Payments went into escrow accounts. In mid June, nearly four years after the spectacular blow-up of OW Bunkers, an important legal milestone, in a long winding path, has been reached. The latest decision favours lenders to OW, rather than the entities who sold fuel to OW.
With OW subsidiaries operating in multiple jurisdictions, including different coasts of the United States, the case is exceedingly complicated. Its bankruptcy filings had taken place in late 2014, only months after a public money raise, at a time of rapidly falling oil prices- a dynamic not agreeable with the “trader” business model, where OW would purchase physical inventory (fuel oil for vessels) from oil majors, independents and larger traders, and then sell the fuel onward to vessel owners.
A $125m financial fraud at OW’s Singapore subsidiary, combined with the deteriorating price environment, brought down OW Bunkers.
The central issues surround liens on the actual fuel, and who should get paid for the fuel. In non-legal terms, suppose OW Bunkers agrees to buy from a physical supplier - an oil company, for example - and then contractually sells on to a shipowner but with the oil company actually stemming the bunkers.
In the latest decision, an Appeals Court in the 2nd Circuit (covers New York), affirmed in part, over-ruled in part, and remanded for further review, a late 2016 decision by the Southern District of New York Court interpreting the fine print in something called the Commercial Instruments & Maritime Lien Act (“CIMLA”, to be found at 46 U.S.C. § 31342). The Southern District’s 2016 case was ING Bank N.V. v. M/V Temara et al- at that time, the court (Judge Katherine Forrest) held that OW Bunkers did not have a lien on fuel- because it was not the physical supplier of the fuel.” ING Bank N.V. was a major lender to OW entities, and hence, sought to have the liens favoring OW- and not its subcontractors (as the physical suppliers are referred to). Interestingly- and showing the patchwork nature of the OW litigation, around the same time- in early 2017, another Judge in the Southern District (Judge Valerie Caproni) had ruled that OW did have, in fact, possess a maritime lien.
In mid-June, following the 2nd Circuit’s pronouncement, Bruce Paulsen, New York based Partner at Seward & Kissel (which has represented ING) told Seatrade Maritime News: “We are very pleased with the decision by the second circuit, which affirmed that subcontractor physical suppliers of marine fuel do not have maritime liens in the OW Bunker cases.”
The courts closely watch rulings from their peers; the just announced Temara ruling came closely on the heels of a ruling by the 11th Circuit ( handles appeals from District courts in Florida and Alabama ) in a case called “Barcliff LLC v. M/V Deep Blue”.
What next? Lawyer Bruce Paulsen also commented: “There are still four appeals left to be decided (one in the 2nd, two in the 5th and one in the 9th) and we believe the rationale set forth in this case “Temara” will help guide the other appeals courts.”