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OW Bunker appeal ruling has major rammifications on how bunkers are sold

OW Bunker appeal ruling has major rammifications on how bunkers are sold
An appeal ruling finding for OW Bunker/ING over Product Shipping and Trading (PST) could have a major impact on the bunkers are bought and sold.

The PST vessel Res Cogitans had received a bunker stem from OW Malta in the preceding the collapse of OW Bunker.

Robert Bright QC, Marcus Mander and Clara Benn and acting for ING, assignee of OW Bunker group companies, successfully argued that with bunkers contracted under 60 days credit terms ownership of fuel still lay with OW.

A statement form 7KBW said: “As usual in the industry, the bunkers were purchased on credit, with payment in this case to take place 60 days after delivery.  During the credit period PST were granted express permission to use the bunkers for the propulsion of the vessel, but title remained vested in OW Malta.  It was therefore envisaged that a significant quantity of the bunkers would be burnt prior to payment.”

The appeal court found that the permission to use the bunkers coupled with the 60 days credit terms was in essence not transfer of property of the bunkers.

It is the third tribunal to have found in favour of OW/ING over PST.

“The judgment has important ramifications beyond bunker supplies and shipping.  It affects all industries in which consumables are supplied on credit terms with title retained pending payment,” 7KBW said.

In terms of shipping two main ramifications were seen. First that bunker buyers who buy from intermediaries may now find they will need to either pay upfront or give some form of security to the physical supplier directly, rather than buying on credit or through intermediaries.

Second was that physical suppliers of bunkers need to appreciate that retention of title clauses (ie clauses providing that they retain ownership of the bunkers until they have been paid for them) may give them no effective security when they sell through intermediaries on credit, and that they will therefore need to think of another way of protecting themselves against the risk of non-payment, or otherwise to demand payment up front.