Tag Archives: Energy

Greek Courts rejects the claims by physical suppliers against Owners in OW related disputes

WORTH READING BY ALL THOSE INVOLVED IN BUNKERS (BUYERS OR SELLERS):

After the financial collapse of OW Bunker Group on November 7, 2014, numerous claims by physical suppliers in risk to remain unpaid due to their counterparty’s bankruptcy, have been brought in different jurisdictions worldwide. Consequently, Owners and Charterers are currently exposed to competing claims for unpaid bunkers both by OWB or their assignees ING and by physical suppliers, with the possibility of arrests. Our firm recently handled claims brought by the physical supplier SEKA against the Owners of the vessels CE/BREEZE and PANAGIA ARMATA in personam (since maritime liens and subsequent in rem proceedings are not recognized under Greek law) and the judgments –which are believed to be the first- found in favor of Owners.

Facts

In October 2014, Owners instructed the Piraeus office of OW Malta to provide the vessels with certain quantities of bunkers and OW Malta confirmed the order which resulted to a contract for the sale of the agreed bunkers, through the exchange of the relative documents (sale confirmation and invoice coupled with OW standard terms and conditions). Since OW Malta operated as a trader and did not possess physical premises for the storage of bunkers, it instructed SEKA to physically supply the agreed bunkers to the said vessels. The purchase of the bunkers was completed through the respective exchange of documents (purchase confirmation, bunker sale confirmation and invoice together with SEKA’s standard terms and conditions which did not include a retention of title clause). Following OW’s filing for bankruptcy, SEKA asked for direct payment of the price from Owners, by forwarding them the relevant invoice addressed to the Owners and/or Managers and/or Charterers and/or Master and/or OW Malta.

Arguments

SEKA’s case against Owners is that it supplied bunkers to the vessels under a contract entered into through the Owners’ authorized agent, OW Malta. The basis of this argument lies in the fact that SEKA’s invoices are addressed both to OW Malta and the Owners and that SEKA’s standard terms identify as jointly and severally liable for the payment both the party that gave the order and the one for whose the benefit the order was made.

SEKA also supports that even if OW was not an authorized agent of the Owners to conclude the bunker sale agreement, both the vessel port agents who contacted SEKA for the arrangements of the supply and the chief engineer who signed the Bunker Delivery Receipt (BDR) in so doing, acted as agents for the purchase of the bunkers binding the Owners.

The Owners’ primary basis for disputing liability was that no contract has ever been concluded between them and SEKA directly. The contracts for the bunkers were separate and distinct as between Owners and OW Malta and OW and SEKA. OW was a separate legal entity that contracted on its own name and for its own account operating as a fuel trader giving credit to buyers. Owners also contended that a unilateral identification of their liability against SEKA in SEKA’s invoice or its standard terms is not binding on them, since they were notified later -SEKA’s invoice has been sent to them after OW bankruptcy- and they have not accepted these terms since they were not party to the contract between OW and SEKA.

Furthermore, in compliance with ING’s request, acting as assignee of OW entities, Owners have already paid the OW invoice price for the bunkers supplied to their vessels directly to ING, having OW’s consent.
Owners further argued that simple signing of the BDR by their chief engineer as well as their agent’s actions for the bunker supply are not enough to prove the conclusion of a contract on behalf of the Owners.

Finally, Owners in support of their above arguments mentioned that OW Bunker deliveries involved a variety of physical bunker suppliers operating in Greece and therefore they were not aware of the physical supplier that would provide the bunkers at the agreed date (i.e. SEKA, EKO or others).

Piraeus First Instance Court Decision

The claims were brought in security measures proceedings and the judgments have been handed down on December 2015 for CE BREEZE and January 2016 for PANAGIA ARMATA. The judge rejected SEKA’s case and found in favor of Owners. Particularly, the court held that in the said case two separate and distinct agreements have been made, one between OW Malta and Owners and another one between OW Malta and SEKA. In arriving at its decision, the court appears to have taken into consideration that these two contracts include different terms as to the purchase price, credit period, jurisdiction and applicable law and the mere sending of the invoice to the Owners or the signing of the BDR by the chief engineer does not establish liability of the Owners. The court also held that OW did not act as agent of the Owners and had no authority to enter into an agreement on their behalf, but as a separate entity acting in its own name.

Conclusion

This decision is in line with the longstanding recognition of privity of contract by Greek case law and protects Owners from unexpected exposures to physical suppliers’ demands for payment, especially in cases where they have already paid off the price either to OW or ING. Hearings in the merits of the case are expected to take place this year, where a binding authority will be issued. However, considering other jurisdictions as well (see the Valero decision of the United States District Court for the Eastern District of Louisiana, Belgian court case) such claims (either on a maritime lien basis in rem or in personam proceedings) will hardly succeed due to the absence of contractual relationship between Owners and physical suppliers. Meanwhile, the shipping industry remains on hold for the RES COGITANS outcome, the hearing of which in the Supreme Court tοοκ place in late March 2016.

