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The Court of Appeals for the Fifth Circuit Denies Maritime Lien Against a Support Vessel Transporting Fuel Delivered to Other Vessels

June 25, 2020

In yet another “round in the maritime litigation spawned by the collapse of the OW Bunker, formerly the world’s largest supplier of fuel for ships,”1 the Fifth Circuit issued an important decision on the scope of maritime liens. Under the Commercial Instruments and Maritime Liens Act (CIMLA), a person may obtain a maritime lien against a vessel by providing it with “necessaries.” In Martin Energy Servs., L.L.C. v. BOURBON PETREL, the court held that fuel transported by support vessels to refuel other vessels was not “necessary” to the support vessels under CIMLA and did not give rise to a maritime lien. 

In 2014, C.G.G. Services, U.S., Inc. (CGG) conducted seismic surveying operations off the coast of Louisiana with three seismic vessels. CGG was responsible for ensuring the vessels were supplied with fuel, supplies and equipment. To do so, CGG used three support vessels, which made deliveries to the seismic vessels from Port Fourchon, Louisiana. Each of the support vessels had a cargo tank for carrying fuel to the seismic vessels, distinct from a “day tank” holding fuel for the support vessels  themselves. CGG purchased the fuel from a trader, O.W. Bunker USA, Inc., which in turn arranged fuel deliveries through a physical supplier, Martin Energy Services.

Thereafter, O.W. Bunker filed for bankruptcy. CGG had not yet paid O.W. Bunker’s invoices for the fuel supplied by Martin. CGG eventually settled with O.W. Bunker, but O.W. Bunker never forwarded payment to Martin.

Martin sued CGG in federal district court asserting in rem claims against the support vessels. The district court ruled in favor of Martin, finding that Martin’s delivery of fuel gave rise to a maritime lien against the support vessels. The court reasoned that the fuel delivered by Martin was a “necessary” to the support vessels under CIMLA and further, it was provided “on the order” of CGG as required by the CIMLA. CGG appealed.

On appeal, the 5th U.S. Circuit Court of Appeals emphasized the unique and powerful nature of the lien as “a special property right in the vessel.” It “grants the creditor the right to appropriate the vessel, have it sold, and then be repaid the debt from the proceeds.” The court applied the provisions of CIMLA stricti juris and held that there was no basis for concluding that the fuel delivered by Martin was a “necessary” to the support vessels. The court adopted CGG’s argument that a different conclusion would “represent an unprecedented expansion of the CIMLA” by extending the concept of “necessaries” to cargo transported by a vessel. The court found no authority—and the parties cited no precedent—to support such expansion.

The court’s ruling provides an important guideline for vessel owners doing business in the offshore industry, where they are often called to transport cargo necessary to fulfill specific missions of other vessels.

Please contact Phelps’ Admiralty team if you have any questions or need compliance advice and guidance.       

 

[1] ING Bank N.V. v. Bomin Bunker Oil Corp., 953 F.3d 390, 391 (5th Cir. 2020) (internal quotations omitted).