Bunker Creditors Free To Arrest A Vessel In Panama

The bunker is the fuel oil used to power ships. It gets the name from the containers on board vessels and in ports where the bunker is stored in. Bunker fuel constitutes a fundamental element in shipping and one of the largest expenses in shipping operations.

There are several reasons why bunker suppliers will attempt to collect their credit against the ship or the owner for the non-payment of fuel nominated by the operator:

  1. Because they remain the owners of the bunker in accordance with a title retention clause included in the terms and conditions
  2. Because the invoice is addressed to the ship owners and who ordered the bunker supply
  3. Because they have a privileged maritime credit enforceable against the vessel.

Under Panamanian conflict of laws rules, recognition of a right to enforce a maritime lien is an issue to be determined by the contractus lex. Besides, Panamanian law recognize necessaries[1] as a maritime lien. Therefore, an unpaid bunker supplier will enjoy a maritime lien if it is included in the contract (terms and conditions of the bunker supplier), and/or as a matter of Panamanian law.

In difficult market conditions, bunker suppliers faced non-payments or delays in payments. Furthermore, the widespread practice in bunker supply contracts is to purchase price after delivery of the bunker.

Ship arrest is an advantageous way to obtain security for a claim, which likely leads to the judicial sale of the vessel if necessary. In addition, ship arrest serves as an instrument of pressure on the debtor to settle the claim due to the business interruption that frequently heads parties to satisfactorily settle the claim. As a result, the arrest of a vessel may be set up as the legal institution best suited to the needs of creditors for unpaid fuel supply, or delayed payment.

Under the Panama Maritime Procedure Code, one of the reasons for the arrest of a vessel in Panama is precisely to make effective maritime liens, which according to the applicable law allows filing the claim directly against the vessel (actio in rem).

The Panama´s Maritime Trade Act[2] establishes that a creditor will have maritime lien on the ship if it owes any of the following credits:

  1. Legal costs incurred in the common interest of maritime creditors.
  2. Expenses, allowances and salaries of assistance and rescue due for the last trip.

  1. Wages, remuneration and compensation due to the master and individuals of the crew for the last trip.
  2. The naval mortgage.
  3. Credits in favor of the Panamanian State in taxes and fees.
  4. Wages and stipends due to dockers and contractors directly by the owner, operator or captain of the ship for loading or unloading of this in its last arrival.
  5. Compensation for damages caused by negligence.
  6. The amounts due as a contribution to common breakdowns.
  7. Amounts owed under obligations assumed for the provision of the ship.
  8. The quantities taken to the bulk on the hull of the ship and rigging for the supplies, armaments and dressings if the contract had been concluded and signed before the ship leaves the port where such obligations were contracted, and the insurance premiums for the last six months.
  9. The salaries of pilots and guardians and the costs of preservation and custody of the ship, its gear and equipment after the last trip and entrance to the port.
  10. The compensations due to the shippers and passengers for non-delivery of the

Loaded or damaged, attributable to the master or last trip.

  1. The price of the last acquisition of the vessel and interest due from the last

two years.

The merits of a ship arrest to execute a credit for bunker payment defaults on the maritime lien basis will depend on the applicable law, which means that it is a case by case concern.  Thus, the applicable law plays a key role, which will be normally contained within the terms and conditions of the bunker supplier.

Frequently, bunker suppliers try to take advantage of the maritime lien applying to the US Law. The US Maritime Lien Act (“MLA”) provides that a person furnishing necessaries to any vessel upon the order of the owner of such vessel, or a person authorized by the owner, will have a maritime lien on the vessel which may be enforced by suit in rem. It shall not be necessary to prove that the credit was accepted by the vessel.

Apart from the responsibility in rem, the bunker creditor can also act against who is personally responsible, the one who is contractually responsible, who is usually the charterer or the owner of the ship, it will again depend on the applicable law.

Several bunkering cases have been litigated by this law firm, among which we can mention the case ING BANK N.V. vs CLIPPER BULK A/S in which, the plaintiff, as the company that manages OW BUNKER receivables worldwide, filed an ordinary maritime claim in the amount of US$293,503.63 -plus interest, costs and expenses- against the defendant, as operator of the ships supplied, M/V KEN GOH, M/V PERSEVERANCE, and the ship arrested, M/V GENCO CONFIDENCE. The fuel delivery was subject to the terms and conditions of OW BUNKER TRADING A/S which set forth the English law as the one governing the contract and which makes the person that produce the nomination, personally responsible. On the other hand, in the case of FALMOUTH PETROLEUM LIMITED (D / B / A BUNKERFUELS) vs. M / N EQUATOR, the plaintiff, the marine fuels supply company, filed a special procedure for the enforcement of a privileged maritime lien in the amount of US$313,941.02 -plus interest, costs and expenses- against the defendant, the vessel supplied. The delivery of fuel was subject to the terms and conditions of FALMOUTH PETROLEUM LIMITED (D / B / A BUNKERFUELS) that establish the law of the United States of America as applicable to the supply contract and that make the vessel responsible for the non-payment of de bunker provision.

For all the above, we could say that, from the bunker supplier´s perspective, the right to arrest a vessel is the most valuable tool in enforcing its maritime claim and recovering its debts against ship owners and/or operators.

[1] Necessaries: “goods and services supplied to a ship”. (WILLIAM TETLEY. Maritime Liens & Claims. Blais. 2nd End. Pg 551.

[2] Act 55 of August 6, 2008.

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