United Arab Emirates (UAE): Legal position of jurisdiction following collapse of OW Bunkers

This information is part of a wider article which offers a broad overview of the legal position across jurisdictions following the collapse of OW Bunkers. View the complete article or alternative jurisdictions.

Leading case

Cases are not reported in the UAE.

Summary of legal position

A substantial number of claims have been brought by physical suppliers against ship owners as a result of OW Bunkers’ (“OWB”) failure to pay.

UAE Maritime Law gives the physical supplier the right to arrest the ship for unpaid bunkers. This is regardless, whether the supply contract was entered with the owners, charterers or another trading or contractual supplier. Accordingly, physical suppliers have used this right under the Maritime Code to arrest vessels for outstanding amounts on OWB across the UAE. However, Courts within the 7 Emirates have taken different views as to whether the ship owner is liable for OWB’s outstanding debt due to the physical supplier.

Dubai: the Court of Appeal recently concluded that the ship owner was not liable to the physical supplier on the basis that there was no contract between the supplier and the ship owners. The case was rejected against the owners of the vessel.

However, the court confirmed the physical supplier’s right to arrest the supplied ship and its right to enforce against her or against any other security placed in court to release her for the outstanding amount of OWB. In practice, this effectively means that though the ship owner “wins the case”, the ship herself or any security placed to release her will respond to discharge the obligation of OWB towards the supply contract entered with the physical suppler.

Ras al-Khaimah: takes the same approach as the Dubai Courts.

Fujairah: the Court has taken a different approach, finding the shipowner was directly liable to the physical supplier. The courts relied on the standard delivery receipt usually signed by the Master of the vessel to establish a direct contractual relation between the shipowner and the physical supplier.

HFW Middle East was successful in counter proceedings brought on behalf of a shipowner (in the same proceedings filed by the physical supplier) against OWB relieving the shipowner from any obligations towards OWB under the supply contract (this can be contrasted with the English law position).

Practicalities

The shipowner should be able to defend any claim by the physical supplier in Dubai or Ras al-Khaimah on the basis that the shipowner is not a party to the contract between OWB and the physical supplier. However, these claims will normally be filed against the shipowner and the OWB jointly. If the physical supplier was able to arrest the vessel in the UAE, such security/arrest may respond to any judgment issued against OWB. Accordingly, the shipowner would win the case but lose the security.

It is to be noted that a number of the above jurisdictions currently have conflicting case precedents, and/or cases pending for appeal. In some cases, the Foreign Court is waiting for guidance from the English Supreme Court, in light of which it will be interesting to see whether the Res Cogitans ruling is now applied beyond the seas or whether those Courts will chart a divergent course.

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