Connect with us


Denmark special: Bad bunker fuel causes damage worth millions – but who is liable?

Copenhagen legal firm NJORD shares with Manifold Times what the recent spate of contaminated bunkers mean for Danish shipping firms looking to recover claims.




5b8628633a3bb 1535518819

The following article is produced by Njord Law Firm’s Shipping and Transport Department and the intended readers of the article are for Danish shipping companies looking to recover claims for bad bunkers. Readers who have additional queries are welcomed to contact the authors for any questions.

Bad bunkers: business as usual?
The shipping industry is following closely the developments regarding poor quality bunkers, the consequences and scope of which has expanded since the problems were first encountered earlier this year. The significant risk of engine failure when using bad bunkers, and the lack of a solution presents ship owners and charterer with an unacceptable risk.

Bad bunkers, however, are not new in the industry: many owners consider it to be “business as usual” when they receive poor quality bunkers from time to time. Whether it is due to mistakes in the blending of different types of fuel or other sources, the usual precautions are taken: purchases are only made from trusted bunker suppliers and bunkers are tested to ensure the quality.

However, the current problems with bad bunkers are not “business as usual”. The problems appeared in April, first at bunker deliveries in Houston, later Panama and now also in Singapore and Hong Kong. During that period more than 100 deliveries of bad bunkers have been reported, all of which are believed to be due to similar causes. Importantly, the standard ISO tests used for bunker quality assurance will not reveal the harmful substances that are causing the problems. The origin and exact content of these harmful substances is unclear. Technical reports refer to traces of shale oil from Estonia or the United States, while other reports refer to chemical waste and by-products from the timber industry. The lack of clarity is in part due to the relatively long supply chain in the bunker industry, ranging from the buyer to the contractual bunker supplier with which the purchase agreement is concluded, and from there to the physical supplier who performs the actual delivery to the ship, and even further to the parties from whom the physical supplier originally bought the bunker oil.

The consequences of using bad bunkers including clogged filters and pipes in the ship's machinery, as well as breakdown of fuel pumps and sometimes total engine shutdown. A number of Danish shipping companies have experienced problems with bad bunkers, with engine shutdown and subsequent grounding as one of the more dire examples. Such problems may result in disputes between charterers and ship owners, and/or between carriers and good-owners. The outcome of such disputes will depend on the provisions of the relevant charterparties or bill of lading, respectively.

Who can claim compensation from whom?
As a buyer of bunkers, you can take the usual precautions, including requiring bunker suppliers to account for the origin of the bunker. However, once the accident occurs, the losses can quickly accumulate. The losses include both direct physical damage to the ship and the resulting repair costs, but also financial loss in the form of off-hire or compensation claims from charterers of the ship or good-owners. In this context, bunker purchasers (both charterers and ship owners) should ensure to explore the options available for recovering their claims from the bunker suppliers.

First, the potential parties against whom a claim can be brought should be identified. So far, the industry has focused on the physical bunker suppliers and parties further up the supply chain, because the nature of the problem indicates that the harmful substances were introduced in this part of the supply chain. However, for a buyers of bunkers it will be at least as relevant to consider the possibility of bringing a claim against the contractual counterparty, ie. the contractual bunker supplier.

This is due in part to the fact that buyers of bunkers may be faced with significant challenges when bringing a claim directly against a physical bunker supplier. Generally, no agreement will have been entered into between the buyer and the physical supplier for the bunker supply. In addition, the claim will often be subject to foreign law (typically the law applicable to the place of delivery), and it will have to be commenced before foreign courts. Only rarely, the claims will be subject to Danish jurisdiction and choice of law, for example in certain circumstances where bunkers are delivered to a Danish flagged ship.

The bunker suppliers’ liability for the claim will depend on the applicable law, but will typically involve a negligence based assessment. The buyer will therefore have to prove that the physical supplier acted negligently when delivering the bad bunkers. Although these challenges may appear difficult to overcome, on the other hand, any provisions on limitation of liability in bunker supplier's terms will normally not apply as no contract has been entered into with the physical bunker supplier.

