As Venable has previously reported, Hanjin Shipping Co. Ltd. (Hanjin) recently filed for court receivership in South Korea. Immediately thereafter, Hanjin sought protection by filing for recognition of the South Korean proceeding pursuant to Chapter 15 of the U.S. Bankruptcy Code.
After an interim hearing and an Interim Provisional Order (issued on September 6, 2016) that effectively denied Beneficial Cargo Owners (BCOs) their stranded cargo, the U.S. Bankruptcy Court for the District of New Jersey (U.S. Bankruptcy Court Judge John K. Sherwood in Newark, NJ) issued a renewed Provisional Order granting provisional relief to Hanjin pending a final hearing for the recognition of the Korean proceeding (Provisional Order) on September 9, 2016.
The Provisional Order ordered an automatic stay that prohibits creditors and other parties from taking actions against Hanjin and its assets within the territorial jurisdiction of the United States. Importantly, the Provisional Order prohibits the following actions, among others, which may be relevant to BCOs and third-party logistics providers:
- Commencement or continuation of any litigation brought against Hanjin;
- Arrest or attachment of any Hanjin vessel―including any vessel operated by or chartered to Hanjin; and
- Transfer, relinquishment, or disposal of Hanjin assets―including containers and chassis―to any third party without Hanjin's consent.
Despite the prohibitions above, the Provisional Order creates a limited exception that allows BCOs and other third-party logistics providers―such as Non-Vessel Operating Common Carriers (NVOCCs)―to obtain custody and/or control of stranded cargo. Specifically, for "cargo yet to have been berthed and worked by the terminal and not already inland," the Provisional Order allows such parties to enter into "release agreements" with terminal operators and other third parties to remove and transport the goods at the BCO's or third party's expense, provided that the BCO has already paid Hanjin for delivery of the affected cargo. The Provisional Order provides that when a payment is made pursuant to such a release agreement, the BCO or third party is subrogated to the rights, liens, and claims of the party paid, and that the BCO's rights to assert a claim against Hanjin on account of any payment made by the BCO are reserved. Such a claim against Hanjin would likely be made in the South Korean receivership.
As the supply chain disruption resulting from Hanjin's court receivership continues to evolve, Venable is able to assist shippers and NVOCCs in enforcing their rights in the wake of the Hanjin fallout.