Lawyers for four shipowners pulled into the OW Bunker legal fracas are arguing that their ships should be free of liens because the collapsed Danish marine fuel giant committed fraud by continuing to sell when executives had suspended payments to physical suppliers in October 2014. Law firm Holland & Knight argues that the alleged fraud invalidates liens that give OW power to arrest ships in US federal courts, as well as the liens that the bunker giant passed on to ING Bank because its $700m credit facility was secured by OW accounts receivables.

The attorneys, led by Holland & Knight’s James Power, contend in court papers that OW Bunker already had decided to suspend or defer payments to physical suppliers when the company’s credit situation became critical in the weeks before it collapsed into bankruptcy. But it continued to ink deals with customers to supply bunkers “with no intention of satisfying the underlying physical supplier contracts”, the lawyers wrote in a memorandum challenging ING’s request to US District Judge Katherine Forrest for summary judgments upholding its claims in New York that it has liens against the ships.

Lawyers for the Dutch bank are preparing a response to Holland & Knight’s latest manoeuvre. “Those arguments don’t have merit,” said Seward & Kissel partner Bruce Paulsen, one of ING’s lawyers, of the arguments by the owners’ camp. The shipowners are challenging liens against the 53,400-dwt bulker Temara (built 2007), which is owned by Spain’s Ership Alvargonzalez; H Vogemann’s former 29,500-dwt general cargoship Voge Fiesta (now Eagle Trader, built 1997); the 32,000-dwt bulker Ocean Harmony (built 2004), which is owned by Ocean Line Holdings of China; and the 95,700-dwt Maritime King (built 2011), a bulker controlled by Japan’s Shoei Kisen Kaisha.

The cases are among several that have involved competing claims from physical suppliers, OW’s surviving entities and ING over fuel delivered but not yet paid for in the weeks before OW collapsed in November 2014. But in these four cases, the fuel in question was ordered by charterers and not owners, and yet ING was able to seize the ships under US lien law, which is generally seen as supplier friendly. The OW debacle has served to test the limits of liens in the US federal courts, and Judge Forrest already has ruled that physical suppliers do not have a lien in cases where the vessel interests contracted only with OW, which served as a middleman in the bunker transactions. A decision finding that OW and ING do not have liens to arrest the ships would be a win for shipowners caught in the OW wrangle, shielding them from arrest in the US and potentially other countries that recognise US liens. However, some lawyers expressed doubt that the effort would work.

Power argues that OW also should not have the benefit of a lien in the US courts because of its “unclean hands” as it allegedly sold fuel with no intention to pay the underlying physical supplier. “Congress did not intend by passing the lien act to give the special lien for necessaries to an entity that perpetrated the contract with fraud,” the lawyer told TradeWinds. “To be clear, there is no way that any court, exercising the power of equity, would reward OW for a contract where it knew in early October that it was not going to pay the third-party physical suppliers.”