Cutting out the middleman

Malcolm Latarche
Malcolm Latarche

30 August 2016


The fallout from the OW Bunker collapse continues to throw up challenges to the industry accepted view of bunker dealings and the consequences of financial failings. Traditionally it has been accepted that the owner of a ship receiving bunkers remains liable for payment even if the vessel was on time charter and the bunkers were ordered by the charterer who subsequently fails to pay for them for whatever reason. Many hours and much thought has been given to drafting charter party clauses that seek to keep the liability away from the owner and millions of dollars have been spent on trying to argue that an owner is not liable when cases involving such clauses have come before the courts. Just recently a number of cases involving OW Bunker supplies have been heard in US courts and the judgements have been surprising. In all cases the unpaid physical supplier of the bunkers ordered through OW and its subsidiaries and delivered to vessels have sought to recover the price of the bunkers even though the owner or charterer had settled with OW Bunker who had not paid the money on. It is usual for the physical supplier’s terms and conditions to state that the supplier retains title until paid and that it has a lien on the bunkers until payment is effected. In all cases the US judges have decided that the suppliers’ claims did not meet the requirements for establishing a maritime lien under the US Commercial Instruments and Maritime Lien Act because the contract was not made directly with the shipowner or someone acting with their authority but through an intermediary not necessarily known to the shipowner. It seems that it was OW Bunker’s practice to contract with the physical supplier through a string of such intermediaries, usually including at least on ofits own subsidiary companies. One can sympathise with both the owner (or charterer) and the supplier in such cases for one has paid the money but the other has not received it, but it raises another question as to how unnecessarily complex shipping has become. For certain, long chains in cargo and chartering contracts have been ever present but the same was not always true for bunkers. Either the owner or charterer contracted direct with the supplier or it was done via the local agent in the bunkering port. With today’s modern communication systems this should be even easier than it was in the past. What is clear is that every link in the chain will want some rake off and so the final cost of bunkers is inflated by significant amounts. With cost cutting now a necessity perhaps some owners and charterers will see the wisdom of forsaking the ease of buying through middlemen and prefer instead to deal direct with suppliers and for their part perhaps some suppliers will see the need to reduce the chain length to protect their own interests as well.