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Lawyer: Is a bunker delivery note a binding contract under Maltese law?

Fenech & Fenech Advocates explains why the bunkering community must continue to watch this space.

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The following legal article is written by Adrian Attard at Fenech & Fenech Advocates. Interested parties can contact him by telephone (+356 2124 1232) or email ([email protected]). The Fenech & Fenech website can be accessed at www.fenechlaw.com.

Following the collapse of OW Bunkers, physical bunker suppliers worldwide have had to rethink their business model with respect to the potential debt exposures that they face when conducting business through bunker traders. The matter is further complicated due to the fact that in many cases, there is not just one bunker trader involved, but rather a series of intermediaries, brokers and intermediary traders.

Overview
When faced with non-payment, many physical suppliers attempt to arrest or commence litigation against the vessels that they supplied or their owners, in hopes of recovering payment directly from said owners. Whether this is permissible heavily depends on the contractual relationships at play, as well as the domestic legislation of the jurisdiction in question.

The aftermath of the OW Bunkers saga has, if nothing else, shown the bunkering community that there is a dire need to ensure that the legal landscape within which physical suppliers ply their trade is well defined, either through regulation or jurisprudence. A number of landmark judgments in certain jurisdictions have helped to give the shipping community this degree of certainty in those countries.

Over the past four or five years, a wave of bunker claims have also been instituted before the Maltese courts by out-of-pocket suppliers. Analysis of these pending claims suggests that most suppliers justify the legal basis of their claims against supplied vessels and their owners (irrespective of the involvement of any intermediary traders) by including stipulations in the bunker delivery note (BDN) incorporating suppliers' terms and conditions. Suppliers contend that a vessel's acceptance of the BDN is tantamount to the acceptance of the suppliers' terms and conditions, which generally tend to hold the shipowner liable in solidum in cases of non-payment.

Until recently, the Maltese courts had not yet had the chance to pronounce a judicial decision on this specific point. However, in the past couple of months, the Maltese courts have delivered two judgments on precisely this matter.

Recent case law
Both actions were incidentally instituted by the same physical supplier with respect to unpaid bunker supplies furnished to vessels within Maltese territorial waters. In both cases, the purchases were not made directly by the shipowner or charterer but ordered through bunker brokers or traders. Following non-payment of its pending invoices, the physical supplier proceeded to arrest the vessels and commenced the relevant proceedings in rem against the respective vessels.

Under Maltese law, and unless a claim is considered privileged, one of the cardinal requirements for the Maltese courts to enjoy jurisdiction in rem is the fulfilment of the 'relevant person test' found under Article 742D of the Code of Organisation and Civil Procedure. In order to satisfy this two-tier test, a creditor must first prove that the person liable for the claim was the owner or charterer, or in possession or control, of the ship or vessel when the cause of action arose. Second, that same person must be the owner, beneficial owner or bareboat charterer of the ship when the action was brought.

Given that the shipowners of the respective vessels had not directly contracted the physical supplier for the consignments of bunkers, in both cases, the latter argued that the shipowner was jointly and severally liable as a result of the crew's acceptance of the BDNs. In both cases, the vessel had accepted and signed the bunkers delivery notes without issue. These notes declared that all deliveries were being made to the physical supplier's general terms and conditions, which in turn had specific clauses holding the vessel and its owners jointly and severally liable in case of non-payment.

BDN does not create juridical relationship
The first judgment concluded that the signing of a BDN does not render the vessel as a participant in the contract of sale. In the presiding judge's view, such a 'delivery note' serves only as evidence of receipt of the agreed quantities of fuels. The court held that the signing of a BDN creates no juridical relationship between the physical supplier and the owners of that vessel. In light of the above, the court ruled against the supplier. This first judgment was naturally applauded by shipowners.

BDN does create juridical relationship
However, a second subsequent judgment delivered less than two months later took a completely different approach when determining precisely the same matter. The second court opined that the clause in the BDN did in fact create a juridical relationship between the owners of the vessel and the physical supplier. The judge held that by accepting and signing the BDN, the owner's representative had recognised that the delivery was being made subject to the physical supplier's terms and conditions. The court went on to explain that the juridical relationship between the shipowner and supplier was created the moment that the bunker traders involved had failed to pay the same physical supplier. The court therefore held in favour of the physical supplier and ordered the vessel in rem to pay the invoice amount for the fuel supplied. Malta does not follow the doctrine of precedent; accordingly, this second judgment was greatly welcomed by local physical bunker suppliers.

Comment
These two judgments are diametrically opposing decisions which effectively leave the question unaddressed. There are a handful of similar proceedings currently pending before the Maltese courts and it would have therefore been convenient if the courts had reached a similar conclusion on the matter, as this would have at least offered a degree of certainty. That said, by the end 2018, there will likely be a spate of similar judgments. Hopefully, the collective body of these judgments will put an end to this conundrum. Until then, the bunkering community must continue to watch this space.

