OW Bunker files for bankruptcy in wake of Dynamic Oil Trading fraud scandal
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Vessels cannot sail without fuel. This industry truth is dynamic oil trading ow bunker in contracts and under U. In fact, enabling ship operators to efficiently obtain fuel is so important that U. However, a recent series of cases demonstrates that the U. An analysis of these cases dictates better contractual practices to mitigate the legal and consequent market uncertainties.
Based in Denmark, O. In Novemberafter disclosure of fraud at a Singapore subsidiary as well as significant losses stemming from the declining price of petroleum, O. Bunker sought bankruptcy protection in Denmark. The facts of the O. Bunker case are not unusual in the bunker supply sector. A shipowner or charterer contracted with O. Bunker for the supply of bunkers for its vessels. Bunker in turn selected dynamic oil trading ow bunker contracted with physical bunker suppliers Physical Supplierswho actually delivered the fuel to the vessels.
Bunker also assigned its rights under certain bunker supply contracts, as security, in favor of its creditor, ING Bank N. For ease of review, the diagram below highlights in very simple and condensed terms the various persons and contractual relationships in a typical supply of bunkers scenario involving O.
While this article is not intended to be an analysis of maritime liens under U. There was no dispute that the Physical Suppliers delivered the bunkers to the vessels. Much has already been written analyzing the various U. This narrow and strict construction of maritime liens led these courts to conclude that O.
The Physical Suppliers were left with merely a contractual claim against O. Bunker for payments owed to them under their bunker supply subcontracts with no recourse against the vessels. Other courts took a more lenient view and held that awarding the maritime liens and, consequently, the payments to O. Bunker, would amount to a windfall in favor of O.
These courts took a more equitable approach and reached the same results as if dynamic oil trading ow bunker had been no bankruptcy. Bunker certainly was earning a margin on its subcontracts with the Physical Suppliers. Therefore, the Physical Suppliers should be entitled to their payments under the subcontracts with O. Bunker should be entitled to just the margins. The divergent outcomes of the U. Furthermore, the above list of suggestions should not be construed to be exhaustive.
However, in light of the divergent decisions in the O. Bunker case by the U. Vedder Thinking Articles Dynamic oil trading ow bunker. If they paid O. Bunker that is, the party with whom they contracted for the supply of bunkers or ING, as its creditor, the Physical Suppliers would arrest their vessels by asserting maritime liens for the value of the fuel actually provided by the Physical Suppliers under the bunker supply subcontracts. Bunker or ING as obliged under their bunker supply contracts and second, to the Physical Suppliers for dynamic oil trading ow bunker release of their vessels from arrest.
Written confirmation in the bunker supply subcontracts by the physical suppliers that the bunkers are being delivered at the direction of the intermediate bunker suppliers. Written confirmation in the bunker supply subcontracts by the physical suppliers that they are not looking to the credit of the vessels for payments under the bunker supply subcontracts.
Written agreement by the intermediate bunker suppliers that either i they have already paid the physical suppliers the payments owed by them under the bunker supply subcontracts or ii if payments have not been made, that the intermediate bunker suppliers will exercise no claim over the bunkers or dynamic oil trading ow bunker vessels until payments are made to the physical suppliers.
The intermediate bunker suppliers would forego any claims to such payments in the escrow account if the physical suppliers were to arrest the vessels for nonpayment under the bunker supply subcontracts. Click below to download the complete newsletter featuring this article. Dynamic oil trading ow bunker Switzerland SAS.
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