Recent developments from OW Bunker Group Collapse

American P&I Club has informed its members of several developments in US courts on the lien rights of parties related to the collapse of the OW Bunker Group in November 2014. Close to 60 cases are pending in the US involving claims for payment, of which about 30 were commenced in New York as interpleader cases by vessel owners and/or time charterers. There are other cases pending throughout the US (including New York) in which interpleader was raised in response to vessel arrest actions commenced by physical suppliers. There are also a number of vessel arrest cases that were commenced by ING Bank as alleged assignee of some OW entities. Usually the cases involved a typical OW scenario: an owner/charterer contracted with an OW entity to supply bunkers to a vessel, the supply was then subcontracted down the supply chain through one or more other OW entities, the last of which then contracted with a physical supplier who delivered the bunkers to the vessel.

In most cases the physical suppliers were left unpaid, and these suppliers are focusing on the vessels supplied, hoping to obtain payment by exercising a maritime lien for necessaries against the vessels under US law. Similarly, in some instances, the OW entity which had contracted with the owner/charterer was not paid. ING Bank, the purported OW entity’s assignee, is sometimes pursuing payment by asserting that the bank possesses maritime lien rights against the vessels. Although the various cases are in different procedural postures, they involve similar substantive issues as to which party in the supply chain, if any, has a maritime lien against the vessels under US law. Most cases were filed in 2014/2015 and until recently the cases have been focused on various procedural matters, including discovery. As 2016 progressed the cases turned their focus to the substantive issue of whether it was the physical suppliers or OW Group/ING that had maritime lien rights against the supplied vessels, or if neither did.

Unlike many jurisdictions throughout the world, US law recognizes a lien in favour of certain suppliers who furnish necessaries to a vessel. There is no dispute in the OW cases that bunkers constitute necessaries as described in the Lien Act and that the bunkers were delivered to a vessel as opposed to another type of conveyance. The point of contention has been on whether the physical suppliers, who were contracted by an OW entity, could satisfy the authority requirement of the Lien Act. In other words, the analyses of the physical suppliers’ lien claims have focused on whether the physical suppliers furnished the bunkers on the order of the owner or person authorized by the owner. To date, every US court to have examined this issue has determined that the physical suppliers cannot satisfy this requirement and hence their lien claims have been rejected. These decisions have all been at the district court level; no appellate court has yet addressed the issues but the first appellate rulings are expected within 2017.

The point of contention with respect to the lien rights of ING/OW is on whether OW furnished a necessary to the vessels in situations where OW was not the physical supplier of the bunkers and never paid for the bunkers. To date, there have been three separate district court decisions to have addressed ING’s lien claims with two courts accepting that ING possesses a maritime lien and one court rejecting the claim. In the case of the latter, an appeal has been lodged with the appellate court with the initial round of briefing expected in the first quarter of 2017. The correspondents noted US district courts were issuing decisions on a regular basis on the key substantive issues relevant to the Lien Act, and decisions at the appellate level were anticipated in the upcoming year. Based on the decisions to date, the correspondents said that it seemed relatively clear that the physical suppliers who were contracted by OW, a trader, would find themselves without the ability to enforce liens against the vessels, while ING’s lien rights were less settled. Until further appellate court rulings are made vessel owners faced with lien claims from either physical suppliers and/or ING could find some assistance in the recent substantive rulings, the correspondents said. American Club’s website has a section containing a range of information, on the OW Bunker Group collapse. It also provides links regarding the OW Bunker Group bankruptcy.