Bunker suppliers lose their lien

Two decisions from the Second and Fifth Circuits have found that physical suppliers do not have a lien against the vessel and instead have favored the contractual parties in the circumstances of each of those cases.  This judicial trend has wide ramifications in the bunker trade for vessel interests and bunker suppliers.

Both courts found the physical supplier not to fall under the Commercial Instruments and Maritime Liens Act (“CIMLA”), 46 U.S.C. § 31301 et seq. Rather, CIMLA states that a person providing necessaries to a vessel “on the order of the owner or a person authorized by the owner” is entitled to a maritime lien on the vessel. 46 U.S.C. § 31342(a). However, CIMLA defines “persons . . . presumed to have authority to procure necessaries for a vessel” as “(1) the owner; (2) the master; (3) a person entrusted with the management of the vessel at the port of supply; or (4) an officer or agent appointed by—(A) the owner; (B) a charterer; (C) an owner pro hac vice; or (D) an agreed buyer in possession of the vessel.”  46 U.S.C. § 31341(a). 

According to the Second Circuit decision – as a subcontractor, a physical supplier is generally not entitled to a maritime lien because it provided the bunkers at the direction of an intermediary bunker trader rather than at the direction of the owner or the charterer of the Vessel.

Our firm’s founding partners have handled many bunker disputes relating to these purported liens over necessaries, intermediary insolvency risk and advised owners/charterers/suppliers on tightening their practices / contracts – all issues which were brought to the fore after the OWB collapse.  These latest decisions suggest that the pendulum is swinging back towards shipowners and charterers – the users of bunkers – and away from bunker suppliers.

Please refer to the judgments for further reference:

For the decision of the Second Circuit:

ING Bank N.V. v. M/V TEMARA, 2nd Cir. June 13, 2018

For the decision of the Fifth Circuit:

Valero Mktg. & Supply Co. v. M/V, 5th Cir. June 19, 2018

If you would like to discuss anything arising from this commentary please contact Ed Floyd at ed.floyd@floydzad.com and +1 (917) 999 6914 or Luke Zadkovich at luke.zadkovich@floydzad.com and +1 (917) 868 1245 / +44 (20) 8068 6844.  This article is to be considered general commentary only and not to be relied upon as legal advice for any particular circumstances.

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