Interpleader as an appropriate remedial mechanism to effectively navigate the OW Bunker saga: the influence of Judge Caproni's ruling of the United States District Court for the Southern District of New York.
TABLE OF CONTENTS I. Introduction 18 A. United States Interpleader Actions 20 II. In Rem Actions Filed Around the World Makes It Necessary for Federal Courts to Retain Subject Matter Jurisdiction Over the Interpleader Actions 23 A. Maritime Liens in the United States 25 III. The Benefit and Problems with Interpleader in the United States 28 IV. Interpleader in Other Parts of the World: Canada, United Kingdom, and Singapore 31 A. Canada 31 B. United Kingdom 33 C. Singapore 34 V. Conclusion 34
Since the 1980s, OW Bunker A/S (OW Bunker) has been one of the world's largest marine fuel suppliers with operations in nearly twenty-nine countries. (1) The company is based in Norresundby, Denmark, but has offices throughout the world, including West Africa, Turkey, the United Kingdom, Germany, Greece, and Hong Kong. (2) At its zenith, OW Bunker had a global market share of around ten percent. (3) The company was engaged in harbor bunkering, (4) bunkering on the roads, and high seas bunkering, both side-by-side and by stern line. (5) The company had an integrated business model, (6) and was both a physical distributor and a reseller of marine fuel. (7) OW Bunker's practice was based on a "buy now, sell later" framework: Essentially, OW Bunker bought fuel from suppliers and later sold it to shipowners and distributers. (8) OW Bunker received financing from both its suppliers and banks. (9) The transactional chain consisted of OW Bunker entities contracting with shipowners or time charterers, or both, to supply fuel to a given vessel. (10)
In November 2014, OW Bunker filed for bankruptcy. (11) The bankruptcy spurred proceedings brought by both vessel owners and charterers who found themselves subject to competing claims by third-party physical suppliers of the fuel, OW Bunker entities, and ING Bank N. V. (ING). (12)
The OW Bunker insolvency has raised a number of legal issues and illustrates the complex intersection of bankruptcy and maritime law. OW Bunker's collapse continues to greatly affect the shipping community worldwide. Along with the proceedings commenced in the United States, claims by bunker suppliers around the world have been filed in Singapore, England, Canada, Italy, and the United Arab Emirates. (13) Interpleader actions can arguably be viewed as a viable, fair, and efficient way for shipowners to protect themselves against competing claims from third-party physical suppliers of the fuel, OW entities, and ING.
This article will address the varying procedures followed by courts in a number of different countries to address the competing claims to OW Bunker's assets. Using the United States District Court for the Southern District of New York's decision in UPT Pool Ltd. v. Dynamic Oil Trading, (14) this article will conclude that the adoption of the United States-style interpleader joining of all parties capable of making a claim is the most effective mechanism to ensure that the wide-ranging and competing claims against OW Bunker's assets receive uniform treatment and shipowners are protected from conflicting and inconsistent resolution.
A. United States Interpleader Actions
Following significant financial losses due to poor risk management and the discovery of suspected internal fraud by senior employees in a Singapore-based subsidiary, OW Bunker filed for bankruptcy in the Danish courts. (15) OW Bunker was Denmark's third-largest company and supplied seven percent of the world's bunker fuel used in shipping. (16)
Either directly or indirectly, these vessel owners and charterers contracted with one or more of the OW Bunker Entities (OW Entities), including the physical supplier, as well as ING, for the supply of fuel. (17) In most cases, the OW Entities did not provide the fuel directly to the vessel owners or charterers. (18) Instead, the OW Entities contracted with third-party fuel suppliers that delivered the bunker to the vessel. (19) As a result of the bankruptcy, the vessel owners and charterers worried that if they paid the OW Entities for the fuel, the portion owed to the third-party fuel supplier would be tied up in the bankruptcy. (20) Similarly, the third-party fuel suppliers were also concerned. (21)
In addition to these concerns, some OW Entities had assigned their rights, specifically those pertaining to certain supply contracts, as security to ING. (22) Accordingly, ING urged that vessel owners or charterers remit all payments for fuel directly to ING rather than to those OW Entities with whom they contracted. (23) As a result of the complex transactions and, ultimately, the bankruptcy, vessel owners and charterers began receiving competing demands for payment for the fuel. (24)
The main concern for the vessel owners and charterers was the potential exposure to double or triple liability in the form of the posting of bonds or the payment to OW Bunker and the physical suppliers of the bunkers for the same bunker supply, as well as the possibility of having their vessels arrested. (25) The vessel owners and charterers sought relief by filing actions under the federal interpleader statute in the United States District Court for the Southern District of New York. (26)
