A recent case in the Rotterdam Court raises questions in respect of: Bunkers; – Bankruptcy; – Delivery; – General conditions – NOVE (General Conditions of the Dutch Association of Independent Bunker Suppliers)
Supply by Argos Bunkering BV, a Rotterdam based bunker supplier of 7,400 mt of fuel oil on 25 October 2014 in Rotterdam on board a seagoing vessel owned by CSCL and given in time charter by CSCL to Cosco. Cosco had purchased this quantity of fuel oil on 18 September 2014 from China Shipping, which in turn bought it from OW Bunker Far East (OWB-FE), the latter from OW Bunker (Netherlands) B.V. (OWB-NL) and OWB-NL from Argos. On the occasion of the physical delivery of the fuel oil, a ‘Bunker requisition to Argos’ and a ‘Bunker Delivery Note’ are drawn up. The bunker acquisition contains a reference to the NOVE conditions declared applicable to the purchase agreement between Argos and OWB-NL. In article 10 NOVE terms a retention of title has been included in favour of Argos. Both documents, put on Argos paper, were signed by the Chief Engineer of the seagoing vessel. As a result of this sale and delivery, Argos sent an invoice to OWB-NL, addressed to: ‘Master and/or Owners and/or Charterers of [name seagoing vessel] and/or OWB-NL’. The payment period of this invoice was from 25 October 2014 to 25 November 2014. OWB-NL does not pay. It went into bankruptcy on 21 November 2014. Even before the bankruptcy was declared, for the first time on 7 November 2014, Argos explicitly invokes its retention of title under the NOVE conditions. By letter of 7 November 2014, ING Bank NV, as pledgee / tranferee of the claims of the OWB group, demands China Shipping to pay the purchase price for the fuel oil owed by the latter to OWB-FE. China Shipping settles the purchase price to ING Bank on 30 March 2016 as transferee of OWB-FE. On 21 February 2016, Equinox, which is the credit insurer of Argos, arrested the vessel to the detriment of, among others, CSCL. It then claims from CSCL, as owner, and Cosco, as operator of the ocean vessel, compensation for the entire purchase price left unpaid by OWB-NL, or at least compensation for the value of the part of the fuel oil that was still unused on board the ocean vessel when Argos first invoked its retention of title, asserting from then on the consumption of fuel became unlawful vis-à-vis Argos.
The Rotterdam court held as follows. The relationship between Argos and OWB-NL is governed by Dutch law. For the claims of Argos against CSCL and Cosco based on extra-contractual liability, Dutch law should also be applied on the basis of Article 4 Rome II-Vo. This law also governs the regime of property law with regard to the fuel oil prior to and up to and including delivery on board of the seagoing vessel.
This case concerns the problem that in a chain of sellers and purchasers of marine fuels, the first seller in the chain (here: Argos) sells the fuel on credit and delivers it on board a ship owned by a third party (here: CSCL) and operated by the last buyer in the chain (here: Cosco), after which the second link in the chain (here: OWB-NL) goes bankrupt and fails to make payment to the first seller of the purchase price agreed between them. Under the circumstances of this case, does the first seller have recourse against the last buyer who actually obtained the marine fuels (here: Cosco)? Or from the owner of the ship? Or both? In assessing this, it is assumed that Equinox as credit insurer entered into the rights of Argos and that Argos was the owner of the fuel oil upon delivery and at the time of invocation of the retention of title.
Argos is not a party to the purchase agreement between Cosco and China Shipping; in relation to Cosco, Argos acted as an auxiliary person to China Shipping as a seller of Cosco. Cosco was obliged to pay the purchase price agreed between it and China Shipping to China Shipping and did so on 12 November 2014.
Nor is Argos a party to the purchase agreement concluded between China Shipping and OWB-FE; in this legal relationship, Argos acted as an auxiliary person to the seller OWB-FE. China Shipping had to pay OWB-FE the purchase price agreed with this agreement and did so by paying ING Bank on 30 March 2016. China Shipping cannot be regarded as an agent of Cosco or CSCL in the context of its purchase.
Argos did not negotiate with CSCL, Cosco or China Shipping for the sale and supply of the fuel oil. The fact that it stated in the confirmation of sale: Master and/or Owners and/or Charterers or [name sea-going vessel] and/or OWB-NL’ does not change this, because she only sent this confirmation to OWB-NL and the confirmation also states that OWB-NL acts as buyer. The confirmation therefore does not contain any indication that OWB-NL did not act as buyer, but as intermediary or representative of CSCL and/or Cosco.
