The O.W. Bunker collapse triggered a plethora of insolvency-related litigation around the world. Despite the similarities in results, a closer look at these rulings casts serious doubts on the future of multi-lateral co-operation in insolvency matters. This presentation suggests that coordination efforts among insolvency claimants should be extended to cover any further litigation, which remains in the availability of the parties but that is not stayed by the filing of the insolvency proceeding .

1. O.W. Bunker: A Common Law Perspective
On Multi-Lateral Cooperation
In Insolvency-Related Cases
Eugenio Vaccari
Ph.D. Candidate at City, University of London
eugenio.vaccari@city.ac.uk

2. Structure
1. CBI Agreements
2. O.W. Bunker: its business, its collapse, and the maritime law issues
3. The Res Cogitans Case [U.K.]
4. The Temara I and II Decisions [U.S.]
5. The Deep Blue and Clearlake Decisions [U.S.]
6. Other Common Law Decisions: Canpotex [Canada] and Precious Shipping
[Singapore]
7. Implications for Cross-Border (Insolvency) Cases

3. CBI Agreements
Private arrangements by means of which interested
parties coordinate their collection efforts and the
distribution of proceeds in C/B cases
More ‘ambitious’ protocols determine the main law
applicable to the insolvency procedure and related matters
CBIs are “emerging as customary international commercial law” (Mason, 2012).
Examples: Maxwell (1992/6), Lehman Bros. (2008/9), Nortel (2009/12).
Some protocols only focus on procedural, admin. and
practical matters, determine the forum of the insolvency
litigation, and do not span more than 3 jurisdictions

4. O.W. Bunker: Its Business
Holding in DK
Original Supplier
Physical Supplier - Subsidiary
in UK, US, Can., etc.
60 days
60 days
90 days

5. O.W. Bunker: Its Collapse
7 Nov. 2014: O.W. Bunker DK (holding) files for insolvency upon the
discovery of massive fraud and unsupervised trading:
• Losses for US$ 275 mln;
• ING Bank assignee of biggest portion of debts.
Nov./Dec. 2014: O.W. Bunker’s 29 subsidiaries file for insolvency in
their countries of incorporation:
• 7% bunkers’ trade market disappears.
Suppliers vs. Insolvent Estate(s) vs. End Users
Who has to pay who?

6. O.W. Bunker: Maritime Law Issues
1) Has any of the parties a valid and enforceable
maritime lien against the vessel(s)? In other
words, has any of the parties an action in rem
against the ships to which the bunkers were
provided?
Maritime Liens
Privileged claims upon sea-connected
properties (e.g. ships);
Arise by operation of the law, and
remain valid despite any changes in the
ownership of the sea-connected
property;
Regulated by the law of the ship, and
the Convention on the Arrest of Seagoing
Ships (1952);
Causes for their recognition vary
depending upon the legislation (for
necessaries?);
No requirement to be recorded for
perfection.
Leapfrog insolvency priority rules?
2) Has any of the parties a valid and enforceable
action in debt against the owners, charterers or the
crew of the ships?

7. The Res Cogitans Case [U.K.]
The Case & The Law:
• Supply contract subject to English law + arbitration clause;
• Litigation triggered by the owners and managers of the Res Cogitans vessel;
• English law does not recognize maritime liens for necessaries (no actio in rem).
The Decisions:
• Arbitrators (16 Apr. 2015): parties have not signed a contract, which fell within the scope
of SOGA 1979 – need to go beyond ‘formal qualification’ provided by the parties (even if
experienced business players?);
• HC and CA affirmed;
• SC (11 May 2016): the relevant bunker sale contract was not a contract subject to the
SOGA 1979 but a sui generis or unique agreement.
“A Contest between two arguably incredible propositions” (Shmiovits, 2016)
• Res Cogitans: “We don’t have to pay O.W. Bunker Malta, O.W. Bunker DK and/or ING
Direct because we signed a contract for sale of goods subject to the SOGA 1979.
However, pursuant to s.49 and Caterpillar, if goods are delivered but title is reserved, the
physical supplier cannot enforce payment of price by an action”;
• O.W. Bunker and ING: “Ok we have a contract for sale of goods, ok it is subject to the
English law, but it is not subject to the SOGA 1979, hence we can recover the price”.