Claims against the contractual bunker supplier
The buyer's claim against the contractual bunker supplier will be subject to the provisions of the bunker supply contract. The terms vary and often contain notification clauses and limitations of liability restricting the buyer's ability to recover the claim in full. Especially the short deadlines for notifying claims have proven problematic for buyers of bunkers, as the poor quality of bad bunkers is often only discovered some time after delivery took place.

The terms and conditions should be reviewed in detail. For claims against suppliers with foreign law and jurisdiction clauses, advice from local lawyers should be obtained. Many Danish bunker suppliers include Danish choice of law and jurisdiction clauses in their standard terms. Claims against such bunker suppliers may be brought before the Danish courts, which may be advantageous for buyers for various reasons.

In order to succeed in a claim against a contractual supplier under Danish law, the buyer of bunkers must prove that the supplier has breached the bunker supply contract, for example by delivering bunkers that did not comply with the specifications in the contract. In this respect, obtaining and securing evidence is essential, including bunker samples and documentation for the use of bad bunkers (and the consequences thereof) by the ship.

In relation to the current problems with bad bunkers, the challenge for buyers is that the bad bunkers often comply with the agreed specifications for the delivered product, because the harmful substances do not show up in the standard ISO quality tests applied in the industry.

Even so, a claim could still be brought under the contract if the bunkers did not comply with any statements made or information provided about the bunkers by the bunker supplier. The same applies if the bunkers were not fit for purpose. Delivery of bad bunkers could therefore, depending on the factual circumstances, constitute a breach of contract, regardless of whether the bunkers delivered comply with the agreed specifications. However, the buyer’s claim would still be subject to any liability limitations in the bunker supply contract.

Product liability
Alternatively, a buyer could also bring a claim in contract under the Danish legal principles on product liability rules. The principles are based on Danish case law and require that the product (1) is defective and (2) has caused damage to something other than the product itself, in order for the buyer to succeed in showing that the bunker supplier acted negligently. This would be the case for bad bunkers that cause damage to a ship's engine.

Although the contractual bunker supplier would not necessarily be the “manufacturer” of bunker oil in the traditional terminology of Danish product liability rules, contractual bunker suppliers will be considered as intermediaries, who will be liable to the same extent as the actual manufacturer under the Danish rules on product liability.

In addition, a Danish court will adopt a narrow interpretation of contractual limitation of liability clauses - and be more willing to set them aside - for claims based on the principles of product liability, compared to ordinary claims in contract. In addition, Danish law provides claims under the principles of product liability are not subject to any notification period. Therefore, any notification period set out in the contractual bunker suppliers terms and conditions must specifically state that they cover claims based on the rules regarding product liability – otherwise, such clauses are unlikely to be applied by the courts. Buyers should therefore carefully review the contracts in this regard in assessing whether claims can be recovered under the principles on product liability.

Attorney at law, Partner, Copenhagen
Direct: (+45) 77 40 10 12 
Mobile: (+45) 40 40 93 59 
[email protected]

Attorney at law, Partner, Copenhagen
Direct: (+45) 77 40 11 47 
Mobile: (+45) 27 79 32 70 
[email protected]

Photo credit: NJORD
Published: 29 August, 2018


Continue Reading


Former CEO of Singapore-listed New Silkroutes Group amongst three others facing 31 charges at court

Dr Goh Jin Hian was the ex-Director of former Singapore bunker supplier and bunker craft operator Inter-Pacific Petroleum; he faced a USD 156 million civil trial at the Singapore High Court in April 2023.





2E101D2A 10BF 471B 9EDB F3FC498435B2

Former Chief Executive Officer of Singapore-listed New Silkroutes Group Limited (NSG), Dr Goh Jin Hian, former Chief Corporate Officer, Oo Cheong Kwan Kelvyn, and former Finance Director, Teo Thiam Chuan William, were charged in court on Wednesday (20 September) with false trading offences under the Securities and Futures Act (SFA).

