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Collapse of Hin Leong spells likely problems for ship owners, operators and their insurers

Some of you may remember the seismic shock caused by the collapse of the Danish headquartered OW Bunker group back in 2014. OW was the world’s largest bunker supplier up until its collapse, owing millions of dollars to creditors. The resulting action taken by the creditor banks behind OW spawned litigation against ship owners and operators in multiple jurisdictions. Many of our clients were affected and in most cases we managed to help them. However, some clients, like many companies, ended up having to pay for bunkers twice: once to the physical supplier and then again to the OW entity through which the stem was placed. The collapse also led to the Supreme Court decision in the Res Cogitans which we reported here.

It remains to be seen if the same problems will arise with the collapse of Hin Leong and their bunkering arm Ocean Bunkering Services, as Hin Leong was not as big or international as OW. Nevertheless, it was still one of the largest suppliers in Asia and a major supplier in Singapore. The main issues will be where bunkering was sub-contracted and the physical supplier seeks to enforce its claim against the vessel. In that situation, the ship owner or operator could be exposed under the terms of the bunker supply contract.

In OW, a number of claims arose against time charterers who were exposed to claims from ship owners in relation to arrests of the vessel for unpaid bunkers in circumstances where they had paid the OW entity but the OW entity had not paid the physical supplier. It is common in all bankruptcy filings for there to be an immediate suspension of all payment activities, so we will have to see if Hin Leong’s collapse leads to a wave of arrests. That will likely depend on whether the financing banks behind Hin Leong take the same steps as those taken by the banks behind OW.

At BDM we have been dealing with issues relating to bunker supply contracts for many years. Indeed, our senior partner Bob Deering is a ship arrest specialist. For over 20 years he has chaired one of the leading international conferences on ship arrest and was heavily involved in many claims which flowed from the OW collapse. It follows that the BDM team are uniquely placed to advise our clients on issues that may arise from the Hin Leong collapse.

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