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Tuesday, 08 December 15
HOW TO MITIGATE LEGAL RISKS WHEN PURCHASING BUNKERS - LESSONS LEARNED FROM THE OW BUNKER COLLAPSE - THE SWEDISH CLUB
 KNOWLEDGE TO ELEVATE
About a year has passed since OW Bunker & Trading A/S filed for bankruptcy. The collapse shows that there are significant risks for shipowners and charterers in using intermediaries for the supply of bunkers. On the one hand the intermediary issues an invoice in capacity as the contractual supplier and should be paid for the bunkers. On the other hand do physical suppliers in some jurisdictions have an independent right to claim the vessel for unpaid bunkers. As a result, there is an inherent risk for competing claims against vessels to the extent the intermediary fails to pass on the payment to the physical supplier.
The collapse of OW Bunker has not only generated disputes involving competing claims against vessel owners by contractual suppliers and physical suppliers, but also charterparty disputes between owners and charterers. The Club’s FD&D lawyers presently handle about 40 cases involving disputes following the collapse of OW Bunkers. The total sum of these disputes is in excess of USD 20 million. The legal issues are complex and case specific. For instance, it has been argued that OW Bunker or their assignees cannot claim payment at all under English law since they never owned the bunkers for which they issued an invoice. This argument was recently dismissed by the English Court of Appeal, see the Club’s Member Alert of 23 October 2015. In addition, a court decision in one country may not apply in another country. Therefore, as of today, no universal solution to the underlying dilemma with competing claims is in sight.
The OW Bunker collapse has generated important lessons for the future. The following steps may be taken by owners and charterers in order to bring contractual clarity in relation to the supply of bunkers, as well as mitigate the risk for competing claims:
Insert BIMCOs non-lien clause in the charterparty, see Special Circular from BIMCO.
Prior to ordering bunkers, the supplier should be provided with the following notice (this is linked to the above non-lien clause):
To: Bunker Sellers (Name, address and contact details)
Take note that we, (Charterers: Name, address and contact details) are today (date) ordering (specification of) bunkers for supply at (port or place) on or about (date) on our account and our credit to MV/MT………… on charter to us and that the bunkers to be supplied to the Vessel are solely for our account as Charterers and that neither the Vessel, the Owners nor the Master is a party to the bunker supply contract and no lien, encumbrance or any rights shall arise on the Vessel.
Yours faithfully
Charterers of MV/MT………
Avoid any reference on the Bunker Delivery Receipt to the physical supplier’s own Terms and Conditions in order to avoid creating a direct contract between the vessel owner and the supplier.
Stamp and sign the Bunker Delivery Receipt with the following wording:
Vessel…………………
This bunker supply is for account of vessel’s time charterers, Messrs………………
I herewith declare that neither owners / bareboat charterers nor the vessel are responsible for payment of this supply and no lien or other claim against the vessel can therefore arise.
Date:
……………………………………………………………
Master / Chief Engineer
Explore possibilities to take out insurance to protect against the risk of charterer (or bunker intermediary) insolvency
As mentioned above, the use of a bunker intermediary will entail an enhanced risk in relation to the supply of bunkers. Members may therefore consider agreeing to only deal with physical bunker suppliers directly and, if so, a provision to that effect should be inserted in any time charterparty.
In the event an intermediary is used the following precautionary steps can be taken:
Endeavour to ensure that the intermediary has an appropriate credit insurance.
Endeavour to agree to pay the intermediary the profit element only by way of paying the physical supplier separately, or by way of making one payment to the intermediary which is split into two; the intermediary receives the profit element as principal and the substantive sum as agent for the physical supplier. At least the first alternative needs to be expressed in the contract with the intermediary.
Endeavour to ensure that the ultimate buyer has the longest credit period in the contractual chain by way of a term in the contract with the intermediary that the intermediary has to first pay their supplier in full for the bunkers before the ultimate buyer is obliged to pay them.
Finally, a word of caution. There is no magic answer which will eliminate all legal risks in relation to the supply of bunkers. All situations differ and there are different parties involved in supply chains. However, the above constitute steps that owners and charterers can take to try to mitigate those risks as much as possible, in appropriate circumstances. It is acknowledged that the steps may be difficult to take in practice.
Source: The Swedish Club | Hellenic Shipping News
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- Petron Corporation, Philippines
- Renaissance Capital - South Africa
- New Zealand Coal & Carbon
- Global Coal Blending Company Limited - Australia
- Jaiprakash Power Ventures ltd
- Rashtriya Ispat Nigam Limited - India
- Kaltim Prima Coal - Indonesia
- Interocean Group of Companies - India
- Anglo American - United Kingdom
- Indo Tambangraya Megah - Indonesia
- SMC Global Power, Philippines
- Bangladesh Power Developement Board
- Coalindo Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Indonesian Coal Mining Association
- The University of Queensland
- Orica Australia Pty. Ltd.