The decision of the district court was much anticipated because it addressed a novel question of law regarding the "interplay among United States bankruptcy law, maritime law[,] and the federal interpleader statutes." (27) On July 1, 2015, the district court concluded that subject matter jurisdiction over the interpleader actions was proper. (28) The initial interpleader action, filed on November 20, 2015, arose out of payments owed for fuel bunkers purchased through the United States debtors prior to November 13, 2014. (29) The plaintiffs were the owners and charterers of various shipping vessels that contracted for the supply of fuel, either directly or through a broker, with one or more OW Entities. (30) These OW Entities were essentially the "middlemen" (31) from which the plaintiffs made a single purchase of fuel bunkers. As a result, "both the OW Entities and the Fuel Supplier assert[ed] that they [we]re entitled to payment...." (32) In addition to the demands for payment from two separate parties, the bankruptcy filings raised a number of concerns for the plaintiffs. Furthermore, ING alleged that pursuant to an Omnibus Security Agreement, certain OW Entities had assigned their rights with respect to many fuel supply contracts. (33) ING's argument was that the plaintiffs should remit all payments owed for the provision of shipping fuel directly to ING. (34)
The multiple demands for payment triggered challenges to the district court's subject matter jurisdiction. The Fuel Suppliers asserted that the court lacked jurisdiction to give interpleader relief and adjudicate the claims because the maritime lien in rem claims were distinct from the in personam claims against the shipowners and charterers. (35) As such, there were no competing claims. Furthermore, because not all of the vessels had been arrested or were present in the United States at the time the actions were commenced, the court lacked subject matter jurisdiction over the interpleader actions. Judge Caproni's ruling shed light on the necessity of the interpleader action as a fair and efficient mechanism to ensure that owners and operators at risk of vessel arrest for non-payment for the supply of fuel are able to have all relevant parties and claims adjudicated in a single forum. (36)
II. IN REM ACTIONS FILED AROUND THE WORLD MAKES IT NECESSARY FOR FEDERAL COURTS TO RETAIN SUBJECT MATTER JURISDICTION OVER THE INTERPLEADER ACTIONS
In response to OW Bunker's bankruptcy filings, some of the third-party suppliers sought to enforce maritime liens directly against the vessels, ignoring the fact that a number of the ship owners and charterers had already paid the OW Entities with whom they had contracted. (37) This identifies a particularly thorny issue, as a number of jurisdictions do not allow the unpaid supplier to arrest the vessel due to the lack of a contractual relationship between the shipowner and the physical supplier. (38) In other words, a bunker supplier would not be entitled to arrest the vessel for unpaid claims in charter situations. (39)
Many Scandinavian countries apply a strict interpretation of the 1952 Arrest Convention (Convention), whereby an arrest by a bunker supplier will be acceptable only if the debtor for the unpaid claim is also the vessel owner. (40) India, although not a signatory, applies a less-strict interpretation of the convention. In India, a charterer who defaults on payments to fuel suppliers may expose the owner to enforcement actions, including vessel arrest. (41)
Italy is a signatory to the Convention and one of the few countries to have ratified it. With respect to the issue of vessel arrest in the OW Bunker bankruptcy, the Tribunal of Venice relied upon the Convention and held that a Cyprus bunker supplier had no title to claim against the owners for payment of the bunkers. (42) Under Italian law, a vessel may not be arrested for claims that are not set out in Article 1(1) of the Convention. (43) In other words, the Tribunal held that the claim by the physical supplier against the owners under the principle of unjust enrichment for having consumed the bunker without having paid for it is not a maritime claim under the Convention and cannot be enforced by the ship's arrest. (44) Furthermore, the Tribunal held that the physical bunker suppliers had no right to claim against the owners for payment of the bunkers, and revoked the arrest that had previously been granted. (45)
The United Arab Emirates Court of Appeals addressed this same concern and held that the sale and purchase contract of bunkers is implied between the shipowner and the physical supplier despite the completion of the deal through a trader. (46) Thus, in the United Arab Emirates, third-party suppliers may arrest a vessel. (47)
With respect to whether third-party suppliers can arrest the vessel, a number of vessel arrest actions have been commenced and allowed in several jurisdictions. (48) In those cases, a new issue emerges with respect to who holds the lien and its priority. If there is only a finite amount of money, there must be a mechanism in place to ensure shipowners are not being exposed to additional risk.
