Landmark OW Bunker ruling in UAE

UAE Federal Supreme Court decides that physical suppliers of bunkers have no right to recourse against Owners/Charterers

In the first decision on the issue from the most senior court in the country, the UAE Federal Supreme Court has decided that physical suppliers of bunkers have no right of recourse against Owners/Charterers where there is a contractual sale and purchase chain.

The Supreme Court has concluded that there are two separate contracts. One contract between Owners/Charterers and the OW entity pursuant to which the Owners/Charterers must make payment and a separate contract between OW and the physical supplier pursuant to which OW must make payment. Where there is such a chain, the Owners/Charterers had no liability to make payment to the physical suppliers directly.

The Supreme Court held that the delivery of the bunkers by the physical supplier to the Vessel did not create any obligations between the physical supplier and the Owners/Charterers; whilst it was recognised that the physical supplier delivered the bunkers to the Vessel, it was held that they did so to the order of OW.

The ramifications of this Judgment are far reaching for bunker suppliers in the UAE. This judgment is certainly good news for Ship Owners who have found themselves exposed to double or even triple payment following the collapse of OW. If the Judgment is followed, Ship Owners will have good defence to claims in the UAE from physical suppliers where there is a contractual sale and purchase chain.

The UAE legal system is a civil law system and accordingly whilst the Judgment of the UAE Federal Supreme Court is of persuasive value it is not binding.

Ince & Co partners Rania Tadros and Mohamed El Hawawy acted for the owners in this matter.