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This article seeks to discuss the possibility for a bunker supplier, whether a physical supplier or a trader, to arrest and enforce the statutory lien generated by their debt over a ship in the United Arab Emirates (“UAE”) jurisdiction.
- The right of ship arrest under UAE law for unpaid bunker.
Relevant to our following discussion is that for ship arrest the UAE has adopted a “closed-list” approach for the definition of a “maritime claim”, where a list consists of limited numbers of maritime debts based on which only a ship could be arrested. These are reduced to fifteen (15) classes of maritime claims listed in Article 115(2) of the UAE Federal Law of No. 26 of 1981, as amended by Federal Law No. 11 of 1988, concerning the Commercial Maritime Law (“CML”). As for the bunkering claim, it is listed in paragraph (i) of the said Article which classifies it as: “Supplies of products or equipment necessary for the utilization or maintenance of the vessel, in whichever place the supply is made.” Thus, ship arrest in the UAE is a preservatory remedy to obtain security, in favor of an unpaid bunker claim in the merits whether commenced or to be commenced through court litigation or arbitration.
- Bunker litigation in the UAE and the time-bar (a statute of limitations as known under common law jurisdictions)
Bunker claim is not only classified by the CML as “maritime debt” but a “priority debt” as stated forth in Article 84 (e) of the CML which classifies bunkering debt as:
“Debts arising out of contracts made by the master, and operations carried out by him outside the port of registration of the vessel within the scope of his lawful powers for an actual requirement dictated by the maintenance of the vessel or the continuance of its voyage, whether or not the master is also the owner of the vessel, or whether the debt is due to him, or to persons undertaking supply, or lenders, persons who have repaired the vessel, or other contractors.”
Thus, bunker claim takes precedence over some other maritime debts such as ship mortgage, demurrages, and insurance premium, and it ranks pari passu with other ship supplies. However, bunker claim would be time-barred within six (6) months as stated forth in Article 93 of the CML.
- The validity of the incorporation of an English law clause contained in the General Terms and Conditions of the bunker supplier into their bunker delivery receipt under UAE law
The position of the UAE Courts has been clearly apparent regarding the incorporation by reference of a clause contained in another standard form contract or in the General Terms and Conditions of a trader stating for the application of the English law into an underlying contract as decided by the Dubai Court of Appeal in Cigna Insurance Middle East (S.A.L) v. Agribusiness United DMCC, Dubai Commercial Appeal No.2320 of 2021 and confirmed by Dubai Commercial Cassation No. 204 of 2022.
This ruling would have considerable benefit for bunker suppliers in raising their claims before UAE Courts, because, while unpaid bunker is not considered as a maritime claim under English law unlike the UAE law as confirmed in the English case PST Energy 7 Shipping LLC v O.W. Bunker Malta Ltd [2015] EWCA Civ 1058 (‘Bunkers’) however, in the same case, the arbitrators, the first instance judge and the Court of Appeal decided that the price of the supplied bunker was due as a matter of debt. Therefore, the supplier’s claim is a straightforward claim in debt and as such is subject to section 5 of the Limitation Act 1980 which states:
“Time limit for actions founded on simple contract: “An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.””
Thus, whenever the terms and conditions of the bunker suppliers state for the application of English law to their supply contracts, they may rely on the extended statutory time limit of six years stated forth by section 5 of the Limitation Act 1980 instead of the six months stated forth in Article 93 of the CML.
- The validity of the incorporation of an arbitration clause contained in the General Terms and Conditions of the bunker supplier into their bunker delivery receipt under UAE law
While Article 7(b) of the UAE Arbitration law of 2018 allows the incorporation of an arbitration clause contained in the General Terms and Conditions by reference those General terms and conditions however, the general rule of incorporation by reference is the “express terms” requirement where specific wording is used. Indeed, in Al Buhaira National Insurance Co. v. The Shipping Corporation of India Limited (Cassation No. 363 of 2011, Civil Appeal), the wording of incorporation of an arbitration clause stated that: “All terms, conditions and exceptions (including but not limited to Due Diligence, Negligence, Force Majeure, War, Liberties and Arbitration clauses) contained in which charter are herewith incorporated and form part hereof.” The court of cassation held that, the above incorporation wording in the bill of lading was sufficiently express to enable the charter party arbitration clause to be validly incorporated by reference. The requirement of express reference to the arbitration clause was confirmed by UAE Courts in recent rulings such as in the Dubai Courts Real Estate Cassations Nos. 603 and 693 of 2021.
Thus, the important aspect of the Court of Cassation’s ruling is that an arbitration clause contained in the General Terms and Conditions of the bunker supplier can be incorporated into their bunker delivery receipt by reference, as long as: (a) not only those General Terms and Conditions are incorporated by reference; but (b) the referral of disputes to arbitration as specified in the relevant General Terms and Conditions clause is also specifically incorporated into their bunker delivery receipt.
Author: Abdelhak Attalah