Photo credit: Fenech & Fenech Advocates
Published: 20 June, 2018

 

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Winding up

Singapore: Liquidators schedule final meeting for Sejahtera Shipping and related companies

Final meetings will be held at 9 Raffles Place, #19-21 Republic Plaza Tower 2, Singapore 048619 for Sejahtera Shipping, Molek Shipping and Madu Shipping.

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The final meetings of Sejahtera Shipping Pte Ltd and its related companies have been scheduled to take place on 21 June, according to the company’s liquidators on a notice posted on Monday (20 May) on the Government Gazette.

The other companies are Molek Shipping Pte Ltd and Madu Shipping Pte Ltd. 

The meetings will be held at 9 Raffles Place, #19-21 Republic Plaza Tower 2, Singapore 048619 at the following times:

  1. Sejahtera Shipping at 11am
  2. Molek Shipping at 10.30am
  3. Madu Shipping at 10am

They will be held for the purposes of having accounts laid before the meeting showing the manner in which the winding-up has been conducted and the property of the company disposed of, and of hearing any explanation that may be given by the liquidator.

The details of the liquidators are as follows:

Cheng Sam Tai Catherine
Liquidator
c/o Crowe Horwath First Trust Corporate Advisory Pte. Ltd.
9 Raffles Place, #19-20 Republic Plaza Tower 2, Singapore 048619

A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the company. The instrument appointing a proxy must be deposited at the Registered Office of the company not less than 48 hours before the time set for holding the meeting.

Related: Singapore: Sejahtera Shipping and related companies to be wound up voluntarily

 

Photo credit: Benjamin-child
Published: 21 May 2024

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Winding up

Singapore: Final meeting scheduled for World Fuel Singapore Holding Company I

Final meeting will be held on 19 June at 4pm at 8 Marina View, #40-04/05, Asia Square Tower 1, Singapore 018960.

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The final general meeting of World Fuel Singapore Holding Company I, has been scheduled to take place on 19 June, according to the company’s liquidator on a notice posted on Friday (17 May) on the Government Gazette.

The meeting will be held at 4pm at 8 Marina View, #40-04/05, Asia Square Tower 1, Singapore 018960. 

It will be held for the purposes of having accounts laid before the meeting showing the manner in which the winding-up has been conducted and hearing any explanations that may be given by the liquidators.

The details of the liquidator are as follows:

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

An Annual Report of World Fuel Services Corporation, before it was renamed to World Kinect Corporation, was filed on 24 February 2023 on the US Securities and Exchange Commission website. 

According to the report, World Fuel Singapore Holding Company I was listed as one of its subsidiaries.

Related: World Fuel Singapore Holding Company I to be wound up voluntarily, creditors to submit claims

 

Photo credit: Jo_Johnston from Pixabay
Published: 20 May 2024

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Bunker Fuel

Allianz: ‘Shadow fleet’ of tankers involved in at least 50 incidents including oil spills

Vessels have been involved in at least 50 incidents to date, including fires, engine failures, collisions, loss of steerage, and oil spills; shadow tankers also participate in ‘dangerous practice of STS transfers in the open ocean’.

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Allianz Commercial marine experts shared some of the major consequences of growing volatility and uncertainties from war and geopolitical events, climate change risk, including the threat the rise of the ‘shadow fleet’ poses to vessels and the environment and the multi-faceted impacts of rerouting. 

The following are excerpts from the original expert risk article by insurer Allianz :

Recent incidents in the wake of the conflict in Gaza have demonstrated the increasing vulnerability of global shipping to proxy wars and disputes. Between November 19, 2023, and the beginning of April 2024, there were more than 50 attacks against merchant shipping in the Red Sea by Houthi militants in response to the conflict. We have also seen the first total loss of a vessel, the first fatal attack, as well as signs that the crisis may have spread following the seizure of a container ship by Iranian forces in the Strait of Hormuz, the world’s most important chokepoint for oil shipping. The Houthi military group has also warned it would target any ships heading to Israeli ports if they are within range.

Disruption to shipping has persisted longer than expected and is likely to remain for the foreseeable future, says Captain Rahul Khanna, Global Head of Marine Risk Consulting, Allianz Commercial. “While we have seen sporadic attacks in the past, the conflict in Gaza has opened the flood gates. Even if a political solution is reached, we may see attacks continue as there is clearly now an opportunity for those wishing to disrupt shipping in the Red Sea and beyond. Ultimately, shipping has become a ripe target for those wishing to wage a proxy war. It opens avenues for terrorists or militia groups to get recognition and hit global markets.”

Rerouting brings supply chain, trade, risk, inflation, and environmental challenges

Attacks against shipping in the Red Sea and Middle East waters, closely following on from the ongoing disruption caused by drought in the Panama Canal, have amounted to a double strike for shipping, causing yet more issues for global supply chains, as well as significantly adding to the distance vessels must sail.

