US courts continue to rule against physical fuel suppliers in the ongoing saga following the financial collapse of OW Bunker & Trading A/S. Separate courts in three leading maritime judicial circuits have ruled that physical bunker suppliers contracted by OW Bunker to provide fuel to vessels were not entitled to maritime liens against the vessels.(1) The courts held that the fuel suppliers provided the bunkers on the order of OW Bunker rather than the vessel owner or other person with authority to bind the ship, and thus were not entitled to a maritime lien for the provision of necessaries under applicable US law.
To obtain a maritime lien for necessaries under United States law, one must:
- furnish necessaries;
- to a vessel;
- on the order of the owner or person authorised by the owner.(2)
The first two required elements for a maritime lien for necessaries were not in dispute in any of the three cases. Fuel, which is a necessary, was supplied to the vessels. The issue lay with the third element: whether OW Bunker was a person with authority to bind the ship. In all three cases the courts held that OW Bunker was not so authorised and thus the fuel suppliers did not meet the requirements for a necessaries lien on the vessels.
The Valero ruling, issued by a federal court in New Orleans, was the first of these decisions. It analysed in detail two competing lines of cases addressing when a supplier of necessaries obtains a maritime lien in circumstances where it contracts with a third party other than the vessel owner, charterer or operator. The 'general contractor/subcontractor' line of cases holds that a person with authority to bind the vessel must have some control over the subcontractor's selection or performance in order for the subcontractor to have a maritime lien for necessaries.(3) Alternatively, the 'middleman' line of cases holds that the order must originate from a person with authority to incur a maritime lien in order for the ultimate supplier to have a maritime lien against the vessel.(4) In Valero, the court held that the situation fell within the general contractor/subcontractor line of cases, and the supplier was not entitled to a lien because its selection was made by OW Bunker without any direction or input from the vessel (for further details please see "Court denies maritime lien to fuel supplier following OW Bunker collapse").
Since the Valero decision, two other courts have reached essentially the same conclusion. The O'Rourke and Bunker Holdings decisions both held that the applicable precedent was the general contractor/subcontractor line of cases, and that the physical bunker supplier was not entitled to a lien because it was selected by OW Bunker without the direction or involvement of the party with authority to bind the vessels. If these decisions are upheld on appeal, they will be a major setback for physical suppliers of bunkers that were caught in the OW Bunker collapse and were relying on their asserted maritime lien as security for the transactions.
More decisions on this issue are expected at both the district court and appellate court levels. The first appellate decision on the topic is anticipated to be issued by the US Court of Appeals for the Fifth Circuit in Valero in the coming months, which will significantly influence future decisions.
For further information please contact please contact Antonio J Rodriguez, Michael Harowski or Ashley Bane at Fowler Rodriguez by telephone (+1 504 523 2600) or email ([email protected], [email protected] or [email protected]). The Fowler Rodriguez website can be accessed at www.frfirm.com.
(1) See Valero Marketing & Supply Co v M/V ALMI SUN, 2016 US Dist LEXIS 15086, 2016 AMC 632 (ED La Feb 8 2016); O'Rourke Marine Servs LP, LLP v M/V COSCO HAIFA, 2016 US Dist LEXIS 48276 (SDNY April 8 2016); Bunker Holdings v M/V YM SUCCESS, 2016 US Dist LEXIS 73499 (WD Wash June 6 2016).
(3) See Lake Charles Stevedores, Inc v Professor Vladimir Popov M/V, 199 F 3d 220 (5th Cir 1999).
(4) Marine Fuel Supply & Towing, Inc v M/V Ken Lucky, 869 F 2d 473 (9th Cir 1988).