A rare opportunity for a shipping case to appear before the US Supreme Court was dashed by an 11th-hour settlement deal in one of the myriad cases triggered by the collapse of OW Bunker, it has emerged.
The justices of the US' highest court were scheduled to hear an appeal earlier this month, but Texas bunker supplier NuStar Energy Services withdrew its appeal just before the meeting, according to court papers.
The appeal could have provided a definitive answer to the question of whether physical suppliers of bunkers to ships have a maritime lien when they have been purchased through an intermediary.
The details of the settlement have not been made public.
San Antonio-headquartered NuStar had the highest number of claims in US courts resulting from the collapse of the Danish bunker supplier.
Connecticut kerfuffle
The NuStar settlement sweeps aside a key dispute that has delayed liquidation of OW’s US subsidiaries after its 2014 collapse.
In the six weeks before the marine fuels giant crumbled, NuStar provided more than $18m in bunkers to ships that had ordered the fuel through OW. But OW's subsidiaries and main creditor ING Bank, which held claims to OW's supply deals as a result of its $700m credit facility to the company, had been chasing repayment of the same bunker bills.
Every court of appeals to consider the question has held that a physical supplier of necessaries to a ship is not entitled to a lien pursuant to the Commercial Instruments and Maritime Liens Act.
Lawyers for ING Bank and OW Bunker USA
The sides have been battling in the US Bankruptcy Court for Connecticut, where OW Bunker North America and OW Bunker USA had filed for Chapter 11 bankruptcy protection and are still undergoing a liquidation.
Jonathan Franklin, the Norton Rose Fulbright lawyer for NuStar, did not respond to a request for comment, and the company's brief motion to dismiss does not explain why the settlement took place just before the Supreme Court was to decide whether to weigh in.
Burning midnight oil
In Connecticut, lawyers told Chief Bankruptcy Judge Julie Manning they agreed on the settlement after working until late on 30 September, the day before the Supreme Court justices were to consider the case in their conference to decide which cases to take up.
“That’s encouraging, and I’m happy that you could do so cooperatively,” said the judge, according to an audio recording of the hearing.
The cases before the Washington DC high court focused on delivery of bunkers to Clearlake Shipping and NYK Line vessels that were purchased through OW but physically delivered by NuStar.
The US fuel-terminal operator had been asking the Supreme Court to decide on its argument that physical suppliers of bunkers bought through intermediary companies, such as OW, have a lien on ships that allows them to arrest the vessels and take priority in claims against them.
"Yet the court below held that OW entities — intermediaries that physically provided no fuel to the vessels, that never saw or touched any of the fuel, and that never expected more than a small markup for facilitating the transactions — possess liens for the full value of the transactions, while NuStar has no liens at all," said NuStar's lawyers.
"The result of this holding, if allowed to stand, is that vessels will be able to avoid all maritime liens to physical suppliers merely by employing affiliated intermediaries to procure their necessaries."
But lawyers for ING Bank and OW Bunker USA argued that US appeals courts have been unanimous on the question.
"Every court of appeals to consider the question has held that a physical supplier of necessaries to a ship is not entitled to a lien pursuant to the Commercial Instruments and Maritime Liens Act," the attorneys said.