8. The Res Cogitans Case [U.K.]
The Maritime Law Implications:
• No recognition of a maritime lien in favour of any of the creditors;
• Buyers (owner and charterers) are potentially subject to a double liability in debt: on one
hand towards the physical suppliers and the insolvency estate and on the other towards the
original supplier of the fuel bunkers.
The Insolvency Law Implications:
• Ranking of creditors is not impaired;
• Maritime rules do not trump over insolvency ones.

9. The Temara I and II Decisions [U.S.]
The Law:
Under the U.S. Commercial Instruments and Maritime Lien Act (“CIMLA”):
“a person providing necessaries to a vessel on the order of the owner or a person authorized by the owner (1)
has a maritime lien on the vessel; (2) may bring a civil action in rem to enforce the lien; and (3) is not required
to allege or prove in the action that credit was given to the vessel” [46 U.S. Code s.31342].
Conditions to establish a maritime lien: (i) provide necessaries; (ii) to a vessel; (iii) on the order
of the owner/agent.
Temara I [S.D.N.Y., Aug. 2016, Forrest J] (interpleader action):
• Maritime lines are disfavoured by the law, the provisions creating them are stricti juris;
• There has been no direct contact between the physical suppliers and the ship-owners, hence
no maritime lien could be recognized in their favor (partial overruling of Maritime Fuel).
Temara II [S.D.N.Y., Oct. 2016, Forrest J]:
• Has O.W. Bunker provided necessaries? No, because the entity has not put itself at financial
or other risk in delivering the bunkers to the end users (consonant to legislature’s attitude);
• No maritime lien was recognized in favor of neither O.W. Bunker U.S. nor O.W. Bunker
DK and ING Direct.

10. The Deep Blue and Clearlake Decisions [U.S.]
Deep Blue [Alabama, Sept. 2016, Cassady J] (interpleader action):
• ‘Payment’ is not a requirement set out in the law for the maritime lien to exist;
• No direct contact between original suppliers and end users, hence no maritime lien in
favour of the firsts;
• Existence of a maritime lien in favour of ING Direct (assignee of the debts, not the
insolvency estate) because the fact that intermediaries usually pay their suppliers (i.e. original
suppliers) before acting against the end users does not mean that this has necessarily to be
the case.
Clearlake [S.D.N.Y., Jan. 2017, Caproni J] (interpleader action):
• Original suppliers are not entitled to a maritime lien, and equity and public policy reasons
cannot lead us to a different conclusion (“maritime liens cannot be invoked to redress the hardship
arising from perfectly valid contractual negotiations, in which one of the parties is left out-of-money because
of the bankruptcy protection granted to the counterparty”);
• Existence of a maritime lien in favour of ING Direct (assignee of the debts, not the
insolvency estate) because ING Direct proved to the satisfaction of the court that the
company put itself at financial risk in providing the fuel bunkers.

11. Canpotex [Canada] and Precious Shipping [Singapore]
Precious Shipping [HC, July 2015] (interpleader action):
• Rejection of the request of interpleader relief from ship-owners because “there is no evidence
[…] that any of the physical suppliers (i.e. original suppliers) intend to or have any basis to assert a
claim in a jurisdiction which recognizes a maritime lien in respect of unpaid bunkers” (emphasis as in
the original version).
Canpotex [FC, June 2015] (interpleader action):
• Canadian law recognises the existence of maritime liens for necessaries;
• A broker trader (i.e. O.W. Bunker subsidiary) is never entitled to payment if its supplier (i.e.
original supplier) has not previously been paid;
• Existence of a maritime lien in favour of the original supplier; the insolvency estates
(i.e. ING Direct) are only entitled to the margin.

12. Implications for Cross-Border (Insolvency) Cases
Minimum Coordination Approach:
(i) Courts’ main concern has been similarity of outcomes;
(ii) No uniformity in ratio decidendi;
(iii) No attempt to come up with general principles applicable to similar cases;
(iv) Practical implications for the ship-owners and charterers largely overlooked;
(v) No or little coordination with the insolvency proceeding(s).
With Reference to Insolvency Practice:
i. Significant blow to reliance on ambitious CBI agreements in ‘borderline’ cases;
ii. Not an isolated case (e.g. executory contracts, punitive damages, etc.);
iii. Insolvency claimants should extend their coordination efforts to cover any further
litigation, which remains in the availability of the parties but that is not stayed by the
filing of the insolvency proceeding.
In Defense of Pure Universalism?
(Perkins, 1999)