A. Maritime Liens in the United States
A maritime lien is a privilege on maritime property arising out of goods and services furnished to or injuries caused by that property. (49) Maritime liens on vessels may be either express (by mortgage) or implied (by the occurrence of a maritime tort or the performance of a maritime service). (50) The nature of the implied maritime lien arises at the moment of the occurrence of the debt or damages which it secures. A seaman can also have a lien on the vessel for his wages. (51) A salvage claim is secured by a lien on the vessel, as are sums due under general average. (52) The rationale for this type of lien is "to enable a vessel to obtain supplies or repairs necessary to her continued operation by giving a temporary underlying pledge of the vessel which will hold until payment can be made or more formal security given." (53)
Although maritime liens typically arise under general maritime law, some liens arise through statute. Under the Commercial Instruments and Maritime Lien Act (CIMLA), "necessaries" include repairs, supplies, towage, and the use of a dry dock or marine railway. (54) Persons presumed to have authority to procure these necessaries include the owner, master, person entrusted with the management of the vessel at the port of supply, an officer or agent appointed by the owner, charterer, an owner pro hac vice, or an agreed buyer in possession of the vessel. (55) The majority of maritime liens arise out of the provision of necessaries to a vessel. The listing of necessaries included in CIMLA is not intended to be exhaustive in light of the fact that the courts have expanded the term to include "things that a prudent owner would provide to enable a ship to perform well the functions for which she has been engaged." (56) The question of what are necessaries is a factual question. (57) The last part of the statute is of utmost importance as it identifies who may assert a maritime lien against a vessel. Therefore, as one of the most conspicuous idiosyncrasies of admiralty law, maritime liens arise under a number of circumstances and serve an integral function in the shipping industry. (58)
The designation of United States law as governing the existence of a maritime lien is significant. The United States is one of a handful of countries that recognizes a maritime lien for the provision of necessaries. (59) The notion of predictability in the law, particularly in the international arena, is one of the main reasons that there is a presumption in favor of enforcing choice of law contract provisions. (60)
The United States District Court for the Eastern District of Louisiana recently addressed the issue of whether a physical supplier held a maritime lien against the vessel in relation to the OW Bunker bankruptcy fallout. (61) The tanker M/V ALMI SUN contracted with OW Bunker Malta through OW Bunker US for the supply of fuel. (62) Valero Marketing and Supply Company (Valero) was the physical supplier. (63) OW Bunker never paid for the supply despite Valero delivering approximately 200 metric tons (MT) of bunkers. (64) Similarly, the vessel owners never paid for the supplied bunkers and, as a result, Valero sued the M/V ALMI SUN in rem. (65) The vessel owner alleged that Valero did not hold a maritime lien that would enable it to arrest the M/V ALMI SUN. (66)
In denying Valero's Motion to Reconsider and to Alter or Amend Order, the court held that Valero was not entitled to a maritime lien against M/V ALMI SUN. (67) The court explained that "maritime liens may arise only by operation of law, rather than by agreement of the parties." (68) The case turned on the third requirement under CIMLA: Whether Valero provided necessaries on the order of the owner or someone authorized by the owner to make such orders. In reaching its conclusion, the court held that the facts presented by Valero did not alter its initial analysis. (69) Nevertheless, "despite CIMLA's purpose to protect American suppliers... the Court cannot favor American companies so heavily as to ignore CIMLA's third statutory requirement for asserting a maritime lien." (70)
Thus, although Valero is an American company, unlike OW Bunker Malta, the court declined to reconsider its prior ruling, precluding Valero from asserting a maritime lien. (71) This case is an example of how CIMLA may work to protect vessel owners from double or triple payments by barring suppliers from enforcing a maritime lien on the vessel altogether. (72)
III. THE BENEFIT AND PROBLEMS WITH INTERPLEADER IN THE UNITED STATES
The question of whether vessels can be shielded from arrest for unpaid fuel invoices in the wake of the OW Bunker bankruptcy has stemmed debate amongst the maritime law community worldwide. Judge Caproni's ruling has unsurprisingly been subject to stark criticism. (73) Arguably, the New York court invented a new rule by depriving a party of a maritime lien claim in rem against a vessel located outside of the United States. Nevertheless, interpleader actions are an appropriate mechanism to provide relief to a party facing numerous claims by several others.
Interpleader actions are designed to allow a defendant who is facing multiple competing claims to lodge the claim sum in the registry of the court and to ask the court to determine which claimant should succeed. Essentially, interpleader actions relieve stakeholders "from the obligation of determining at [their] peril which claimant may ultimately prevail, as well as preventing multiple liability which could flow from adverse rulings in different courts." (74) A court may, in appropriate circumstances, support such interpleader proceedings by granting injunctions preventing vessel arrest pending the outcome of the interpleader proceedings.
An additional benefit of interpleader is that it "can be employed to reach an early and effective determination of disputed questions with a consequent saving of trouble and expense for the parties." (75) At common law, the traditional view required that an action satisfy a four-part test to determine whether it was eligible for interpleader:
(1) all of the claimants had to be claiming precisely the same property or obligation; (2) all claims had either to be dependent upon each other or to derive from a common source; (3) the stakeholder could claim no interest in the stake; and (4) the stakeholder could have no independent obligation to any claimant. (76)
In the United States, there is a difference between statutory interpleader actions and rule interpleader actions. (77) Rule 22 of the Federal Rules of Civil Procedure allows any plaintiff or defendant to interplead another party. (78) One of the downsides of rule-based interpleader is that a proceeding will fail if the forum lacks jurisdiction over the claimants. Rule 22 requires complete diversity of all parties and the amount of the property in controversy to be more than $75,000. (79) In other words, the stakeholder must not be a citizen of the same state as any of the competing claimants. Rule interpleader follows the traditional rules that apply to diversity jurisdiction. Opposing parties must be completely diverse, thereby satisfying the rule of Strawbridge v. Curtiss. (80)
Statutory interpleader is more flexible, in that it eliminates some of the restrictions imposed by Rule 22. The Federal Interpleader Act allows federal courts to hear cases with minimal diversity among the competing claimants and where the property in dispute is worth at least more than five hundred dollars. (81) In other words, at least two competing claimants must be citizens of different states. There is no requirement that the claimants seek precisely the same property or that their claims have a common origin. (82) Statutory interpleader dispenses with the common law requirements that all claims must be asserted against precisely the same property or obligation and that each claim must be dependent upon the other, or derive from a common source. (83) Essentially, the statute authorizes courts to enjoin claimants from otherwise litigating with respect to the stake in question. (84) Thus, once the requirements of statutory interpleader are satisfied, the court can issue an injunction to prevent claimants from instituting proceedings involving the subject property. (85)
Judge Caproni's decision in UPT Pool Ltd. and the multitude of actions filed all over the world presents the following classic interpleader problem: Multiple claimants for the same debt. Another interesting issue arising from OW Bunker's bankruptcy is the conflict between maritime lien rights and interpleader protection. The question then becomes whether the right to a nationwide injunctive protection (as per the interpleader rules) eviscerates bunker suppliers' maritime lien rights as per OW Bunker sales contracts. Arguably, without the District Court for the Southern District of New York having subject matter jurisdiction over the interpleader actions, vessel owners and charterers could not possibly dispense with all liens against their vessels without paying double or triple the amount owed for the fuel received. An examination of the interpleader actions in other jurisdictions is appropriate in order to understand whether this is the only mechanism that can efficaciously protect shipowners against competing claims.