A fourth individual, Huang Yiwen, the sole director of GTC Group Pte Ltd (a commercial market maker engaged by NSG during the material time), was also charged with similar offences.

The four men were each charged with 31 counts of Section 197(1)(b) of the SFA read with Section 109 of the Penal Code for engaging in a conspiracy to create a misleading appearance with respect to the price of NSG securities.

They allegedly placed orders and executed trades in NSG securities for a purpose of pushing up the price of NSG securities on 31 trading days between 26 February 2018 and 27 August 2018. The alleged price manipulative orders and trades include share buy-backs conducted through NSG’s corporate trading account.

Dr Goh faces a further eight counts of Section 197(1)(b) of the SFA for allegedly placing orders and executing trades in NSG securities through his personal trading account for a purpose of pushing up the price of NSG securities on eight trading days between 31 August 2018 and 4 December 2018.

The charges above arose from a joint investigation carried out by the Commercial Affairs Department of the Singapore Police Force and the Monetary Authority of Singapore which started in September 2020.

If convicted of an offence under Section 197 of the SFA, offenders may be liable to an imprisonment term not exceeding seven years, or a fine not exceeding $250,000, or both.

Inter-Pacific Petroleum

Dr Goh, who was the ex-Director of former Singapore bunker supplier and bunker craft operator Inter-Pacific Petroleum (IPP), in April 2023 faced a USD 156 million civil trial initiated by IPP liquidator Deloitte & Touche over alleged breach of his director’s duties for IPP.

The Singapore branch of Maybank and Societe Generale (SocGen), both IPP’s largest creditors, are respectively looking to recover from exposure of an estimated USD 88.3 million and USD 81.3 million.

Reportedly, Dr Goh has said it was not the responsibility of the director to authenticate documents from management and he disputes against the banks’ own due diligence and credit risk assessments.

International Energy Group 

NSG in late March 2019 announced subsidiary New Silkroutes Capital signing a share sale and purchase agreement with Hong Kong-based TK Energy Limited for the disposal of the entire shareholding interests in International Energy Group Pte. Ltd. (IEG) for US $10 million in cash.

Singapore-headquartered IEG, which trades mainly gas oil and fuel oil, sells its products to international counterparties including oil majors and national oil companies.

In January 2021, stakeholders of IEG decided the firm can no longer continue business due to its liabilities and proceeded to summon a creditors’ meeting.

A meeting to distribute intended dividend to IEG creditors was later held in March 2023.

A timeline organised list of events preceding the current development of Inter-Pacific Petroleum has been recorded by Manifold Times below:

Related: Singapore: Civil trial between Inter-Pacific Petroleum and Dr Goh Jin Hian begins
Related: Former Singapore Director of Inter-Pacific Petroleum sued for USD 156 million
Related: Inter-Pacific Petroleum creditors authorised to fund lawsuit against former Director
RelatedNew Silkroutes under investigation over possible breach of Securities and Futures Act
Related: Judicial Managers considering to take former Singapore Director of Inter-Pacific Petroleum to court
Related: Singapore: Inter-Pacific Group receives winding up order from High Court
Related: Singapore: Inter-Pacific Group files for winding up application at High Court
Related: MPA revokes Inter-Pacific Petroleum Pte Ltd bunker supplier licence
Related: Co-heads of Trade and Commodities Finance for Asia-Pacific leave SocGen
Related: Inter-Pacific Group, Inter-Pacific Petroleum to hold creditors’ meet
Related: NewOcean detains Singapore-flagged bunker tanker “Pacific Energy 28”
Related: SocGen lawsuit against NewOcean Petroleum dropped, party to counterclaim
Related: MPA revokes Inter-Pacific Petroleum bunker craft operator licence
Related: Magnets on MFMs: Trial starts for former bunker clerk of “Consort Justice
Related: First suspect charged over MFM tampering in landmark case
Related: With nearly $180 million of debt, IPP proposes interim judicial management
Related: Inter-Pacific Group, Inter-Pacific Petroleum under judicial management
Related: Magnets on MFMs: “Consort Justice” crew pleads ‘not guilty’ to tampering charge
Related: IPP responds to temporary suspension of bunker craft operator licence
Related: MPA temporarily suspends IPP bunker craft operator licence
Related: Singapore: Bunker Cargo officer, crew face charges over alleged MFM tampering

