UK: Unpaid Bunker Suppliers Free To Pursue Their Maritime Lien Against Owners In The US

Last Updated: 15 December 2010
Article by Daniel Jones and Sacha Christopher

Oceanconnect UK Ltd & another v Angara Maritime Ltd (Fesco Angara) [2010] EWCA Civ 1050

Under English conflict of laws rules, recognition of a right to enforce a maritime lien is a matter to be determined by the lex fori (the law of the place where the action is heard). However, English law does not recognise the concept of a maritime lien for necessaries (charges for goods and services rendered to the vessel). Therefore, an unpaid bunker supplier would not enjoy a maritime lien as a matter of English law. However, under US maritime law, such a bunker supplier does have a maritime lien. In this case, US bunker suppliers sought to set aside an anti-suit injunction obtained by the vessel owners in the English court so that they could pursue a claim for unpaid bunkers by way of an in rem claim in the US.

Background facts

The original dispute between the parties in this case related to a claim by bunker suppliers, Oceanconnect, for unpaid bunkers which had been supplied to Britannia Bulkers A/S, charterers of the Fesco Angara. The charterers subsequently went into administration and the bunker suppliers sought to recover their losses from Angara Maritime, who were the owners of the vessel. The London Mercantile Court rejected Oceanconnect's claim against the owners (see report on that decision in our July 2010 e-brief). However, the matter came before the Court of Appeal on a slightly different issue.

Oceanconnect had originally arrested the vessel in Amsterdam in order to secure their claim. The parties subsequently entered into an escrow agreement whereby the vessel was released upon provision by the owners of an amount by way of security.

The escrow agreement was expressed to be "governed by and construed in accordance with English law and any dispute arising hereunder or relating thereto or arising in connection herewith shall be referred to the exclusive jurisdiction of the High Court of England and Wales" (clause 7). However, clause 3 of the escrow agreement also stated amongst other things that the amount of the claim was payable to Oceanconnect "...by virtue of a judgment (which is not or no longer subject to appeal) rendered against Angara by a competent court of law having jurisdiction ....or by virtue of a valid arbitration award which is not or no longer subject to appeal...."

Thereafter, the owners commenced proceedings in the English court for negative declaratory relief, seeking a declaration that they were not liable to Oceanconnect in respect of the sale of bunkers to Britannia. Subsequently, Oceanconnect (for a second time) arrested the vessel in Louisiana in the United States for the purposes of founding jurisdiction for an in rem claim based on a maritime lien under US law. The vessel was released from that arrest after Angara filed a copy of the earlier escrow agreement with the US court, the effect of which was that the owners were regarded as having given security for the claim already, in the form of the funds in escrow. As a result of Oceanconnect commencing legal proceedings in the US, the owners applied to the English court for an anti-suit injunction arguing that England was the forum conveniens for the dispute and that the ends of justice required the English court to decide the underlying claim.

Application for an anti-suit injunction

At first instance, Mr Justice Simon granted the anti-suit injunction. He held that the law and jurisdiction clause in the escrow agreement, on its proper construction, was intended to provide for the English court to be the exclusive forum for the resolution of disputes between the parties in relation to the supply of bunkers and that the US proceedings were brought in breach of that agreement. He also said that it made good commercial sense for the parties to provide that all their disputes should be resolved in one forum, particularly where (as in this case) the claim was relatively small in commercial terms. The judge concluded that England was the appropriate forum for the dispute and that the ends of justice required him to grant the order for an anti-suit injunction in order to avoid unnecessary parallel litigation in the US.

Court of Appeal

On appeal by Oceanconnect, the Court of Appeal set aside the anti-suit injunction. Lord Justice Gross gave the leading judgment and held that, construed as a whole and in context, the escrow agreement did not provide for the exclusive jurisdiction of the English court in respect of the underlying substantial claim for unpaid bunkers. Whilst he acknowledged that the wording of clause 7 ("any dispute arising hereunder or relating hereto or arising in connection herewith") was capable of being read as extending to the jurisdiction for determining the underlying claim, he concluded that it was in fact confined to the province of the escrow agreement itself. He added that the wording of clause 3, although it could have been better expressed and had a "boilerplate" element in that it also referred unnecessarily to arbitration, suggested that the jurisdiction for the resolution of the substantive claim had been left open.

Lord Justice Gross further stated that the object of the escrow agreement had been to achieve the release of the vessel from arrest as speedily as possible by providing security, rather than to address the jurisdiction for determining the underlying claim. Had the parties wished to extend the escrow to deal as well with the forum for resolving the claim, he said that they could have done so by express wording to that effect. The appeal judge also highlighted that it was unlikely that the bunker suppliers would agree to exclusive English jurisdiction (effectively a "one stop" adjudication) in circumstances where they had a relatively straightforward claim pursuant to a maritime lien in the US, compared to more difficult claims in tort, bailment and restitution in England.

The appeal judge also found that the US proceedings were neither vexatious nor oppressive in that they did not involve unnecessary parallel litigation because the issues raised in the US proceedings were not very similar or identical to those arising in the English proceedings. Furthermore, as he believed Oceanconnect's claim for a US maritime lien was bound to fail in the English court but enjoyed a strong chance of success in the Louisiana court, the judge was unable to accept that England was the natural forum for the proceedings. Rather, he held that the considerations of justice pointed to Oceanconnect being at liberty to pursue their claim in the US courts.

Comment

The Court of Appeal in this case took into account the fact that the bunker supplier's claim was doomed to fail in England whereas it had good prospects of success in the US, and obviously regarded it as improbable that the bunker suppliers would have restricted themselves to the exclusive jurisdiction of a court where they were unlikely to succeed on their claim. Whilst the escrow agreement might have been expressed more clearly, the Court of Appeal held that, properly construed, it meant that the English law and jurisdiction clause applied only to matters under the escrow agreement and did not prevent the bunker suppliers pursuing their underlying claim in the US.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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