IV. INTERPLEADER IN OTHER PARTS OF THE WORLD: CANADA, UNITED KINGDOM, AND SINGAPORE
It is prudent to look at how courts outside of the United States have treated interpleader with respect to the OW Bunker saga. While some jurisdictions have aligned with the United States approach, other jurisdictions have refused interpleader altogether, or have applied a stricter approach to interpleader.
Canada has adopted a common sense approach to interpleader, similar to the mechanism employed by courts in the United States. The idea is to adopt a mechanism that would allow the key players in the action to seek a response in the same forum. In Canada, the statutory provisions of the Federal Court Rules allow for interpleader. (86) In Canpotex Shipping Services Ltd. v. Marine Petrobulk Ltd., the Federal Court of Canada explained that interpleader is appropriate "where two or more persons make conflicting claims against another person in respect of property in the possession of that person and that person... claims no interest in the property, and is willing to deposit the property with the Court or dispose of it as the Court directs ...." (87)
Canpotex Shipping Services Ltd. (Canpotex) is a Canadian exporter that ships potatsh from Saskatchewan in international ocean trade. (88) In 2014, Canpotex chartered two foreign registered vessels to carry its product, and contracted with OW Supply & Trading A/S (OW Trading) for fuels, which were in turn supplied by Marine Petrobulk (MP), a Canadian bunker supplier. (89) MP submitted its invoices to OW Bunkers (UK) Limited (OW UK), a subsidiary of OW Trading, and Canpotex was expected to make payment to OW UK. (90) As with a number of other cases worldwide, OW Trading entered into bankruptcy before paying MP's invoice and prior to receipt of any payment by Canpotex. (91) A court order provided that any amount owed to OW Trading was to be collected by its Receiver, ING. (92) As a result, both ING and MP claimed entitlement to the amounts owed by Canpotex. (93) A consent order under Rule 108 of the Canadian Federal Court Rules required that Canpotex deposit the amount owing into a trust account.
Canpotex filed an application in the Federal Court for a declaration that the payment of the funds into the trust account extinguished its liabilities and any in rem claims. (94) In addition to the application filed by Canpotex, Justice Russell considered two other motions for summary judgment pursuant to Rules 108 and 216 of the Federal Court Rules. (95) Both ING, as OW Trading's receiver, and Marine Petrobulk Ltd., as the supplier, demanded summary judgment of their own entitlement to the funds. (96)
After considering the federal rule on interpleader, Justice Russell held that the contractual arrangements entered into by Canpotex, OW Trading, OW UK, and MP for the supply of bunkers to the vessels rendered the subject matter of the competing claims the same as between MP and ING. (97) As such, interpleader was appropriate because MP and ING both claimed entitlement to a portion of the amount sought by MP for the supply of marine bunkers to the vessels. (98) In reaching its decision on the question of interpleader, the Federal Court of Canada explained that "justice requires the intervention of interpleader to ensure that Canpotex does not have to pay twice for the marine bunkers that MP supplied to the Vessels, and that ING does not receive a windfall to which OW UK was not contractually entitled." (99) There is one key difference between the Canadian interpleader decision and the US interpleader decision. In allowing interpleader, Justice Russell found in favor of the physical supplier, thereby awarding the funds directly to Marine Petrobulk, not ING. (100) Thus, not only did the Canadian Federal Court allow the interpleader motion, but it also decided the rival claims. (101) It has been suggested that Justice Russell's decision could have novel implications on recovery for physical suppliers. (102)
B. United Kingdom
Similar to the response in both the United States and Canada, several shipping companies in England commenced interpleader proceedings regarding OW Bunkers' November 2014 insolvency. (103) Rather than challenging its duty to pay for the bunkers, the shipowners argued that interpleader was necessary to avoid the risk of exposure to double payment given the multiple jurisdictions engaged and the varying approaches to interpreting contractual obligations and rights of maritime liens. (104) In the English action, Stena Bulk AB v. Copley, a vessel owner and charterer who had purchased bunkers for various vessels from OW Bunker initiated proceedings in the Admiralty Court in London as a stakeholder, seeking to pay funds into court to avoid being exposed to competing claims. (105) Furthermore, paying the funds into court would also guard the owner and charterer from having its vessels arrested by those claiming outstanding sums owed for the bunkers. (106) The vessel owner and charterer both contended that the interpleader proceeding would promote fairness and justice by forcing the competing parties to make submissions to the court as to who was entitled to receive what portion of the funds. (107)
