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Loudoun County Attorneys > Blog > Admiralty & Maritime > Leading From the Front: A Creditor’s Plan of Action

Leading From the Front: A Creditor’s Plan of Action

In an article for the shipping industry magazine Bunkerspot, firm principal J. Stephen Simms explains how bunker suppliers can act quickly and effectively to protect their own interests when owners or charterers file for insolvency. It is critical that bunker suppliers are aware of the nationality of the customer or entity that they are dealing as well as the provisions of the insolvency laws of those countries. This is especially important in determining whether a customer’s filing of insolvency proceedings automatically voids any attachment a bunker supplier has made of the customer’s assets. While the court may require the release of an insolvent’s assets, this order will not apply to the release of an in rem arrest. Notably, an “arrest” for a bunker supplier has various implications throughout the world. A wise bunker supplier will select a jurisdiction for arrest that recognizes an in rem maritime lien which should hold despite the insolvency proceedings.

Despite U.S. law purportedly recognizing in rem maritime lien rights, shipowner or charterer insolvency proceedings can hold bunker suppliers prisoner if U.S. bankruptcy courts are first to enter the stay order. The insolvent debtor has been increasingly afforded protection by U.S. bankruptcy courts focused on the rehabilitation of the debtor. U.S. bankruptcy courts have not only prevented arrest, but also refused to grant bunker suppliers adequate, alternate security. Because of this recent trend towards increased protection of insolvent debtors, bunker suppliers should act swiftly at the first hint of an insolvency filing. It is crucial that a bunker supplier arrest a vessel in advance of the filing of insolvency proceedings to protect itself from being pushed behind creditors’ interests. Given the expediency necessary to secure a successful arrest that will survive an insolvency filing, bunker suppliers would be well served to seek out competent legal counsel in preparation for the inevitable insolvency proceedings in the bunker industry.

For further information on specific steps your company should take to protect its interests in the anticipation of insolvency proceedings, a PDF version of the full article is available here.

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