Parties facilitating financing in shipping industry must consider law of transferor's domicile

Parties facilitating financing in shipping industry must consider law of transferor's domicile
Jesper Windahl 14 November 2018

Two Danish OW Bunker companies gave a foreign bank security against the companies' ordinary claims. The companies subsequently became subject to insolvency proceedings. The insolvent estates' ability to extinguish the security was governed by Danish law, as the foreign bank had derived its right from the Danish companies as transferors.

Facts

A Dutch bank (A), together with a group of other banks, provided financing through an international credit agreement to two Danish OW Bunker companies (C) and (D). As part of the credit agreement, A was given security against the companies' outstanding (and future) accounts generated from the sale of bunker stems. The security was established by two agreements: the English Omnibus Security Agreement and the Security Agreement Pledge of a Certain Bank Account.

C and D subsequently became subject to insolvency proceedings. The insolvent estates (E) purported to extinguish or avoid the collateral security. In relation to avoidance, A and E agreed on Danish law governing the matter. However, the parties disagreed on the governing law in regard of E's ability to extinguish the collateral security given to A.

As a result, E brought proceedings before the Maritime and Commercial Court against A, claiming that Danish law governed:

whether the outstanding accounts were to be seen as collateral security or a transfer of title; and
the matter of extinguishment.

A claimed that:

whether the outstanding accounts were to be seen as collateral security or as a transfer of title should be decided in accordance with the English Omnibus Security Agreement; and
E's ability to extinguish the collateral security should be decided in accordance with English law.

more...https://www.internationallawoffice.com/Newsletters/Shipping-Transport/De...