The Admiralty Court was satisfied that is was authorized to order the funds to be paid into court, as this was consistent with the interests of justice. (108) As such, if the parties could not reach an agreement as to who is entitled to what portion of the funds, the court would step in and make a determination through an interpleader proceeding. (109)
Justice Chong's decision in Precious Shipping v. OW Bunker illustrates a stark contrast to the approaches taken in the United States, Canada, and England. (110) In particular, Justice Chong declined interpleader because the competing claims allegedly did not disclose any prima facie case for relief. (111) Although not the only reason for rejecting the interpleader, Justice Chong found this lack of a prima facie case for relief sufficient to dispose of the consolidated applications. (112) Furthermore, Justice Chong found that the in personam claims brought by ING and the in rem claims asserted by the third-party suppliers did not arise from the same subject matter. (113) In order to be considered adverse within the scope of the interpleader process, the competing claims must be made in respect of the same subject matter. (114) Overall, Justice Chong held that the statutory preconditions were not satisfied and therefore denied interpleader relief. (110)
An interpleader approach can easily be viewed as providing the most equitable process for all parties in the bunker supply chain, particularly where there are two (or more) active competing claimants and where the claim is large. Most recently, the Court of Appeals for the Second Circuit affirmed interpleader jurisdiction (thereby agreeing with Judge Caproni) with respect to the OW Bunker bankruptcy relying on the purpose and language of the interpleader statue. (116) The Second Circuit reiterated the purpose of interpleader to be "'remedial'... , particularly to prevent races to judgment and the unfairness of multiple and potentially conflicting obligations." (117) The United States approach to allowing interpleader by no means abrogates the right of the fuel suppliers to be paid. Rather, "it merely requires [them] to litigate [claims] in the context of the same proceeding as competing claimants... [to] minimize or eliminate the risk of double payment to the extent the governing law permits." (118) Although the United States approach provides a fair, swift, and efficient mechanism for the disposal of the rival claims, it remains uncertain whether Judge Caproni's decision will influence other rulings around the world, such as the Dutch OW Bunker proceedings pending in the Netherlands. (119) Nevertheless, the United States approach should be considered as the proper approach, as it provides the most fair and just means for resolution. Despite this suggestion, there is no doubt that the claims filed arising from the well-publicized OW Bunker bankruptcy will be treated differently in other jurisdictions.
Danielle Tamara Gauer (*)
(*) LL.M in Maritime Law & J.D. Magna Cum Laude, 2016, University of Miami School of Law; J.D. 2013 (common law), University of Ottawa, Faculty of Law; B.A. (Hons.), Criminal Justice, 2010, Ryerson University. Ms. Gauer is a licensed attorney in Ontario where she is a member of the Law Society of Upper Canada. She is currently based in Florida, working with the law firm Hamilton, Miller & Birthisel LLP. Ms. Gauer would like to dedicate this article to her beloved parents, Denise and Elliott, for their unwavering encouragement, love, and support. She would also like to acknowledge and thank Mark E. Newcomb, Counsel and Vice President Claims & Insurance, ZIM Integrated Shipping Services, for his invaluable mentorship and ongoing guidance.
(1.) Erik Larson, OW Bunker Files U.S. Bankruptcy Days After Fraud Report, BLOOMBERG BUSINESS (updated Nov. 14, 2014, 11:28 AM), http://www.bloomberg.com/news/articles/2014-11-13/ow-bunker-s-u-s-units-seek-bankruptcy-protection-correct-.
(2.) Oil, Gas and Consumable Fuels, Company Overview of OW Bunker & Trading A/S, BLOOMBERG BUSINESS, http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=64410 44 (last visited Nov. 11, 2016).
(3.) Peter Levring & Winnie Zhu, Danish Fuel Supplier Collapses Months After Its IPO, BLOOMBERG BUSINESS (Dec. 11, 2014, 3:48 PM), http://www.bloomberg.com/news/articles/2014-12-ll/marine-fuel-supplier-ow-bunker-collapses-months-after-its-ipo.
(4.) Bunkering is the action of supplying fuel (bunker) to a ship. See Texas Transp. & Terminal Co. v. City of New Orleans, 264 U.S. 150, 156 (1924).
(5.) Oil, Gas and Consumable Fuels, Company Overview of OW Bunker & Trading A/S, BLOOMBERG BUSINESS (Mar. 17, 2016, 4:53 PM), http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=6441044.
(6.) OW Bunker, THE INTERNATIONAL BUNKER INDUSTRY ASSOCIATION, http://ibia.net/o-w-bunker-bio/ (last visited Nov. 10, 2016).
(8.) Alessandro Mauro, OW Bunker: How One of the World's Largest Marine Fuel Traders Went from IPO to Bankruptcy-Part 1, Founding to IPO, SHIP & BUNKER (Jan. 7. 2015), http://shipandbunker.com/news/features/industry-insight/649431-ow-bunker-how-one-of-the-worlds-largest-marine-fuel-traders-went-from-ipo-to-bankruptcy-part-1-founding-to-ipo.
(11.) Levring & Zhu, supra note 3. In November 2014, the company suffered hedging losses of almost $300 million. Interestingly, eight months prior to filing for bankruptcy, OW Bunker was valued at almost $1 billion in Denmark's second-largest Initial Public Offering (IPO) since 2010. See Larson, supra note 1.
