ITIC reminds agents to beware of bankruptcies

The International Transport Intermediaries Club (ITIC) has warned agents that it has been seeing an increasing number of ship agents becoming exposed to the fall-out of their principal going bankrupt.

Normally the ship agent would settle a range of suppliers’ invoices on behalf of the principal and then recover these costs from the principal once the port call was complete. However, if the principal goes broke, trustees are increasingly demanding that agents repay these fees. ITIC said that this could leave the agent severely out-of-pocket.

ITIC does not cover the amounts at stake but it does cover associated legal costs. The Club said that jurisdictions differed, but noted that most said that payments made in the usual course of business and on usual terms could not be recovered by the trustee in bankruptcy.

In one particular case, ITIC recounted that it was asked to assist a global ship agency where a claim of $107,000 was being made against its African office and $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 which concluded with the ship agent having to return just $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 and encourage invoices for disbursements to be submitted as soon as possible.