IBIA calls for industry wide co-operation post OW…

Bunkering, Legal — By on May 13, 2016 at 1:42 PM

IBIA LogoIBIA calls for industry wide co-operation post OW to ensure fair play when contracting for bunkers

The International Bunker Industry Association, (IBIA) is calling for the industry to think innovatively to overcome the unfortunate situation that has arisen as a result of the OW Bunker collapse, leaving end buyers vulnerable to multiple demands for payment for the same stem.

The U.K. Supreme Court this week ruled that the owner of the vessel Res Cogitans should pay OW’s assignee ING Bank, in a case where OW acted as a trader rather than the physical supplier. The case did not directly address whether the physical supplier, which was never paid by OW, also has a right to make a claim against the vessel owner, leaving the status of supplier with outstanding payments unresolved.

Historically the legal framework the bunker industry operates within has always been uncertain due to the international nature of bunker supply and shipping, meaning they are dealing with a multitude of legal regimes.

The Res Cogitans ruling in the UK, along with rulings emerging from other countries in connection with the OW insolvency, highlights the need for continued, effective industry-wide cooperation to develop sales terms which are fair and fully understood by each participant in the fuel sale process.

IBIA expects that the various legal outcomes relating to OW will encourage focus and hopefully cooperation between all parties, including lenders, to develop greater uniformity and predictability of bunker sales and credit practices.

Looking at the various outcomes of legal proceedings evident in the wake of OW’s demise so far, IBIA’s legal working group has highlighted a decision (pending appeal) by the Federal Court of Canada in the Canpotex case might point to a more fair and balanced way forward.

In the Canpotex case, the current ruling suggests all parties in the sales chain should get only what they originally bargained to get, meaning OW would only be entitled to its trader margin with the rest of the payment going directly to the physical suppliers. Crucially, the ultimate buyer would only make one payment corresponding to the sum contracted for the fuel supplied.

Effective cooperation would result in suppliers being paid for their supply, traders being paid where they take title, brokers being paid their commission, and lenders being assured of their security for loans to suppliers and traders. Overall, when a customer makes payment, that customer must be assured that it will not have to make the payment more than once.

IBIA has long taken a lead, working along with other industry groups including BIMCO to develop standard sales terms which achieve fairness and greater uniformity for each participant in the fuel sale process, thereby improving the degree of alignment between different members of the chain in terms of obligations and expectations.

IBIA continues to invite all industry members’ participation in the process toward identifying ways address the uncertainties and inconsistencies laid bare by the fallout from OW’s bankruptcy, including through IBIA’s membership and its working groups.

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