The attacks in the Red Sea have severely impacted Suez Canal transits, while a lack of rain and the El Nino phenomenon contributed to the second driest year in the Panama Canal’s history, also affecting transits.  Both routes are critical for the transport of manufactured goods and energy between Asia, Europe, and the US East Coast.

At the start of 2024 transits in the Suez and Panama canals were down by more than 42% and 49% respectively, compared to their peaks. Whichever route vessels take, they face lengthy diversions and increased costs. For example, avoiding the Suez Canal adds at least 3,000 nautical miles and 10 days sailing time to each trip, rerouting via the Cape of Good Hope.

Businesses that source goods and components from factories in China and South-East Asia have faced delays and higher costs from longer transit times. Some reported rises of 300% for container hire, and logistical delays, adding up to three to four weeks to delivery times, creating cashflow difficulties, and component shortages on production lines.

Such experiences have thrown the shipping industry and the issue of supply chain resilience into the public consciousness, says Khanna.

“Supply chains have been disrupted by a series of events in recent years, from extreme weather and climate incidents, container ship fires and groundings, through to the pandemic and conflicts in Ukraine and the Middle East, not forgetting the recent Baltimore bridge collapse.

“How should the shipping industry and its customers address this challenge? In today’s interconnected environment it is even more important to have a ‘Plan B’ and alternative options. An unexpected event can have a domino effect globally. Shippers around the world should consider diversification of their supply chains and in some cases nearshoring and onshoring might be an option.”

Increased transparency is also part of the solution, particularly when it comes to tracking cargo. While the global risk environment for shipping has changed significantly in recent years, the average shipper still knows very little about the location of their cargo, which makes it very difficult for them to put effective contingency plans in place to minimize disruption. Ultimately businesses will need to update their approach to cargo risk management and business continuity planning, says Régis Broudin, Global Head of Marine Claims, Allianz Commercial.

Rerouting will also require a shift in the shipping industry supply chain, if large numbers of vessels switch to alternative routes around the Cape of Good Hope for a prolonged period. Container lines tend to ply the same established trade routes, but rerouting will require alternative bunkering, supply, repair, and maintenance facilities. The risk environment could be impacted suggests Wayne Steel, Senior Marine Risk Consultant, Allianz Commercial. For example, storms and rough seas could be more challenging for smaller vessels used to plying coastal waters, especially where crews may not be sufficiently trained and equipped for such conditions.

Other areas impacted include container capacity, older vessels being kept in service as longer journeys means an increasing demand for ships, inflation – according to Allianz Trade analysis, a prolonged period of disruption in the Red Sea could cause it to increase by +0.5% – as well as the environment. The disruption in the Red Sea, combined with factors linked to the Panama Canal and the Black Sea in the wake of the Ukraine war, could erode the environmental gains achieved through ‘slow steaming’, as rerouted vessels increase speeds to cover longer distances. The longer distances caused by rerouting container ships from the Suez Canal to the Cape of Good Hope result in an estimated 70% increase in greenhouse gas emissions for a round trip from Singapore to Northern Europe. Shipping diversions from the Red Sea are already cited as being a primary cause of a 14% surge in the carbon emissions of the EU shipping sector during the first two months of 2024.

Ukraine war: ‘shadow fleet’ risk to vessels and environment

A gradual tightening of international sanctions on Russian oil and gas exports over the past three years since its invasion of Ukraine has resulted in the emergence of a sizable ‘shadow fleet’ of tankers, mostly older vessels that operate outside international regulation and often without proper insurance. This situation presents serious environmental and safety risks in key chokepoints where oil is shipped.

Russia is not the only country to operate a shadow fleet. Iran and Venezuela have used such tankers to circumvent sanctions and maintain oil exports. Estimates put the size of the dark fleet at between 600 to 1,400 vessels, roughly a fifth of the overall global crude oil tanker fleet.

Much of the shadow fleet is likely poorly maintained and may not have undergone appropriate inspections. Shadow tankers also participate in the dangerous practice of ship-to-ship transfers in the open ocean, as well as turning off Automatic Identification System (AIS) transponders to obscure their identity. Vessels have been involved in at least 50 incidents to date, including fires, engine failures, collisions, loss of steerage, and oil spills. The cost of dealing with these incidents often falls on governments or other vessels’ insurers if one is involved in an incident.

“As long as there are sanctions on countries like Russia and Iran, the shadow fleet looks here to stay,” says Justus Heinrich, Global Product Leader Marine Hull, Allianz Commercial. “Given the age of the vessels in the shadow fleet, safety is a big concern. Often these vessels are at the end of their operational lives and are used in a high-risk business.”

Note: The full article by Allianz can be found here

 

Photo credit: Shaah Shahidh on Unsplash
Published: 20 May 2024

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