(12.) See generally MarEx, Investors Launch $120mln Case Against OW Bunker, THE MARITIME EXECUTIVE (June 26, 2015, 10:15 AM), http://www.maritime-executive.com/article/investors-launch-120mln-case-against-ow-bunker; see also 28 Institutional Investors to Sue OW Bunker, WORLD MARITIME NEWS (June 26, 2015), http://worldmaritimenews.com/archives/164804/28-institutional-investors-to-sue-ow-bunker/. ING is a global financial institution of Dutch origin that acted as assignee of various OW entities. Other suits have been brought by Danish investors against OW Bunker seeking $120 million for misleading them in its initial public offering. Two of the largest pension funds in Denmark, ATP and PFA, with assets totaling of more than $165 billion, filed two lawsuits. The first lawsuit against OW Bunker, its management, and Altor Funds, the private equity fund that owned the company before listing it, pertains to their responsibility for drawing up the prospectus for the flotation in March 2014. The second lawsuit alleges that OW Bunker failed to disclose information in a timely manner as per stock exchange rules in Denmark.
(13.) See, e.g., Canpotex Shipping Services Ltd. v. Marine Petrobulk Ltd., 2015 F.C. 1108 (Can. C.A.); Stena Bulk AB v. Copley,  1 Lloyd's Rep. 280 [QBD (Admlty)]; Precious Shipping Pub. Co. v. O.W. Bunker Far East Pte. Ltd.,  SGHC 187 (Singapore); The XIN CHANG SHU,  SGHC 308 (Singapore) (concerning the issue of wrongful arrest in Singapore and under what circumstances damages will be awarded; the vessel was arrested by a physical supplier for the supply of 4,000 metric tonnes of marine bunkers to the contractual purchaser).
(14.) 2015 WL 4005527, *1 (S.D.N.Y. July 1, 2015) (twenty-four related docket numbers omitted).
(15.) See In re OW Bunker Holding North America, Inc., No. 14-51720 (AHWS) (Bankr. D. Conn, filed Nov. 13, 2014). This initial filing led to a series of other bankruptcies across the globe by other OW Bunker & Trading A/S subsidiaries and affiliates. OW Bunker USA, Inc., OW Bunker Holding North America Inc., and OW Bunker North America Inc., filed voluntary petitions for Chapter 11 relief in the United States Bankruptcy Court for the District of Connecticut. Id.
(16.) Danish Ship Fuel Supplier OW Bunker Goes Bankrupt, BBC NEWS (NOV. 7, 2014), http://www.bbc.com/news/business-29961566.
(17.) See UPT Pool Ltd., 2015 WL 4005527, at *2.
(18.) Id. at *1.
(20.) Id. at *2.
(21.) See generally OW Bunker Bankruptcy and Unpaid Bunkers-A Global Dilemma, GARD (Dec. 8, 2014), http://www.gard.no/web/updates/content/20774009/ow-bunker-bankruptcy-and-unpaid-bunkers-a-global-dilemma.
(22.) ING is the agent for a syndicate of lenders to OW Bunker Group (which assigned and charged to ING all rights, title, and interest in its third-party and intercompany receivables). See O.W. Bunker & Trading A/S, PRICEWATERHOUSECOOPERS, http://www.pwc.co.uk/services/business-recovery/administrations/owbunker.html (last visited Nov. 11, 2016).
(23.) UPT Pool Ltd., 2015 WL 4005527, at *2.
(24.) Id. at *3 ("Plaintiffs have, in many cases, received competing demands for payment from the O.W. Entities, Fuel Supplies and ING.").
(25.) See UPT Pool Ltd., 2015 WL 4005527. at *3.
(27.) Id. at *2.
(28.) "Interpleader Actions" refers to the twenty-five other interpleader actions filed since the initial filing on Nov. 20, 2015, involving fuel bunker transactions made through an OW Bunker Entity. Id.
(29.) For example, OW Bunker Holding North America Inc., OW Bunker North America Inc., and OW Bunker USA Inc. Id.
(30.) UPT Pool Ltd., 2015 WL 4005527, at *2.
(31.) An OW Entity typically did not provide the fuel directly to the shipping vessels. Rather, an OW Entity would contract with a third-party fuel supplier that bore the burden of physically delivering the fuel. Id.
(34.) Id. at *3.
(35.) UPT Pool Ltd., 2015 WL 4005527, at *3
(36.) Id. at *4.
(37.) See RICHARD L. DESGAGNES, BUNKER LITIGATION: THE TEACHING OF OW BUNKER'S DEMISE (2016).
(38.) See, e.g., 1952 International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships art. 3, May 10, 1952, 439 U.N.T.S. 193 (Convention). The United States is not a signatory. Id. See also International Convention of Arrest of Ships art. 3, adopted Mar. 12, 1999, 2797 U.N.T.S. 3 (entered into force Sept. 14, 2011).
(39.) Shrikant Hathi and Binita Hathi, Unpaid Bunker Suppliers, http://bruschambers.com/publications/bunker.pdf (last visited Sept. 20, 2016).
(40.) Shrikant Hathi and Binita Hathi, Unpaid Bunker Suppliers, http://bruschambers.com/publications/bunker.pdf (last visited Sept. 20, 2016).
