UK High Court Rules in Favor of OW Bunker

The English High Court has upheld the arbitration ruling according to which the fuel supply contract between Greek shipowner Product Shipping & Trading with bankrupt fuel supplier OW Bunker was determined valid.

The arbitration tribunal decided that OW and their assignees ING Bank N.V. were entitled to payment for bunkers supplied, even in circumstances where OW did not own property in the bunkers.

The case involved the direct supply by an OW Bunkers subsidiary to the vessel owners just before the OW bankruptcy was announced. No payment was made by owners pending clarification of the party rightfully entitled to be paid for the bunker supply. OW Bunkers did not pay the physical supplier.

In line with the arbitration ruling, the Sale of Goods Act 1979 (SOGA) did not apply to the relevant bunker supply contract.

“The linchpin to this finding was the tribunal’s conclusion that SOGA did not apply to the relevant bunker supply contract which incorporated OW’s standard terms and conditions. This conclusion prevented owners from relying on SOGA in defence of the claim, in particular section 49(1) which prevents the seller from claiming the price of the goods supplied where property in the goods has not passed,” UK lawfirm Holman Fenwick Willan (HFW) said.

However, during yesterday’s hearing Mr Justice Males held that the effect of a retention of title clause, combined with the imminent destruction of the goods, materially altered the nature of the contract and agreed with the arbitrators that, on analysis, the contract was not one for the sale of goods.

Instead, the contract was one by which OW had agreed to arrange for the delivery of the bunkers to the vessel and to ensure that the true owner of the bunkers consented to them being consumed pending payment, HFW added.

“In the meantime, the judge’s decision to dismiss owners’ application for permission to appeal the tribunal’s decision has various consequences for the “players in the saga” but inevitably spells bad news for owners and charterers subject to similar OW bunker contracts and compounds the risk of ‘double jeopardy’,” the lawfirm concluded.

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