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Tuesday, 08 December 15
HOW TO MITIGATE LEGAL RISKS WHEN PURCHASING BUNKERS - LESSONS LEARNED FROM THE OW BUNKER COLLAPSE - THE SWEDISH CLUB
 KNOWLEDGE TO ELEVATE
About a year has passed since OW Bunker & Trading A/S filed for bankruptcy. The collapse shows that there are significant risks for shipowners and charterers in using intermediaries for the supply of bunkers. On the one hand the intermediary issues an invoice in capacity as the contractual supplier and should be paid for the bunkers. On the other hand do physical suppliers in some jurisdictions have an independent right to claim the vessel for unpaid bunkers. As a result, there is an inherent risk for competing claims against vessels to the extent the intermediary fails to pass on the payment to the physical supplier.
The collapse of OW Bunker has not only generated disputes involving competing claims against vessel owners by contractual suppliers and physical suppliers, but also charterparty disputes between owners and charterers. The Club’s FD&D lawyers presently handle about 40 cases involving disputes following the collapse of OW Bunkers. The total sum of these disputes is in excess of USD 20 million. The legal issues are complex and case specific. For instance, it has been argued that OW Bunker or their assignees cannot claim payment at all under English law since they never owned the bunkers for which they issued an invoice. This argument was recently dismissed by the English Court of Appeal, see the Club’s Member Alert of 23 October 2015. In addition, a court decision in one country may not apply in another country. Therefore, as of today, no universal solution to the underlying dilemma with competing claims is in sight.
The OW Bunker collapse has generated important lessons for the future. The following steps may be taken by owners and charterers in order to bring contractual clarity in relation to the supply of bunkers, as well as mitigate the risk for competing claims:
Insert BIMCOs non-lien clause in the charterparty, see Special Circular from BIMCO.
Prior to ordering bunkers, the supplier should be provided with the following notice (this is linked to the above non-lien clause):
To: Bunker Sellers (Name, address and contact details)
Take note that we, (Charterers: Name, address and contact details) are today (date) ordering (specification of) bunkers for supply at (port or place) on or about (date) on our account and our credit to MV/MT………… on charter to us and that the bunkers to be supplied to the Vessel are solely for our account as Charterers and that neither the Vessel, the Owners nor the Master is a party to the bunker supply contract and no lien, encumbrance or any rights shall arise on the Vessel.
Yours faithfully
Charterers of MV/MT………
Avoid any reference on the Bunker Delivery Receipt to the physical supplier’s own Terms and Conditions in order to avoid creating a direct contract between the vessel owner and the supplier.
Stamp and sign the Bunker Delivery Receipt with the following wording:
Vessel…………………
This bunker supply is for account of vessel’s time charterers, Messrs………………
I herewith declare that neither owners / bareboat charterers nor the vessel are responsible for payment of this supply and no lien or other claim against the vessel can therefore arise.
Date:
……………………………………………………………
Master / Chief Engineer
Explore possibilities to take out insurance to protect against the risk of charterer (or bunker intermediary) insolvency
As mentioned above, the use of a bunker intermediary will entail an enhanced risk in relation to the supply of bunkers. Members may therefore consider agreeing to only deal with physical bunker suppliers directly and, if so, a provision to that effect should be inserted in any time charterparty.
In the event an intermediary is used the following precautionary steps can be taken:
Endeavour to ensure that the intermediary has an appropriate credit insurance.
Endeavour to agree to pay the intermediary the profit element only by way of paying the physical supplier separately, or by way of making one payment to the intermediary which is split into two; the intermediary receives the profit element as principal and the substantive sum as agent for the physical supplier. At least the first alternative needs to be expressed in the contract with the intermediary.
Endeavour to ensure that the ultimate buyer has the longest credit period in the contractual chain by way of a term in the contract with the intermediary that the intermediary has to first pay their supplier in full for the bunkers before the ultimate buyer is obliged to pay them.
Finally, a word of caution. There is no magic answer which will eliminate all legal risks in relation to the supply of bunkers. All situations differ and there are different parties involved in supply chains. However, the above constitute steps that owners and charterers can take to try to mitigate those risks as much as possible, in appropriate circumstances. It is acknowledged that the steps may be difficult to take in practice.