- Carbofer General Trading SA - India
- PowerSource Philippines DevCo
- Electricity Authority, New Zealand
- OPG Power Generation Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- IEA Clean Coal Centre - UK
- Sical Logistics Limited - India
- The Treasury - Australian Government
- Directorate General of MIneral and Coal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maheswari Brothers Coal Limited - India
- PetroVietnam Power Coal Import and Supply Company
- PNOC Exploration Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Ceylon Electricity Board - Sri Lanka
- Economic Council, Georgia
- White Energy Company Limited
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- VISA Power Limited - India
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- Energy Link Ltd, New Zealand
- Tata Chemicals Ltd - India
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- Parliament of New Zealand
- Sree Jayajothi Cements Limited - India
- Global Green Power PLC Corporation, Philippines
- Sakthi Sugars Limited - India
- Gujarat Electricity Regulatory Commission - India
- Cement Manufacturers Association - India
- Independent Power Producers Association of India
- Posco Energy - South Korea
- Baramulti Group, Indonesia
- Gujarat Sidhee Cement - India
- Trasteel International SA, Italy
- ICICI Bank Limited - India
- Dalmia Cement Bharat India
- Indian Oil Corporation Limited
- Cigading International Bulk Terminal - Indonesia
- Thiess Contractors Indonesia
- Samtan Co., Ltd - South Korea
- Central Electricity Authority - India
- Heidelberg Cement - Germany
- Leighton Contractors Pty Ltd - Australia
- Latin American Coal - Colombia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- London Commodity Brokers - England
- Alfred C Toepfer International GmbH - Germany
- Asmin Koalindo Tuhup - Indonesia
- Agrawal Coal Company - India
- Banpu Public Company Limited - Thailand
- McConnell Dowell - Australia
- Commonwealth Bank - Australia
- Mjunction Services Limited - India
- Sinarmas Energy and Mining - Indonesia
- Altura Mining Limited, Indonesia
- Manunggal Multi Energi - Indonesia
- Kideco Jaya Agung - Indonesia
- Antam Resourcindo - Indonesia
- Bharathi Cement Corporation - India
- Australian Commodity Traders Exchange
- Marubeni Corporation - India
- Standard Chartered Bank - UAE
- Bayan Resources Tbk. - Indonesia
- Bukit Baiduri Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Mercuria Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Videocon Industries ltd - India
- Larsen & Toubro Limited - India
- Indian Energy Exchange, India
- Directorate Of Revenue Intelligence - India
- Indogreen Group - Indonesia
- Kobexindo Tractors - Indoneisa
- Sindya Power Generating Company Private Ltd
- Bukit Makmur.PT - Indonesia
- Sarangani Energy Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Mercator Lines Limited - India
- Oldendorff Carriers - Singapore
- GMR Energy Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Bhoruka Overseas - Indonesia
- Tamil Nadu electricity Board
- Orica Mining Services - Indonesia
- Toyota Tsusho Corporation, Japan
- Essar Steel Hazira Ltd - India
- CNBM International Corporation - China
- Semirara Mining Corp, Philippines
- Binh Thuan Hamico - Vietnam
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- Eastern Coal Council - USA
- Central Java Power - Indonesia
- CIMB Investment Bank - Malaysia
- Kartika Selabumi Mining - Indonesia
- Metalloyd Limited - United Kingdom
- TeaM Sual Corporation - Philippines
- Aditya Birla Group - India
- European Bulk Services B.V. - Netherlands
- Deloitte Consulting - India
- The State Trading Corporation of India Ltd
- ASAPP Information Group - India
- Timah Investasi Mineral - Indoneisa
- Vizag Seaport Private Limited - India
- Africa Commodities Group - South Africa
- Medco Energi Mining Internasional
- Chettinad Cement Corporation Ltd - India
- Power Finance Corporation Ltd., India
- Bhushan Steel Limited - India
- Vedanta Resources Plc - India
- Simpson Spence & Young - Indonesia
- Meenaskhi Energy Private Limited - India
- Merrill Lynch Commodities Europe
- India Bulls Power Limited - India
- Thai Mozambique Logistica
- Planning Commission, India
- Ministry of Finance - Indonesia
- Eastern Energy - Thailand
- Edison Trading Spa - Italy
- GVK Power & Infra Limited - India
- Price Waterhouse Coopers - Russia
- Attock Cement Pakistan Limited
- Bukit Asam (Persero) Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Aboitiz Power Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Sojitz Corporation - Japan
- Straits Asia Resources Limited - Singapore
- LBH Netherlands Bv - Netherlands
- Chamber of Mines of South Africa
- SMG Consultants - Indonesia
- Energy Development Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Singapore Mercantile Exchange
- Karaikal Port Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Australian Coal Association
- Ambuja Cements Ltd - India
- Therma Luzon, Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Electricity Generating Authority of Thailand
- Star Paper Mills Limited - India
- Lanco Infratech Ltd - India
- Riau Bara Harum - Indonesia
- Formosa Plastics Group - Taiwan
- MS Steel International - UAE
- Kepco SPC Power Corporation, Philippines
- PTC India Limited - India
- Port Waratah Coal Services - Australia
- Indika Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Wood Mackenzie - Singapore
- Barasentosa Lestari - Indonesia
- Wilmar Investment Holdings
- Pendopo Energi Batubara - Indonesia
- San Jose City I Power Corp, Philippines
- Makarim & Taira - Indonesia
- Salva Resources Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- South Luzon Thermal Energy Corporation
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Mines - Canada
- Mintek Dendrill Indonesia
- Parry Sugars Refinery, India
- Rio Tinto Coal - Australia
- SN Aboitiz Power Inc, Philippines
- Bhatia International Limited - India
- Ind-Barath Power Infra Limited - India
- Malabar Cements Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kumho Petrochemical, South Korea
- Savvy Resources Ltd - HongKong
- Neyveli Lignite Corporation Ltd, - India
- Global Business Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kapuas Tunggal Persada - Indonesia
- Romanian Commodities Exchange
- Gujarat Mineral Development Corp Ltd - India
- Ministry of Transport, Egypt
- Siam City Cement - Thailand
- Coal and Oil Company - UAE
- Miang Besar Coal Terminal - Indonesia
- Georgia Ports Authority, United States
- Globalindo Alam Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coastal Gujarat Power Limited - India
- Minerals Council of Australia
- IHS Mccloskey Coal Group - USA
- Goldman Sachs - Singapore
- Borneo Indobara - Indonesia
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