Comparing Notes: OW Issues from ARACON Conference in Rotterdam

In a recent article for the shipping industry magazine Bunkerspot, firm Principal J. Stephen Simms synthesizes the legal issues relating to bunker supply contracts which were discussed at the ARACON conference in October, organized by Petrospot.  Mr. Simms provides an edited version of the exchange between three lawyers with in-depth knowledge of the OW cases – Paul Taylor of Hill Dickinson (United Kingdom), Steve Simms of Simms Showers LLP (United States), and Carel van Lynden of AKD (the Netherlands). Mr. Taylor primarily explained the developments in the case of PST Energy 7 Shipping v. OW Bunker Malta Ltd. & ING Bank N.V. (the Res Cogitans).  Given that English law does not provide for maritime lien rights or the unique procedural feature of interpleader actions as does the U.S., the outcome of the Res Cogitans case has progressed differently than what one might expect from U.S. courts.  Essentially, in the Res Cogitans case, the UK court rejected the argument of the owners that OW Bunker and their purported assignees, ING Bank, could not claim the price of the marine fuel supplied to the vessel because OW Bunker had not paid the physical supplier, and the physical supplier, through a retention of title clause, retained title to the property (bunkers).  The UK court found that the contract in question did not fall under the Sale of Goods Act, and declined to find in favor of the owners.

Mr. Simms provided insight into the function of an interpleader proceeding in U.S. courts and the potential benefit to shipowners.  Essentially, in an interpleader action, the shipowner typically deposits money into the registry of the court and allows the court to make a determination of who should be paid from the funds in the hopes of avoiding the scenario where the shipowner pays twice for the fuel.  One of the disadvantages of an interpleader action is that it forces the physical supplier and the broker to fight over the distribution of the funds.  A recent decision from a Canadian court found strongly in favor of the physical supplier in awarding the funds directly to the supplier (and not ING).  This could have landmark implications on interpleader action sin the U.S. and recovery for physical suppliers.

Mr. Lynden explained that most continental European laws do not recognize the concept of a maritime lien.  In light of that, the Dutch Association of Independent Bunker Suppliers opted to insert a clause in the conditions used by many Dutch suppliers that states that Dutch law applies to the terms of the contract, but U.S. federal law applies to the question of whether there is a maritime lien.

For more information on the discussion of the developments in OW cases across various jurisdictions and the potential impact on bunker supply contracts, a PDF version of the full article is available here.