By Mathias Steinø
Hafnia Law Firm LLP
Nyhavn 69 · 1051 Copenhagen K · Denmark
Tel: +45 33 34 39 00
OW / ING Case Decision on Maritime Liens in the US Court of Appeals for the Second Circuit
We all know the US as a good place for arrest of charterer’s debt. That position has been tested intensely in the body of case law which has erupted following the bankruptcy of OW. Among other things, there has been a debate as to whom had the lien on the vessel. Was it the physical supplier or the party who contracted with the vessel – the “last trader before the vessel” so to speak?
The US courts have generally granted maritime lien in favor of the party who contracted with the vessel or the vessel representative. The “last trader before the vessel” has consequently been successful in asserting maritime liens in competition with the physical suppliers. But, there has been a few decisions which have found in favor of the physical supplier of the vessel or holding that neither the physical supplier nor the trader had a maritime lien. A leading appeal decision on the competing lien claims has now been issued by the Court of Appeals for the Second Circuit (which covers the geographical areas of New York, Connecticut and Vermont).
The decision decided 13 June 2018 concerned the vessel TEMARA. In this case, CEPSA was the physical supplier and CEPSA sought to wipe out the claim of ING/OW holding that it was CEPSA not ING/OW who was entitled to assert a maritime lien. OW/ING also claimed to have a maritime lien, and the question before the Court was consequently who among the competing claimants would have the right to assert the lien.
The first instance decision held – quite mysteriously – that none of the claimants were entitled to a maritime lien. The first instance court found in favor of the vessel.
The Court of Appeals for the Second Circuit has reversed the judgment and has found in favor of the OW/ING. The Court finds in its conclusion that “we hold O.W. Denmark was a provider of necessaries under CIMLA and may assert a maritime lien against the Vessel.” (CIMLA is the Commercial Instruments and Maritime Liens Act)
According to the decision, traders enjoy a better position than physical suppliers. It is the trader – not the physical supplier – who can enforce a lien on the vessel.
The decision in full can be found in the link below. It is relatively long but informative.
Second Circuit decision – TEMARA