Source: HSN & Karmela Mavrochi, Partner, Costas Georgopoulos & Partners. Attorneys-at-law) 6.4.2016

 

World Bank Flagship Report: The yearly Global Economic Prospects (Published Jan 6, 2016)

 

Here is the full 286-pages PDF report. Happy reading (and thanks to the World Bank) :

World Bank – Global Economic Prospects – January 2016

For those interested only in the MENA region, here is the 31-pages PDF report covering the region ( Libya showing over 35% growth in 2016 ? ..In as much as one hopes so, this is wishful thinking to say the least !!!)

– World Bank – Global Economic Prospects -January 2016-MENA

 

 

 

OW Bunker Collapse: Comprehensive Report on “How and Why” it happened !

 

Here is the 401-pages comprehensive report on the collapse of OW Bunker – a major scandal in the maritime industry that has changed the bunker business of ever !.. Just click the name to open the PDF file.

Our thanks to Halling-Overgaard – Sølvkær Olesen – Henriksen, Advocates, Aarhus, Denmark (http://www.fhplaw.dk)

OW Bunker

 

MENA: The changing geopolitics of oil in the Middle East

One in every three barrels of exported crude petroleum still comes from the Middle East. Yet significant shifts in this sector are transforming the geopolitical equation of oil in the region:

• The US is not as reliant on the region as it once was, as its shale gas revolution has made it relatively energy independent.
• Iran could once again become a regional competitor in the sector, if its diplomacy efforts with the US succeed.
• Energy prices are volatile, frequently hitting budget-busting lows.
• Chinese demand will become significantly more relevant for the region.
• Two former large producers, Libya and Iraq, are in deep crises and producing well below potential, with no quick-fix solution in sight.
• Extremists control vast swathes of territory across Syria and Iraq and sell crude oil at steep discounts. Though not enough to significantly impact the oil market overall, this factor is sufficient to ensure a steady influx of money that will continue to create havoc in the region and slow down trade and pipe lines.
• Saudi Arabia has found itself in a tight spot in this new context and its allegiances are becoming more muddled by the day – over ISIS, over Syria, over Iran and over the global oil regime by using oil prices to defend their market share and position themselves politically.

So what do these shifts mean? Well, for one, they mean that energy policies will have to adapt, as will the overall policies of regional powers. A sound and forward-looking energy policy that pays due diligence to the local and regional environment is as critical to national security as it is for uninterrupted energy access.
This concern was a key takeaway from sessions at the recent World Economic Forum on the Middle East and North Africa.
So too was the idea that the region’s governments must reverse the traditional thinking that strict security measures and state control are the fundamental ingredients to ensuring socioeconomic sustainability. Instead, they must realize that socioeconomic sustainability and a sense of social inclusion is paramount to improve the security of the region. At times, oil-dependent governments have announced economic reforms when the commodity price has been depressed, but when prices recover, implementation is deprioritized or halted, keeping meaningful socioeconomic development an illusion. But reform is more needed than ever before.
The largest obstacle to achieving the above is the lack of good and transparent governance, legal certainty and physical security in the region. Multinationals have the luxury of managing operations at a portfolio level and choose to invest in regions where it is easier to work. While regional businesses can navigate regional complexities better, the stark lack of stability and transparency in most of the region are still huge obstacles to them, too.
Coherent energy policies are critical for the economies of much of the region, given the sector’s revenue windfall, but de-politicization of these policies is even more crucial to advancing stability in the region. To do this, the role of government and the private sector must be reconfigured. Governments still control most of the energy sector as a means to manage their economies, but tend to do so in rather inefficient and opaque ways. Governments would be well advised to limit their roles to clear and fair regulation, to allow the private sector to maximize the energy industry’s performance. This in turn will provide governments more wealth to invest in essential public service entities and projects.
As highlighted in the shifts described above, the global ramifications of developments in the Middle Eastern energy landscape are significant, and what happens globally will impact the future of the Middle East. The politicization of oil prices in general and the current drop in value could hurt the shale oil boom in the US and Canada. Chinese energy demand is likely to further offset the decrease in demand created by the US shale gas revolution, so although economic diversification is a necessity for socioeconomic development in the Middle East and North Africa region, the bulk of the wealth of much of the region will continue to derive from petroleum.
Half of China’s energy consumption is industry-related. Hence, when China’s consumer demand increases, which appears inevitable given its exponentially increasing middle class, its demand for energy will grow as well. And although China is boosting R&D spending on alternative energy sources, the progressive alternative energy policies of Europe still demonstrates that fossil fuel dependency does not disappear overnight. Furthermore, Japan’s energy demand is going in reverse as energy security, following Fukushima, has gained more relevance. It seems fair to expect that as the US dependence on the region recedes, Asian powers will find themselves obliged to take a stronger role vis-à-vis the Middle Eastern political and security challenges.
Thus, given the reality that the energy sector will continue to dominate the Middle East region for some time, it is important that the sector develop a transparent model for public-private partnerships. In a tumultuous geopolitical landscape, those in the Middle Eastern energy sector have an opportunity to play a positive role in both ensuring greater economic security through diversification and socioeconomic development. In short, as the energy sector transforms, energy politics in the region must change from being divisive to being an enabler of sustainable and inclusive economic growth, which is critical to security in the region and beyond.

World Economic ForumJune 25, 2015