• Chapter 15 at 11: Chapter 15 Provides Provisional Relief in Hanjin Shipping
  • January 27, 2017 | Author: Jeffrey A. Liesemer
  • Law Firm: Caplin & Drysdale, Chartered - Washington Office
  • On August 31 2016 one of the world's largest shipping companies, Hanjin, filed for insolvency protection in South Korea because a liquidity crisis had rendered it unable to meet its debts, including those owed to creditors in the United States. On the same day that Hanjin commenced its insolvency proceeding, the Korean court granted an injunction staying all creditors from taking action against Hanjin and its assets. The stay was intended to have worldwide application. However, creditors holding US maritime liens threatened to arrest and seize Hanjin's vessels - along with containers, cargo, bunker fuel and other onboard assets - as soon as the vessels entered US territorial waters. Hanjin's vessels were stranded in international waters, unable to dock at US ports due partly to the threat of arrest and seizure.(1) Even if Hanjin's vessels were permitted to enter US ports without arrest and seizure, there was no assurance that their cargo would be unloaded or the vessels refuelled, as Hanjin's suppliers could take the position that the insolvency filing permitted them to terminate their contracts with Hanjin.(2) Companies reportedly scrambled to find alternative means to move their goods. Without the assurance of a reliable shipping service, Hanjin feared that "a mass of transport contracts might be cancelled and clients might leave, which necessarily would result in a rapid decrease of [Hanjin's] sales and decrease in the value of its assets". (3)