May 11, 2016 / 9:34 AM / 3 years ago

UK court ruling in OW Bunker case may mean double payments for shippers

(Reuters) - The UK Supreme Court ruled in favour of bankrupt marine fuel supplier OW Bunker Malta in a dispute over payment liabilities, potentially leaving buyers around the world liable to pay for the same fuel twice.

“The Supreme Court unanimously dismisses the appeal by the Owners, PST Energy,” the Court said on Wednesday.

PST Energy 7 Shipping LLC (PST Shipping) contracted with OW Bunker to buy marine fuel, known as bunkers, in 2014. OW Bunker then subcontracted the deal to a Rosneft Marine (UK) Ltd subsidiary to physically deliver the fuel to PST’s vessel Res Cogitans.

However, the fuel was delivered around the time that OW Bunker went bankrupt and OW Bunker did not pay Rosneft nor did PST pay OW Bunker.

ING Bank, as the company responsible for settling OW Bunker’s debts, attempted to collect payment from PST that was contractually owed. However, PST countered that it was not liable to pay ING because the contract was a sale of goods governed by the Sale of Goods Act of 1979.

Following the November 2014 collapse of Denmark-based OW Bunkers, the world’s biggest bunker supplier at the time, this left hundreds of ship owners liable to paying twice for the same bunkers - to ING as the assignee of OW Bunkers, under the contractual agreement, and to the physical suppliers for the actual bunker fuel.

Earlier court decisions found that ING could collect payment, setting up the Supreme Court decision on Wednesday.

“Given the outcome of this case, Members and other operators will need to carefully review their bunker contracts in order to protect themselves from such situations arising in the future,” said the UK Defence Club, an insurance club for the marine industry.

Marine companies have been closely watching the case since it sets up a precedent that companies involved in the OW Bunker bankruptcy could be double-charged for the fuel.

“Shipowners are left facing double jeopardy and competing demands for payment for the same supplies of bunkers from both insolvent OW Bunker and from physical suppliers,” said Scott Pilkington and Paul Dean, attorneys with Holman Fenwick Willan in Singapore and London, in an e-mail. “Owners and operators who have not settled OW Bunker’s claims will now face renewed action by ING Bank.”

Reporting by Roslan Khasawneh; Editing by Christian Schmollinger

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