Marasi Magazine Issue 35

LEGAL INSIGHTS
Should ship owners pay for bunkers if
the chartering company is bankrupted?
Natalie Jensen
Managing Associate, Ince
Rania Tadros
Managing Partner, Ince
In light of difficult market conditions and the evolution
of today’s shipping markets, it is not unheard of for charterers
to become insolvent or file for bankruptcy and to
leave behind numerous debts including for bunkers loaded
on board ships they had under charter. In recent years,
even some of the most successful charterers have struggled.
Time charterers are generally responsible for providing
the vessel with bunkers during the currency of the charter
and the contractual position as between the owners and
the charterers generally provides that the ownership of
the bunkers lies with the charterers.
In the bunkering industry, it is often the case that bunkers
are supplied on credit terms to the charterers with a
delayed term for payment following delivery of the bunkers.
In return, bunker suppliers often seek to retain ownership
in the bunkers and rights of lien against the bunkers.
In circumstances where the charterers do not make
payment to the bunker supplier, it is not uncommon for
the bunker suppliers to seek recourse against the vessel to
which the stem was made and/or the ship owners.
Risks to owners/the vessel
Global trade results in vessels calling at countries which
adopt different laws and regimes in respect of the unpaid
bunker suppliers’ rights as against the vessel and/or the
owners.
Depending on the vessel’s trade, there is a potential
threat of interruption of service to the vessel and delay as
a result of a bunker supplier’s potential efforts to establish
a ship arrest, detain the vessel, or establish a maritime lien
or claim.
There are a number of bases upon which unpaid bunker
suppliers commonly seek to claim against the vessel
and/or the owners. They often argue that (i) ownership
in the bunkers rests with them as a result of a retention
of title clause; (ii) the bunkers were also supplied to the
owners and/or vessel (particularly in circumstances where
the bunker invoice is also addressed to the master, owners
and/or the vessel and the bunker delivery note is signed
by the Master or Chief Officerl); and/ or (ii) they have a
lien against the vessel.
The bunker suppliers’ ability to arrest the vessel and/or
obtain a maritime lien varies depending on the jurisdiction
in question.
Position in the UAE
Ship arrest
The UAE has not ratified any of the ship arrest conventions
and the position in respect of the ability to arrest
a vessel is governed by Federal Law No. 26 of 1981 (the
“UAE Maritime Code”), which draws heavily on the 1952
Ship Arrest Convention. The grounds available for ship arrest
are largely based on Article 1 of the 1952 Ship Arrest
Convention.
Article 115 of the UAE Maritime Code provides that a
party may arrest a vessel for the satisfaction of a “maritime
debt”. Article 115(2)(i) includes “supplies of products
or equipment necessary for the utilization of or maintenance
of the vessel…” as a “maritime debt”. Bunker supplies
will tend to be classified as falling within this category.
Article 117 of the UAE Maritime Code also provides that
“if the vessel has been chartered to a charterer together
with the right of navigational management thereof, and he
alone is responsible for a maritime debt connected therewith,
the creditor may arrest the said vessel or any other
vessel owned by the same charterer”. There is therefore a
right to arrest the vessel even though the maritime debt
is owed by the charterer provided that the vessel arrested
68 SEPTEMBER - OCTOBER 2019