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Source: Skuld

Bankruptcy of OW Bunker A/S – urgent update

Urgent advisory to members

Applicability: Shipowners and Charterers

Further significant developments have occurred since the Association first reported on this matter. Members are advised to carefully review their potential exposure.

The Association has had the benefit of the significant input and work conducted by its Copenhagen office since the beginning of this situation.

The situation

Further to the Association's advices of 7 November 2014, more information has come to light with respect to the potential impact and scale of the consequences from the bankruptcy of OW Bunker A/S in Denmark.

As of today's date, the Association is aware of OW companies declaring bankruptcy or taking steps in that regard in Denmark, Germany, Singapore and the USA.

Among these are the parent OW Bunker A/S, OW Bunker & Trading, OW Bunker Supply & Trading as well as OW Bunker Far East.

At present the situation with respect to Dynamic Oil Trading is not sufficiently clear to make a firm statement, but there are likely to be developments in the near future.

The Association is aware of there being possibly up to 40 OW Bunker and related offices around the world and a number of different trading names. As such it is likely that further news and developments will occur in a number of jurisdiction in the near future and members are advised to follow these closely to see how they may be affected.

Affected parties

As a result of this situation a number of different parties have been directly affected.

In the shipping context that includes:

- Shipowners that have bunkers on board supplied by or through OW or an affiliated company.

- Time charterers that ordered or received on a chartered vessel such bunkers.

- Bunker brokers and traders involved in the arrangement of the supply.

- Actual performing suppliers of fuel.

- Bunker barge owners and charterers involved in a supply or supply contract related to OW or an affiliated company.

As such a significant number of companies may be directly or indirectly affected by this still developing situation.

Bankruptcy effect

While the main parent company, and certain affiliates / subsidiaries have gone in to bankruptcy, it must be understood that:

- the bankruptcy of one company does not immediately mean the bankruptcy of another.

- bankruptcies of separate legal entities in separate legal jurisdictions will be handled according to the local law and practice - there is no "global" bankruptcy - but cross border recognition may be granted by some jurisdictions of another's proceedings.

- it is possible to be a creditor in one set of bankruptcy proceedings and a debtor in another.

- a company's bankruptcy does not immediately or necesarily mean it's contractual positions are closed off, terminated or that it is in any form of repudiatory breach.

- bankruptcy puts a stay on legal action for that entity in that particular jurisdiction.

There are many other issues to consider and members will be well advised to ensure they seek specific advice for specific jurisdictions from local subject matter practitioners in law. There is likely to be no "one size fits all" legal advice or solution to this situation.

Steps to take for creditors

If you believe that OW Bunker A/S or any of its subsidiaries or affiliates owe you any sum, then you need to check if that company is already in bankruptcy.

If the company is not in bankruptcy then you would need to take normal legal steps to recover any sums outstanding or press any legal claims. Should the company subsequently be declared bankrupt then it is likely that such action will be stayed in favour of the bankruptcy proceedings.

If bankruptcy is already underway then it is important to check how, in the specific legal jurisdiction where the specific OW entity is located, a creditor needs to file a claim in the bankruptcy. This is best done early in order to gain admission to creditor meetings and have a vote at such meetings, which often start to follow a few short weeks after the applicable local court grants the order for bankruptcy.

In Denmark, two law firms, Plesner and Gorrisssen Federspiel, have been appointed as trustees in bankruptcy of OW Bunker A/S.

Through its lawyers the Association asked the trustees to provide us with details of to be contacted for the filing of claims against OW Bunker A/S:

Christian Pedersen
Phone +45 86 20 74 71
cpe@gorrissenfederspiel.com

With the following cc:

Morten Midtgaard Pedersen
Phone +45 33 41 41 44
mmp@gorrissenfederspiel.com

Line Gritt Boel Jensen
Phone +45 33 41 42 68
lgj@gorrissenfederspiel.com

The Association understands that for OW Bunker Far East, KPMG in Singapore are the provisional liquidators and should be contacted with respect to any claims or positions relating to that company.

Possible claims against members

Owners and charterers that have received fuel through or by OW Bunker A/S, affiliates and subsidiaries will need to check whether there was a separate performing supplier involved and whether that company has in fact been paid.

It is likely that unpaid physical / actual suppliers may consider to take action against vessels which received fuel through / via OW Bunker or affiliates and which did not see the performing supplier get paid.

This brings with it the risk that if the supply has not been paid for at all, that competing claims are made by possibly:

a. performing supplier

b. the oil trader

c. receivers / trustees in bankruptcy of OW

d. any assignee of OW (the Association is aware that OW has assigned rights to payments to at least one bank)

The basis for these claims could be on a variety of legal grounds, and these would in part depend on the specific law and practice of both the supply contract as well as the jurisdiction in which legal action is contemplated.

If a claim is notified or legal action is threatened, members are asked to urgently contact their Business unit at Skuld for advice.

Double claims

At present there is a potential risk of more than one demand for payment being made for the same stem of fuel.

That would even be the case where the member has already paid OW, but then OW failed to pay the performing supplier.

Whether the risk of a double payment will ultimately be borne out will depend on a number of factors including the law of the supply contract, the jurisdiction in which any legal action takes places, the jurisdiction in which the relevant OW entity may be undergoing bankruptcy and the possibility of multi-party negotiations to find a commonly acceptable solution.

Indeed the Association would encourage members affected to seek to start an early dialogue with possible counterparties, claimants and receivers / trustees in bankruptcy as the alternative of multi-party / multi-jurisdictional legal action is likely to be an unsatisfactory experience for all concerned.

What to do for open contractual positions

As stated earlier, the mere bankruptcy of a company does not necessarily mean its contractual positions are automatically terminated. It will be a matter for both the general law of that contract, as well as the decisions made by the trustee in bankruptcy, which could see contracts survive or come to an end.

It can be legally dangerous to "jump the gun" and prematurely consider a contract repudiated, and thus risk committing a repudiatory breach of one's own. Careful legal analysis is required before taking any step in this regard.

Clearly if fuel was to be supplied by or through OW, an affiliate or a subsidiary then an urgent review needs to be made of that position and whether any third party was going to be involved.

It may be possible to somewhat salvage such positions, but again careful legal analysis will be a pre-condition.

Checks to undertake

There are a number of possible claim scenarios where someone may either owe money to OW (or an affiliate) or be owed money by them. These scenarios may involve competing demands from multiple claimants as discussed above.

Anyone who has done business with OW or its subsidiaries or affiliates will be well advised to carefully review their position in order to establish the potential exposure.

Things to watch out for are:

- check to identify the precise OW entity and its home jurisdiction for each and every contractual position

- review which positions are open and which are recently closed (perhaps going back at least four weeks and perhaps more)

- identify whether you are a debtor or creditor in any situation

- check whether the specific OW entities under consideration have already filed for bankruptcy

- consult with legal advisors for each specific jurisdictional situation

- check which invoices have already been paid

- seek to find out if any third party was involved to any transaction or position

- make early contact with that third party, establish whether they were paid or not

- if that third party believes it has a claim for an unpaid supply then seek to start a dialogue now rather than wait for possible legal action (which could follow without warning)

Further developments

It is likely that further developments will happen with respect to both companies already in bankruptcy and others which will follow.

These events may be hard to predict as to their exact timing and nature, which means members affected or potentially affected by this situation will need to closely follow these events.

Members with specific queries are asked to contact their usual Skuld Business unit.