Updated 16 July 2015
The first test case in London arbitration resulted in a successful outcome for OW Bunkers/ING and the award was upheld by the High Court. Vessel owners are now taking the case to the Appeal Court.
The case involved the direct supply by an OW Bunkers subsidiary to the vessel owners just before the OW bankruptcy was announced. No payment was made by owners pending clarification of the party rightfully entitled to be paid for the bunker supply. OW Bunkers did not pay the physical supplier.
The case was first arbitrated and the tribunal found in favour of OW Bunkers/ING. Owners appealed the award and on 14 July 2015 the English High Court largely upheld the tribunal’s findings, but on 15 July 2015 granted leave to owners to continue their fight. The issue may impact all suppliers of consumables provided upon credit terms.
The judge dismissed owners’ argument that OW Bunkers/ING were not entitled to payment under the bunker supply contract because they had failed to transfer title of the bunkers to owners. The judge found that the effect of the standard terms and conditions of OW Bunkers together with market practice and expectation, resulted in the contract falling outside the scope of the Sale of Goods Act. Therefore, the court held that payment was due to OW Bunkers/ING.
Under the contract, OW Bunkers’ subsidiary (in this case Malta) had agreed to arrange for delivery of the bunkers to the owners’ vessel and to ensure that the true owner of the bunkers (the physical supplier) consented to the consumption of bunkers during the period of credit. Therefore, under English law the physical supplier could not have a claim against the owners in conversion, nor were owners contractually obliged to make payment to the physical supplier. Once the credit period had expired, the debt was owed by the vessel owners to OW Bunkers/ING.
Other physical suppliers interested in the outcome may seek to intervene in the Appeal Court proceedings to ensure their arguments are heard.