Diesel, jet fuel, crude and other petroleum products are traded in large volumes, often through a chain of intermediaries. When the deal works, several people expect to be paid: the seller, and one or more brokers or mandates on each side. An attorney paymaster gives that chain one documented place where commissions are received and paid.
How the main payment usually moves
In most genuine oil deals, the buyer pays the seller through bank instruments arranged between their banks, such as a documentary letter of credit, or by direct transfer against shipping documents. The product payment rarely passes through a lawyer. What often does pass through a paymaster is the commission stream: the amounts due to intermediaries under their commission agreements.
Where the paymaster fits
- The seller (or buyer) and the intermediaries sign a commission agreement, often called an IMFPA. See IMFPA commission agreements explained.
- The paymaster's client signs a Paymaster Agreement and irrevocable payment instructions listing each payee, the amount or rate per barrel or metric ton, and their bank details.
- Every payee completes identity and verification documents and is screened against sanctions lists.
- After each lifting, the paying party wires the commission amount to the trust account.
- The paymaster pays each payee as instructed, after confirming bank details by phone, and reports the payments in writing.
Documents that matter
Payment under commission agreements is usually tied to a performance event, such as a completed lifting or payment of an invoice. Useful evidence includes the bill of lading, the quantity and quality certificates from an independent inspector, and the commercial invoice. The payment instructions should say which documents trigger each payment.
Sanctions and compliance
Petroleum is one of the most sanctions sensitive commodities. Origin, vessels, ports and counterparties all matter. A paymaster screens names, but the parties are responsible for making sure the product, vessel and route are lawful. Funds connected to sanctioned origins or parties cannot be accepted or paid.
Warning signs
- Procedures that require the buyer to pay fees before any verification is possible.
- Requests for the paymaster to issue letters about the buyer's or seller's funds.
- Product "in tanks" that cannot be verified with the terminal directly.
More on our oil and petroleum page. To discuss a commission structure, contact the attorney.