A timeline organised list of events preceding events of International Energy Group is as follows:

Related: New Silkroutes under investigation over possible breach of Securities and Futures Act
Related: Singapore: Gas oil, fuel oil trading firm IEG disposed for $10 million
Related: Singapore: International Energy Group to be wound up; calls for creditors meeting
Related: Singapore: Liquidator issues notice of intended dividend to IEG creditors

Photo credit: Manifold Times
Published: 21 September, 2023

Continue Reading

Winding up

Singapore: AGM and creditors meeting scheduled for An Hui Shipping, Nan Yi Maritime

Purpose of the AGMs is for stakeholders to receive an update on the liquidation, and for creditors to receive an account of the liquidators’ acts and dealings.






An annual general meeting (AGM) and creditors meeting has been scheduled for An Hui Shipping Pte Ltd and Nan Yi Maritime (Pte) Ltd, said their liquidator on a Tuesday (19 September) Government Gazette post.

The event will be held on 3 October; timing as follows:

  • AGM of An Hui Shipping (10:00am)
  • AGM for creditors of An Hui Shipping (11:00am)
  • AGM of Nan Yi Maritime (2:00pm)
  • AGM for creditors of Nan Yi Maritime (3:00pm)

The purpose of the AGMs is for stakeholders to receive an update on the liquidation, and for creditors to receive an account of the liquidators’ acts and dealings, and of the conduct of the winding up.

Details of the liquidator for both An Hui Shipping and Nan Yi Maritime are as follows:

Ho May Kee
Liquidator c/o 8 Marina View
#40-04/05 Asia Square Tower 1 Singapore 018960

Photo credit: Benjamin Child
Published: 21 September 2023

Continue Reading


South African Revenue Service issues media statement on detention of bunkering vessels

Detentions of bunker barges done in the normal course of investigating whether provisions of the Customs and Excise Act have been contravened, says SARS.





calculator ga78b5a3e4 640

The South African Revenue Service (SARS) on Wednesday (20 September) issued a media statement concerning the detention of five vessels involved in the fuel bunkering supply chain:

From 2016 SARS has been engaging with the fuel industry to encourage compliance with the legislation concerning the importation, the trading in and other operational activities of vessels engaged in the supply of fuel.

Alongside these engagements, SARS has also been conducting investigations around compliance in fuel bunkering, and the detention of the vessels mentioned in the media article is part of this on-going investigation.

SARS confirms that several vessels were detained in terms of the Customs and Excise Act, 91 of 1964. This was done in the normal course of investigating whether the provisions of the Act have been contravened. SARS is of the view that the detention is lawful and, as the investigation is ongoing, no decision to seize such vessels has been taken.

SARS Commissioner Mr Edward Kieswetter said “SARS is obliged to administer the law fairly, without fear, favour or prejudice and to conduct investigations in a responsible manner in accordance with a fair procedure. SARS has no interest in jeopardising economic growth nor of contributing to the problem of unemployment, poverty and inequality.”

The Commissioner implored taxpayers and traders to comply with their tax and Customs obligations. He emphasised that SARS will not hesitate to act firmly and robustly to ensure that non-compliance is hard and costly for those that wilfully and intentionally ignore their obligations. The clarion call to all taxpayers and traders is: “comply or face the consequences”.

Related: ENGINE: Algoa Bay bunkering at a standstill as authority detains barges – sources

Photo credit: steve pb from Pixabay
Published: 21 September, 2023

Continue Reading