The Impact of RES COGITANS on the Bunker Industry

Firm Principal Steve Simms recently explained the outcome of the UK Supreme Court decision in the Res Cogitans case in an article for Bunkerspot. The May 11, 2016 decision in the Res Cogitans case essentially requires a vessel owner or manager to pay multiple times for bunkers supplied to the vessel, even to parties who had no role in the original transaction. As a result of the decision, ING (the security agent for a consortium of lenders) ended up getting paid from the vessel owner for bunkers that it never supplied and for which the intermediate trader paid the physical supplier but was never paid itself. As the bunkering industry tries to make sense of the Res Cogitans decision, many are left perplexed by the UK Supreme Court’s failure to even consider the underlying principle and tradition of equity inherent in admiralty law. The Res Cogitans case certainly raises many questions to which leaders in the bunkering industry are scrambling to work out the answers. One of the first questions is how the physical suppliers in these OW / ING transactions should be paid. Given that ING was awarded money that was actually due to the intermediate trader in the Res Cogitans case, applying the equitable principles of unjust enrichment, constructive trust or agency, it may be possible to recover against ING for the sums it will undoubtedly try to collect around the world for transactions it may not have even financed. Another serious consideration is whether vessel owners should have to pay twice for a physical supply of bunkers. The principle of equity dictates that each party to the underlying transaction should only have to pay once and for the amount that was originally intended. That means that vessel owners should be credited amounts that they have already paid to intermediate suppliers against whatever small commission they may be ordered to pay ING.

If you are interested in reading more about the Res Cogitans case and its impact on the bunkering industry, a full version of the article is available here. For information and advice on how the Res Cogitans case may affect your business, email Steve Simms.