(41.) See Chemoil Adani Pvt. Ltd. v. M.V. HANSA SONDERBURG & Ors, (2010) (Supp.) Bom. C.R. 273 (India) (confirming the order of arrest of a vessel where the bunker supply was requisitioned by time charterer of the vessel and supply of bunker oil was made by the bunker supplier on the vessel although there was no privity of contract with the vessel owner and bunker supplier).
(42.) Dardani Studio Legale, Ship Arrest for Unpaid Bunkers Following OW Bunker Group Collapse, LEXOLOGY (Oct. 14, 2015), http://www.lexology.com/library/detail.aspx?g=0394690e-ea4f-47c5-b2ca-a4a9596ea9ac.
(44.) See id.
(46.) Al Tamimi & Company, Turmoil Following OW Bunker's Insolvency, LEXOLOGY (Jan. 31, 2015) http://www.lexology.com/library/detail.aspx?g=8adac976-71a9-4b38-98cd-8b2aff1bc96c.
(48.) See OW Bunker Malta Ltd. v. MV TROGIR, 602 Fed. Appx. 673 (9th Cir. 2015).
(49.) 46 U.S.C. [section] 31301(5) (2012); THOMAS J. SCHOENBAUM, ADMIRALTY AND MARITIME LAW [section] 9-1 (4th ed. 2004).
(50.) 46 U.S.C. [section] 31301(5)(A)-(B) (2012).
(51.) 46 U.S.C. [section] 31301(5)(D) (2012).
(52.) 46 U.S.C. [section] 31301(5)(E)-(F) (2012).
(53.) Lake Charles Stevedores v. PROFESSOR VLADIMIR POPOV MV, 199 F.3d 220, 223 (5th Cir. 1999) (quotation omitted).
(54.) 46 U.S.C. [section]31301(2012).
(55.) 46 U.S.C. [section]31341(2012).
(56.) Equilease Corp. v. M/V SAMPSON. 793 F.2d 598, 603 (5th Cir. 1986) (en banc), cert, denied, 479 U.S. 984 (1986).
(57.) SCHOENBAUM, supra note 49, at [section] 9-3.
(58.) See id. [section][section] 7-1-7-9. The primary purpose of a maritime lien was to promote shipping by allowing suppliers to freely extend credit to ships but still be protected from shipowners who may try to escape their debts by sailing away without payment. Because of the diverse nationalities and geographical locations of shipowners, their customers, and their suppliers, there needed to be a mechanism in place to allow for a lien upon the property of another wherever such property is found. Id.
(59.) See WILLIAM TETLEY, MARITIME LIENS AND CLAIMS 551 (2d ed. 1998) (stating that maritime liens arise only in those nations that have signed on to the 1926 Brussels Convention, which provides a maritime lien for necessaries under limited circumstances).
(60.) See World Fuel Services Trading, DMCC v. M/V HEBEI SHIJIAZHUANG, 12 F. Supp. 3d 792 (E.D. La. 2014) (holding that the bunker supplier's United States general maritime law choice of law provision includes the Federal Maritime Lien Act which is applied to provide a United States maritime lien to a foreign supplier of a foreign vessel in a foreign port); see also Trans-Tec Asia v. M/V HARMONY CONTAINER, 518 F.3d 1120 (9th Cir. 2008) (holding that the Federal Maritime Lien Act permits a foreign necessaries provider to obtain a maritime lien under the circumstances because of the plain language of the statute coupled with the choice of law clause).
(61.) See Valero Mktg. and Supply Co. v. M/V ALMI SUN, IMO No. 9579535, 160 P. Supp. 3d 973 (E.D. La. 2016).
(62.) Id. at 975.
(64.) Id. at 975.
(66.) Valero, 160 F. Supp. 3d at 976. On Nov. 26, 2014, Valero filed a complaint and the M/V ALMI SUN was arrested the same day. Valero and the vessel's owner then entered into a security agreement. A letter of undertaking was posted as the substitute res for Valero's claim against the vessel. Id.
(67.) Id. at 976. The district court denied Valero's motion for summary judgment on Dec. 28, 2015. The district court concluded that as a matter of law Valero did not have a maritime lien against the vessel. See id.
(68.) Id. at 980.
(69.) Valero, 160 F. Supp. 3d at 985 (citing Galehead, Inc. v. M/V ANGLIA, 183 F.3d 1242 (11th Cir. 1999) (holding that a party need not be the physical supplier to have provided necessaries under the CIMLA)).
(70.) Valero, 160 F. Supp. 3d at 980 (holding that the provision of necessaries to a vessel are "on the order of the owner or a person authorized by the owner"); 46 U.S.C. [section]31341(2012).
(71.) Valero, 160 F. Supp. 3d at 986.
(72.) On Mar. 7, 2016, Valero filed an appeal with the United States Court of Appeals for the Fifth Circuit. Valero Marketing & Supply Co. v. M/V ALMI SUN, IMO No. 9579535, No. 16-30194 (5th Cir. Mar. 7, 2016).
(73.) UPT Pool Ltd., 2015 WL 4005527, at *2.
(74.) Johnston v. All State Roofing & Paving Co., Inc., 557 P.2d 770, 773 (Alaska 1976) (citing CHARLES ALAN WRIGHT & ARTHUR R. MILLER, 7 FEDERAL PRACTICE AND PROCEDURE: CIVIL [section] 1702, 362-63 (3d ed. 1972)).
