A Minotaur’s Labyrinth of Contracts and Claims for Lien for Necessaries; Conflicts of Applicable Law

Aegean Maritime Petroleum S.A. v. KAVO PLATANOS M/V, 2023 WL 5332972, 2023 U.S. Dist. LEXIS 145536 * (W.D. Wash. Aug. 18, 2023, Chun, J.)

            Another fallout from the demise of O.W. Bunkers (U.K.) Ltd. (O.W.) results in a labyrinth of contractual relationships and questions of what nation’s law applies to particular parties and their relationships. The case presents conflicts of laws issues which would make a perplexing law school Conflicts of Law exam.

            The facts are rather simple and familiar to those who followed the numerous law suits filed following the collapse and bankruptcy of O.W. Bunkers. The vessel, M/V KAVO PLATANOS, was charted by Canpotex Shipping Services, Ltd. (Canpotex) from its owner, Indy Maritime SA. (Indy). Then, Canpotex entered into a contract with O.W. for bunkers to be delivered to the vessel in Vancouver, B.C. Canada. This contract contained a choice of law clause adopting U.S. maritime law as the applicable law for maritime liens. O.W. then contracted with the claimant, Aegean Maritime Petroleum, S.A. (Aegean), to furnish and deliver the bunker fuel to the vessel. The choice of law provision in this contract called for the application of Greek law as to enforcement and performance.

            Aegean filed suit in the Western District of Washington under the Commercial Instrument and Maritime Lien Act against both the vessel in rem and Gourdomichalis Maritime S.A., the manager of the vessel. In addition, the vessel and fuel were attached under a writ of attachment and garnishment.

            Canpotex moved initially to dismiss, transfer or stay the proceedings. The court granted the stay pending resolution of numerous lien claims pending in the Southern District of New York arising out of the bankruptcy of OW. With those claims resolved, the stay was lifted. Canpotex then proceeded to resolve its Motion to Dismiss.

            In the meantime, Aegean amended its claim several times to assert claims under the laws of Canada and its maritime lien statutes, for breach of contract, unjust enrichment and quantum meruit.

The court first considered whether there is a contractual relationship between Aegean and Canpotex as there is no direct privity of contract between them. The court “tentatively concluded” that the law of Canada applies to determine the issue of whether a contract was formed between OW and Aegean and is the “background law” of the case. Based on Canadian law, there is “a form of contractual privity between Aegean and Canpotex. So long as Aegean ‘insisted[ed]’ that its terms apply, there is a contractual relationship between Aegean and Canpotex.”[1] In reaching this conclusion, the judge relied on ING Bank N.V. v. Canpotex Shipping Services, Limited, 2020 FCA 83 (Can.)[2] The court should attempt to read the provisions of the two contracts, namely the OW/Canpotex contract and the OW/Aegean contract harmoniously.

            The contracts, however, also contain two different choice of law clauses. The OW/Canpotex contract requires the application of U.S. law with respect to any maritime lien regardless of the country in which an action is initiated. On the other hand, the contract between OW and Aegean calls for Greek law to apply.

            Canpotex asserted that applying this principle to the contracts before the court the provisions can be harmonized. U.S. maritime law applies to whether a party has a maritime lien whereas Greek law applies to contract performance and enforcement. As Aegean did not respond, the court adopted this reasoning. Thus, with respect to what law applies to whether Aegean has a maritime lien, U.S. law applies. As a result, Aegean has no maritime lien and has further abandoned any maritime lien claim under U.S. law. In dictum the court noted that even if Greek law were to apply under the OW/Aegean contract, Aegean would still have no maritime lien as under Greek law there is no maritime lien for necessaries. The maritime lien is dismissed.

            In addressing the claim for breach of contract, Judge Chun held that Greek law applies. With the law of Canada applicable to contract formation and under Canadian law choice of law clauses are valid and enforceable. The OW/Aegean contract calls for Greek law to apply. As neither party sufficiently briefed Greek law, the court did not rule on the breach of contract claim.

            Aegean also asserted a claim for unjust enrichment. Early in the proceedings, the court indicated that the law of the State of Washington would apply to this quasi-contract claim. However, Canada has greater contacts in the case as the bunkers were delivered in Vancouver, B.C. Judge Chun then “tentatively assumed” the law of Canada would apply to the unjust enrichment claim but withheld ruling on the matter with more information about the Canpotex/ING settlement, the OW bankruptcy and further briefing of Canadian law on unjust enrichment. (The court also initially held that Canadian law is the “background law” of the case. The unjust enrichment claim likely falls if the court ultimately determines Aegean has a claim for breach of contract.)

            Aegean claimed it had causes of action for the arrest of the bunkers and for maritime attachment and garnishment. The court questioned (rightfully) whether these are causes of actions as opposed to procedural remedies for jurisdiction. But, as the breach of contract claim was not dismissed, the court did not dismiss the arrest and garnishment and attachment.

Thus, the judge ultimately dismissed only the maritime lien and withheld ruling on the breach of contract and unjust enrichment claims.

[1] Aegean, 2023 WL 5332972 at *6-7.

[2] Id. at *7.