ITIC reminds agents to beware of bankruptcies

International Transport Intermediaries Club ITIC said that it had been seeing an increasing number of ship agents becoming exposed to the consequences of their principal going bankrupt.

ITIC noted that, in the normal course of business, the ship agent would settle a range of suppliers’ invoices on behalf of the principal, subsequently recovering these costs from the principal once the port call was complete. However, if the principal enters bankruptcy, trustees were increasingly demanding that agents re-pay these fees, leaving the agent” severely out-of-pocket”.

ITIC said that it did not cover the amounts at stake but it did cover associated legal costs.

ITIC said that, although jurisdictions differed, most would say that payments made in the usual course of business and on usual terms could not be recovered by the trustee in bankruptcy.

ITIC cited one particular case where it asked to assist a global ship agency. A claim of $107,000 was being made against its African office and a further claim for $70,000 against its Europe office. ITIC engaged a lawyer who successfully argued that the disbursements paid to the African office were in the normal course of business and so did not have to be returned. In Europe, however, there had been a considerable delay in the ship agent invoicing for its disbursements and the paperwork had only been submitted shortly before the bankruptcy proceedings. This led to considerable negotiation. Ultimately the ship agent returned $12,000 to settle the matter. ITIC covered the cost of the lawyer. ITIC urged ship agents to beware of the issues surrounding the possible bankruptcy of their principals. It said that invoices for disbursements should be submitted as soon as possible