals for the Second Circuit has affirmed her decision. Further proceedings will now be required to determine precisely which entity is entitled to be paid from the funds paid into court by the owners and time charterers.

An obvious solution?

From an operational perspective, and all other things being equal, a solution is obvious – the owner or time charterer pays the OW Bunker entity with whom it contracted, the OW Bunker entity pays the entity with whom it contracted and, ultimately, the physical supplier is paid in full, with each person in the contractual chain retaining its contemplated profit.

Here, however, all other things are not equal. ING Bank contends that OW Bunker assigned its receivables to ING Bank as security for loans made by ING Bank to OW Bunker. If then, in fact, the owners and time charterers only have to pay once, either the end physical suppliers or ING Bank bears the credit risk of the default and demise of OW Bunker. ING Bank contends it perfected a security interest in the receivables and ‘takes first’, while the physical suppliers contend they have a maritime lien against the ship in rem and that they must ‘take first’.

However, the owners and time charterers concerned want to pay only once and do not want to be concerned about future arrests or disruptions to their business.

Recent developments

Recently, the physical suppliers have suffered setbacks in district court cases in Washington, Louisiana and New York (in a case before a different judge). These cases are not part of the interpleader actions before Judge Caproni. In these cases, the courts have held that the physical suppliers have no lien under United States law because there was no agency relationship connecting the ship to the physical supplier. Instead, the courts have held that the physical supplier is akin to a subcontractor, who does not generally have a lien against a ship to which it supplies services on the order of a general contractor.

The Louisiana case is already on appeal and the others will doubtless be appealed as well. The physical suppliers contend inter alia that the district courts have misconstrued the United States lien statute which, they argue, only requires proof that the bunker order originated ‘on the order of’ ship interests – a fact that has been admitted in all of the decided cases – and that there is no requirement under United States statute that the physical supplier must also prove that OW Bunker, as intermediary, was acting as an agent of the ship in ordering the bunkers.

Meanwhile, all eyes are on New York and the showdown in front of Judge Caproni as she decides who gets the funds paid into court, and whether the owners and time charterers before her will in fact be relieved from the risk of paying twice for the same bunker supply.

She has selected four test cases for summary judgment, both on the maritime lien issues discussed above and also on whether ship interests can be discharged from these cases with no further liability. These test cases have been submitted to Judge Caproni, and her decisions are expected later this year.

In these cases, an owner or time charterer contracted with an OW Bunker entity to supply bunkers to the subject ship. Before the owner or time charterer paid for the bunkers supplied, however, OW Bunker collapsed. OW Bunker – typically, but not always – contracted with other parties to make the physical supply to the ship in the agreed port. At the time that OW Bunker in Denmark and affiliates elsewhere filed for bankruptcy, neither OW Bunker nor the physical supplier at the bottom of the chain had been paid in a large number of cases. The relevant OW Bunker entity, as well as the physical supplier, have since contended that they each are entitled to enforce a lien on the same ship for the value of the bunkers so supplied.

1 [2016] EWHC 583 (Comm)

Category: Defence

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