The fact that CSCL is the owner of the seagoing vessel does not make her the recipient, let alone the owner, of the fuel oil when it was delivered on board the seagoing vessel in Rotterdam. This delivery has not unjustifiably enriched CSCL either, since in its relationship to the time charterer Cosco, the batch of fuel oil belonged to Cosco. The actual receipt of the fuel oil and its use for propulsion, in accordance with the instructions of the time charterer Cosco, does not constitute an unlawful act by CSCL towards Argos, except in special circumstances.
By delivering the fuel oil on board the ocean-going vessel, Argos voluntarily transferred ownership to Cosco, which – having bought the fuel oil from China Shipping for delivery on board the ocean-going vessel – is deemed to have acquired it in good faith. Cosco, too, was not unjustifiably enriched by this delivery; it had to pay the purchase price agreed with China Shipping for the fuel oil, and it did so.
The Chief Engineer’s signature of the bunker acquisition cannot be interpreted as a voluntary agreement by CSCL or Cosco to enter into a (binding) agreement with Argos to supply the fuel oil or to pay a fee in the amount of the purchase price. Rather, the bunker-requisition should be seen as a request from the ship’s side to deliver the specified quantity of marine fuels and confirmation that the necessary measures have been taken to safely receive those quantities, or as a notification from the supplier that those measures should be taken. The bunker-requisition can therefore not be considered as an agreement under property law in which property is transferred or reserved. This is not changed by the reference to the NOVE-conditions in the bunker-requisition; such a reference cannot lead to unintentional obligations being imposed on a third party.
The NOVE conditions have been drawn up for the sale and delivery of fuels for seagoing vessels in international traffic. Article 10.1 of the conditions contains a retention of title for the seller until he has received the purchase price in full. Article 10.2 makes this retention of title a restriction, in the sense that the buyer may use the marine fuels purchased under the retention of title for the propulsion of the ship, even if the purchase price has not yet been paid to the seller. With article 10.2 Argos therefore allowed OWB-NL to use the fuel oil (or have it used) for the propulsion of the seagoing vessel. Article 10.3 has the intention to grant the seller the right of complaint as referred to in Article 7:39 of the Dutch Civil Code. This right must be exercised with due observance of the term of 48 hours after delivery referred to in Section 8:228 of the Dutch Civil Code. It does not follow from Articles 10.2 and 10.3 that the right of use granted in Article 10.2 lapses (and an obligation to return arises) as soon as the buyer is in default with his payment obligation and the seller therefore invokes his retention of title. Such an interpretation would also be inconsistent with the practice of bunker deliveries. After all, the delivered seagoing vessel will practically never be in the port of delivery again, but on the high seas or elsewhere far away. The fact that the retention of title of Article 10.1 is no longer of any significance as a result, is a direct consequence of the consumption permitted in Article 10.2 for the propulsion of the ship and the provisions in Article 8:228 of the Civil Code. This consequence is in line with the purport of the transaction, the provision of fuels for a seagoing vessel in international traffic and with the practice in the seagoing shipping industry. The invocation of the retention of title by Argos in November 2014 has therefore not led to the lapse of the restriction on that retention of title referred to in Article 10.2. After all, this would amount to a unilateral modification of the purchase agreement between Argos and OWB-NL, to which OWB-NL has not agreed. Since the fuel oil was only used for the propulsion of the seagoing vessel, i.e. within the framework of Article 10.2 of the NOVE Conditions, the conclusion must be that, if and to the extent that Cosco and/or CSCL should already have taken into account the retention of title stipulated by Argos with respect to OWB-NL in Article 10.1 of the NOVE Conditions, this consumption cannot be considered as unlawful towards Argos. The primary claim, in which Equinox demands payment of the full purchase price, comes up against this. And because the restriction on the retention of title contained in article 10.2 of article 10.1 did not expire when Argos invoked the retention of title, the same applies to the subsidiary claim, which is intended to compensate for the value of fuel oil that had not yet been used up at the time when the retention of title was invoked. In the circumstances of this case, Argos, the first seller in the chain, therefore has no recourse against the last buyer Cosco who actually acquired the batch of fuel oil, nor against CSCL as the owner of the vessel. The same applies to Equinox as (agent of) the legal successor(s) of Argos.
Ref: Equinox Global Limited v. CSCL Star Shipping Company Limited and China Shipping Container Lines Company Limited, Case number / role number: C/10/527683 / HA ZA 17-523, Judgment of 13 March 2019
Note that Mr. A.J. van Steenderen acted as counsel to the third party Cosco Shipping Development (Hong Kong) Co. Ltd.