(75.) CHARLES ALAN WRIGHT & ARTHUR R. MILLER, 7 FEDERAL PRACTICE AND PROCEDURE: CIVIL [section] 1702, 362-63 (3d ed. 1972)).
(76.) Donald L. Doemberg, What's Wrong With This Picture?: Rule Interpleader, The Anti-Injunction Act, In Personam Jurisdiction, and M.C. Escher, 67 U. COLO. L. REV. 551, 557 (1996) (citing John N. Pomeroy, 4 EQUITY JURISPRUDENCE [section] 1322 at 906 (3d ed. 1905)).
(77.) Don Zupanec, Interpleader Action-Subject Matter Jurisdiction-Post-Filing Events, 21 No. 8 FEDERAL LITIGATOR 4 (Aug. 2006).
(78.) FED. R. CIV. P. 22.
(80.) 7 U.S. 267, 267 (1806). Federal courts are courts of limited jurisdiction. They may only hear cases where there is a federal law at issue (federal question jurisdiction) or where there is diversity of citizenship (diversity jurisdiction). The federal court in Strawbridge held that there must be "complete diversity" in order for the court to have subject matter jurisdiction under 28 U.S.C. [section] 1332. If even one defendant is from the same state as the plaintiff, diversity is destroyed. Id.
(81.) 28 U.S.C. [section] 1335 (2012). At least two competing claimants must be citizens of different states. Id.
(82.) 28 U.S.C. [section] 1335(b) (dispensing with the common law requirement of "identical" claims). Such a situation might arise, for example, if multiple claimants seek the proceeds of an insurance policy but not every claimant seeks the entire amount. See, e.g.. Metropolitan Life Ins. Co. v. Enright, 231 F. Supp. 275 (S.D. Cal. 1964).
(83.) Doemberg, supra note 76, at 562.
(84.) 28 U.S.C. [section] 2361 (2012) ("[A] district court may... enter its order restraining [all claimants] from instituting or prosecuting any proceeding in any State or United States court affecting the property, instrument or obligation involved in the interpleader action until further order of the court.").
(85.) In the New York OW Bunker interpleader actions, the court issued "a restraining order pursuant to 28 U.S.C. [section] 2361 restraining the arrest or attachment of the subject vessel and accepted the proposed interpleader funds deposited within the court registry as a substitute res against which claimants could assert their competing claims." Marie E. Larsen, The US Perspective: Interpleader to the Rescue of Shipowners Following the OW Bunker Collapse, ADMIRALTY AND MAR. LAW COMM. NEWSLETTER, Summer 2015, at 21.
(86.) Rule 108 of the Federal Court Rules, SOR/98-106 (Can.). Pursuant to subsection 46(4) of the Federal Court Act S.C. 1990, ch. 8, [section] 14(4), a copy of the proposed Federal Court Rules, 1998 was published in the Canada Gazette. The Governor in Council, on the recommendation of the Minister of Justice, pursuant to subsection 46(1) of the Federal Court Act S.C. 1990, ch. 8, [section] 14(1), approved the annexed Federal Court Rules on Jan. 26, 1998. Canada is similar to the United States in that procedural rules can only be established with statutory authority.
(87.) Id. (cited with approval in Canpotex Shipping Services Ltd. v. Marine Petrobulk Ltd., 2015 F.C. 1108 (Can. C.A.)).
(88.) Canpotex, 2015 F.C. at 1108.
(90.) Canpotex, 2015 F.C. at 1108.
(95.) Canpotex, 2015 F.C. at 1108. See also Rule 108 of the Federal Court Rules, SOR/98-106 (Can.).
(100.) Canpotex, 2015 F.C. at 1108.
(101.) See id.
(102.) Steve Simms, Paul Taylor, & Carel van Lynden, Comparing Notes, BUNKERSPOT (Dec. 2015/Jan. 2016), http://www.simmsshowers.com/site/wp-content/uploads/2015/12/Dec-Jan-2015-2016-Petrospot-Comparing-Notes-on-OW.pdf.
(103.) Stena Bulk AB,  1 Lloyd's Rep. 280.
(108.) Stena Bulk AB,  1 Lloyd's Rep. 280.
(110.) Precious Shipping,  SGHC 187.
(115.) Precious Shipping,  SGHC 187. The High Court of Singapore similarly refused interpleader in another case related to the OW Bunker bankruptcy relying on the distinction between contractual and lien claims. See Kamil Norwid Shipping Co., Ltd. v. ING Bank N.V. and Transocean Oil PTE. Ltd., SGHC (Apr. 24, 2015) (Singapore).
(116.) Hapag-Lloyd Aktiengesellschaft v. U.S. Oil Trading, 814 F.3d 146 (2d Cir. 2016) (citation omitted).
(117.) Id at 151.
(118.) Id. at 153.
(119.) Under Dutch law, a bunker supply contract is a purchase agreement where the buyer is obligated to pay for the goods received despite the seller failing in its contractual obligation with the supplier.
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|Author:||Gauer, Danielle Tamara|
|Publication:||Loyola Maritime Law Journal|
|Date:||Jan 1, 2017|
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