An early January decision by Judge Valerie Caproni, of the United States District Court Southern District of New York, represents an important milestone in the ongoing saga of OW Bunker & Trading A/S, and its related companies.

Bruce Paulsen, partner at New York firm Seward & Kissel, explained to Seatrade Maritime News that: “Shipowners knew that they owed somebody money for bunkers taken aboard, but they were not sure whether they owed it to an OW company, or, instead, to the physical suppliers of the fuel.” Under the “Interpleader Actions” commenced during 2015- 2016, shipowners owing money for fuel taken in a late 2014, just prior to the demise of OW, paid money into the court, similar to an escrow fund. Paulsen further explained that the ruling concerned four “test cases” (out of 24 cases in front of this Judge), concerned fuel supplied by Nustar Energy Services in the US Gulf (to vessels controlled by NYK and by Clearlake) and by US Oil Trading LLC on the US West Coast (to vessels controlled by Hapag Lloyd).

Though legal complexities abound in the lengthy opinion rendered by Judge Caproni, the essence of the ruling is that the physical suppliers do not have a lien on vessels for the payments due for bunkers provided. According to Paulsen, “Suppliers of ‘necessaries’, such as bunker fuel, to vessel can obtain a maritime lien if they are following the order of owner, or a party authorized by owner. The judge decided that the physical suppliers did not receive their orders from the shipowners, so they do not have the lien.” The Judge conducted a thorough study of the four vessel fuelings, and noted that “…The uncontradicted testimony from the Vessel Interests is that they saw the choice of physical supplier as essentially OW’s to make….In short, the inclusion of the Physical Suppliers on the confirmations provided by O.W. and the Vessel Interests does not amount to a ‘selection’ by the Vessel Interests of NuStar or US Oil Trading.”

In these 24 cases, the court has not yet released the money being held. Paulsen explained that Judge Caproni’s decision brightens the outlook for Seward & Kissel’s client, ING Bank- the security agent under a $700m credit facility that had been extended to OW. He said, “For our client, this is a very important milestone.”

Lawyers representing OW’s US companies also looked favorably at the decision. Robert O’Connor, a Litigator in the New York office of Montgomery, McCracken, Walker & Rhoads, told Seatrade Maritime News: “Our client, OW Bunker USA Inc, is certainly pleased with the result; we believe that the Judge properly applied the Lien statutes, and we are pleased that the decision comports with the decisions rendered by other District courts.” O’Connor, who specializes in maritime matters, explained that the first decisions were rendered in late 2015 by a court in Texas, when an effort to assert a maritime lien by a supplier, in this case Valero, was denied in the Almi Sun case. In talking about the January, 2017 decision, he said, “There’s definitely momentum now,” referring to cases in Washington State, Alabama and earlier cases decided in the New York court by a different Judge.

The implications of the ruling could well go beyond the 24 cases before Judge Caproni; the detailed decision may also set a pattern for additional cases still to be decided by elsewhere in the US District Courts system, as well, according to Paulsen. The New York Southern District ruling is not binding on the other courts, but it is “persuasive authority,” he explained.