OW Bunker bankruptcy – the insolvency law perspective

Category: Bankruptcy Law Published: Sunday, 21 December 2014 Written by Admin

Risk of vessel arrest by bunker supplier
Competing claims for payment of stems
Making claims against bankruptcy estate

The bankruptcy of the Danish-based OW Bunker entities with limited liability as per November 7 2014 has given rise to legal uncertainty among shipowners which fear that their vessels may be arrested by unpaid physical bunker suppliers. The risk that payment for bunkers will have to be made twice (ie, both to a physical bunker supplier and to an insolvent bunker provider) appears to be an imminent possibility. This update looks at relevant points from a Danish insolvency law perspective.

Risk of vessel arrest by bunker supplier

A claim for payment of bunkers delivered to a ship is considered a maritime claim which falls under the list of claims set out in Article 1(1) of the Arrest Convention (1952). However, under Danish law an arrest can be made only if the vessel is owned by the debtor which is liable to pay the bunker claim for which arrest is sought (Section 93(4) of the Danish Merchant Shipping Act). This implies that arrest cannot be effected for ships on time charter if only the time charterer (and not the owner) is responsible for payment of the stem.

A physical bunker supplier may apply for security against other assets (eg, bunkers, bank accounts and hire earnings) owned by the debtor for the claim. However, the attachment of such assets can be made only if the bunker supplier can demonstrate to the satisfaction of the court that the debtor would otherwise hide or conceal the assets against which the petition for attachment is directed if attachment were not granted. Under Danish bankruptcy law, a (physical) bunker supplier cannot arrest or seize assets owned by a debtor under insolvent liquidation.

An order confirmation or invoice for bunkers is often issued to the master and/or owner and/or charterers, of the vessel. In some cases it has been submitted that by accepting the bunkers delivered to the vessel, the master has bound the owner to pay for the bunkers on a contractual basis. In a Supreme Court case decided on November 28 2012 the bunker supplier had pleaded in support that the owner was liable to pay for the stem, that an order for supply of bunkers is deemed to originate from the ship, and that the masters acknowledgement of receipt means that the vessel is liable to pay for the bunkers on a contractual basis. This may result in the owner being considered liable for payment of the stem, meaning the vessel may be arrested.

Competing claims for payment of stems

If an owner has paid an insolvent bunker supplier then no claims exist between the two parties. However, if the owner pays the physical bunker supplier the amount which the insolvent bunker supplier should have paid, then it will step into the physical bunker suppliers claim against the insolvent bunker supplier and become a creditor regarding the insolvent bunker supplier. As the insolvent bunker supplier is concurrently a creditor for a claim against the owner (for the delivery of the bunker), there are two claims between the owner and the insolvent bunker supplier.

Set-off between the two claims may be possible under Danish insolvency law, but this depends on a number of issues. The above issues may not necessarily be (solely) governed by Danish law.

Making claims against bankruptcy estate

The trustees will approach all of OW Bunkers known creditors. Through an announcement in the Official Gazette, the trustees will invite all creditors to file their claim within four weeks of publication. However, even after the expiry of the four-week notice period, it will be possible to file claims against the bankruptcy estate. The last opportunity for filing a claim is when the account of the bankruptcy estate is being approved, and it is expected that it will take some time before the bankruptcy estate is closed. However, it is advised that any party with a claim against OW Bunker, having paid the bunker supplier or for other reason(s), file a claim against the company as soon as possible.

For further information on this topic please contact Jesper Windahl at Birch Windahl by telephone (+45 35 25 38 00), fax (+45 35 25 38 01) or email (This email address is being protected from spambots. You need JavaScript enabled to view it.). The Birch Windahl website can be accessed at www.birchwindahl.dk.



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