Survival of the Fittest: Bunkering in a Time of Transition

In a recent article for the shipping industry magazine Bunkerspot, firm principal J. Stephen Simms analyzes sales terms, particularly retention of title, and explains their importance in assisting recovery efforts against buyers in light of the game-changing collapse of OW Bunker. A reservation of title (ROT) clause is a contractual agreement whereby the seller retains title to the subject goods until the price has been paid in full. Generally, properly drafted and communicated ROT sales terms and conditions can increase suppliers’, brokers’ and traders’ leverage to be paid when buyers become insolvent. Effective ROT clauses allow marine fuel sellers to retain title, reclaim unpaid supplies, pursue a security interest superior to other creditors in proceeds from unpaid fuel, and possibly proceed against vessel owners for conversion of unpaid-for fuel. Sellers should note that simply including favorable ROT clauses as part of a set of marine fuels sales terms and conditions is not enough to ensure enforcement. Rather, sellers must make vessel owners, managers, and all “upstream” brokers and traders to which sellers sell aware of the ROT clause.

Marine fuel sellers should strive to construct and communicate ROT sales terms and conditions which give sellers the greatest latitude and possibility for recovery in the most jurisdictions. However, sellers must be mindful that where some jurisdictions may honor ROT clauses, others may not; thus, it may be necessary to track the vessel and select the jurisdiction in which it is most advantageous to proceed.

For more information on the significance of ROT clauses in protecting sellers of marine fuels as well as recommendations for provisions which should be included in every marine fuel supplier’s, broker’s and trader’s terms and conditions, a PDF version of the full article is available here.