It is understood that, on Thursday, 1 September 2016, the Seoul Central District Court accepted a rehabilitation application made by Hanjin Shipping Co Ltd on 31 August 2016, and that, as part of the resulting procedure, the Court required a revival plan to be submitted by 25 November 2016 and appointed the company’s Chief Executive Officer, Seok Tae Soo, as the Manager for that purpose.
The entry of Hanjin into rehabilitation in this way has had a significant impact in the global shipping market, given the size and scope of the business structure of the company (thought to be the world’s 7th largest container carrier). Already, it is understood that a number of Hanjin vessels have been arrested at Chinese ports (including Tianjin and Shanghai) and in Singapore, while there are reports that other Hanjin vessels have been refused entry to ports in North America and South Korea because of fears by service-providers of non-payment. This has produced a spike in freight rates, as manufacturers (which include LG and other Far East producers) seek alternative carriage providers. Hyundai Merchant Marine Co., South Korea’s second-largest container line, has already sought to add vessels to the busiest routes previously operated by Hanjin in order to ease the pressure.
As experienced professionals from the London shipping legal market will know, the experience of Hanjin is, unfortunately, not the first occasion on which a substantial international shipping entity has encountered such difficulty and been placed into rehabilitation or a similar asset-protection procedure in its home jurisdiction. In recent times, the market has witnessed similar procedures affecting Korea Line Corporation, STX Pan Ocean, Samsun Logix, and Sanko Steamship, among others.
As a consequence of such earlier rehabilitation/restructuring events, the potentially complex issues of law which arise (as the entity entering into rehabilitation, its third party contractual counterparts, and other entities affected by the knock-on effects of the rehabilitation all seek to establish, accommodate and resolve its consequences) are ones which the London legal market is well-equipped to address (where, as is very common, the underlying contractual relations are governed by English law and/or are subject to English jurisdiction or arbitration agreements).
Such issues will include the effect of the rehabilitation procedure (as a matter of English law) upon long-term charters, slot arrangements, and pooling agreements; its impact upon service providers and other third party creditors; the possibility of claims by chartering and cargo interests for increased carriage charges (as a result of the need to procure replacement tonnage or carriage services) or in respect of stranded cargoes; the effect of rights of lien; the scope for arrest; the potential effect of international recognition (by way of the Cross Border Insolvency Regulations 2006) of any insolvency measures implemented in South Korea; and the interaction (as a matter of private international law) between English law (where that is the governing law of a contract) and the law of South Korea (as the law of the place of rehabilitation/restructuring).
At this very early stage of Hanjin’s rehabilitation procedure, it is impossible to predict precisely what issues will arise as a consequence. However, previous experience suggests that commercial parties who are affected by the events as they unfold will benefit from prompt and comprehensive advice as to their position as a matter of English law.
Given their pre-eminence in the field of shipping law, and their involvement at almost every level in earlier substantial rehabilitation/restructuring events in the shipping market (including those referred to above), members of Quadrant Chambers are very happy to provide assistance in this respect where required.