Source: The Swedish Club | Hellenic Shipping News
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- Merrill Lynch Commodities Europe
- Billiton Holdings Pty Ltd - Australia
- Sical Logistics Limited - India
- Renaissance Capital - South Africa
- Bhushan Steel Limited - India
- Standard Chartered Bank - UAE
- Global Green Power PLC Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- International Coal Ventures Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Deloitte Consulting - India
- Vizag Seaport Private Limited - India
- Edison Trading Spa - Italy
- India Bulls Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Jindal Steel & Power Ltd - India
- GAC Shipping (India) Pvt Ltd
- Energy Development Corp, Philippines
- Jaiprakash Power Ventures ltd
- Interocean Group of Companies - India
- CIMB Investment Bank - Malaysia
- Maheswari Brothers Coal Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Trasteel International SA, Italy
- GMR Energy Limited - India
- Siam City Cement - Thailand
- Star Paper Mills Limited - India
- Petron Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Parry Sugars Refinery, India
- Sinarmas Energy and Mining - Indonesia
- Videocon Industries ltd - India
- Tamil Nadu electricity Board
- Georgia Ports Authority, United States
- McConnell Dowell - Australia
- Mercator Lines Limited - India
- South Luzon Thermal Energy Corporation
- Miang Besar Coal Terminal - Indonesia
- White Energy Company Limited
- Semirara Mining Corp, Philippines
- Posco Energy - South Korea
- Singapore Mercantile Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Latin American Coal - Colombia
- Kartika Selabumi Mining - Indonesia
- Thiess Contractors Indonesia
- Madhucon Powers Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Barasentosa Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kapuas Tunggal Persada - Indonesia
- ASAPP Information Group - India
- Indika Energy - Indonesia
- Rio Tinto Coal - Australia
- Heidelberg Cement - Germany
- Makarim & Taira - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Ambuja Cements Ltd - India
- The Treasury - Australian Government
- CNBM International Corporation - China
- Bayan Resources Tbk. - Indonesia
- TeaM Sual Corporation - Philippines
- Indian Oil Corporation Limited
- Rashtriya Ispat Nigam Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Mintek Dendrill Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Aboitiz Power Corporation - Philippines
- Mercuria Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Meenaskhi Energy Private Limited - India
- GVK Power & Infra Limited - India
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Baiduri Energy - Indonesia
- Intertek Mineral Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kumho Petrochemical, South Korea
- Directorate Of Revenue Intelligence - India
- Larsen & Toubro Limited - India
- Australian Commodity Traders Exchange
- Tata Chemicals Ltd - India
- Coal and Oil Company - UAE
- Globalindo Alam Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Port Waratah Coal Services - Australia
- Central Java Power - Indonesia
- SMC Global Power, Philippines
- Iligan Light & Power Inc, Philippines
- Sakthi Sugars Limited - India
- San Jose City I Power Corp, Philippines
- Wilmar Investment Holdings
- Ministry of Mines - Canada
- Global Business Power Corporation, Philippines
- Planning Commission, India
- Parliament of New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Ind-Barath Power Infra Limited - India
- PTC India Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Salva Resources Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Africa Commodities Group - South Africa
- PowerSource Philippines DevCo
- Straits Asia Resources Limited - Singapore
- Borneo Indobara - Indonesia
- Bharathi Cement Corporation - India
- Thai Mozambique Logistica
- Indonesian Coal Mining Association
- The University of Queensland
- Bhatia International Limited - India
- Essar Steel Hazira Ltd - India
- Sarangani Energy Corporation, Philippines
- Therma Luzon, Inc, Philippines
- New Zealand Coal & Carbon
- Baramulti Group, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Commonwealth Bank - Australia
- Indo Tambangraya Megah - Indonesia
- Aditya Birla Group - India
- Power Finance Corporation Ltd., India
- Vedanta Resources Plc - India
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Uttam Galva Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Karaikal Port Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Alfred C Toepfer International GmbH - Germany
- Ministry of Transport, Egypt
- Directorate General of MIneral and Coal - Indonesia
- London Commodity Brokers - England
- Lanco Infratech Ltd - India
- Bangladesh Power Developement Board
- Ceylon Electricity Board - Sri Lanka
- SMG Consultants - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Toyota Tsusho Corporation, Japan
- Gujarat Sidhee Cement - India
- Orica Australia Pty. Ltd.
- Neyveli Lignite Corporation Ltd, - India
- Central Electricity Authority - India
- Orica Mining Services - Indonesia
- Altura Mining Limited, Indonesia
- Eastern Coal Council - USA
- Kepco SPC Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Sree Jayajothi Cements Limited - India
- Energy Link Ltd, New Zealand
- Sindya Power Generating Company Private Ltd
- Kalimantan Lumbung Energi - Indonesia
- Simpson Spence & Young - Indonesia
- Agrawal Coal Company - India
- Romanian Commodities Exchange
- Kobexindo Tractors - Indoneisa
- Bulk Trading Sa - Switzerland
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Makmur.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- SN Aboitiz Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Economic Council, Georgia
- MS Steel International - UAE
- Marubeni Corporation - India
- Medco Energi Mining Internasional
- Coastal Gujarat Power Limited - India
- Cement Manufacturers Association - India
- Independent Power Producers Association of India
- Ministry of Finance - Indonesia
- Goldman Sachs - Singapore
- Mjunction Services Limited - India
- Chamber of Mines of South Africa
- LBH Netherlands Bv - Netherlands
- Asmin Koalindo Tuhup - Indonesia
- Australian Coal Association
- Meralco Power Generation, Philippines
- Metalloyd Limited - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- Carbofer General Trading SA - India
- VISA Power Limited - India
- Minerals Council of Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indogreen Group - Indonesia
- Price Waterhouse Coopers - Russia
- Oldendorff Carriers - Singapore
- Formosa Plastics Group - Taiwan
- Banpu Public Company Limited - Thailand
- IEA Clean Coal Centre - UK
- Pendopo Energi Batubara - Indonesia
- Grasim Industreis Ltd - India
- Siam City Cement PLC, Thailand
- Malabar Cements Ltd - India
- Binh Thuan Hamico - Vietnam
- ICICI Bank Limited - India
- Electricity Authority, New Zealand
- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Anglo American - United Kingdom
- Indian Energy Exchange, India
- Timah Investasi Mineral - Indoneisa
- Manunggal Multi Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Xindia Steels Limited - India
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- Dalmia Cement Bharat India
- Coalindo Energy - Indonesia
- The State Trading Corporation of India Ltd
- Krishnapatnam Port Company Ltd. - India
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