Vol 13 (2016) - Issue 6

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The Collapse of Hanjin Shipping: An English Lawyer’s Perspective

Introduction
The Korean container shipper, Hanjin Shipping Co., Ltd. ('Hanjin') is one of the world’s top ten container carriers in terms of capacity with a fleet that includes 61 container ships and 18 bulk carriers, with a presence in 60 countries and 6,000 employees. By way of example of its importance to world trade, it reportedly accounts for about 8% of trans-Pacific trade volume for the United States. On 31 August 2016 Hanjin filed for bankruptcy in South Korea. It is one of the largest, if not the largest, container shipping insolvencies in history. It follows on from a series of shipping bankruptcies in recent years including Korean Line Corporation, STX Pan Ocean, Samsun Logix and Sanko Steamship. As Hanjin’s bankruptcy, and possible rehabilitation, in South Korea proceeds, the international effects of the bankruptcy continue to be felt. Stories in the international press abound about significant container build up at port facilities, Hanjin vessels not putting into port so as to avoid arrest attempts and freight forwarders desperately seeking to access cargo in Hanjin containers. The bankruptcy has been recognised in multiple jurisdictions under the UNCITRAL Model Law. In Great Britain, Hanjin’s bankruptcy was recognised by an order of Nugee J dated 6 September 2016 ('the Recognition Order') pursuant to the UNCITRAL Model Law as implemented by the GB Cross-Border Insolvency Regulations 2006 ('CBIR'). The Recognition Order was in the usual ‘extended form’. That is to say that not only is Hanjin treated in Great Britain as if it has been wound up by a creditor’s petition but also enjoys the moratorium afforded to companies that have entered into administration in England pursuant to paragraph 43, Schedule B1 to the Insolvency Act 1986. Hanjin’s bankruptcy has thrown up a plethora of complex issues concerning the interaction of insolvency law, maritime law, property law and conflicts of law (among other things). In this article we address just some of the very many issues arising and outline the potential approaches that the English courts may take going forward, regarding: (a) the bases on which English courts are likely to modify the Recognition Order to allow a claim to be commenced or continued against
Hanjin; (b) the enforceability of sub-freight liens and claims for freight under a bill of lading in light of the moratorium in England pursuant to the Recognition Order; (c) detention of cargo at ports; and (d) potential submission of Hanjin’s creditors’ claims to the jurisdiction of the Korean insolvency. Our aim is to identify the English courts’ likely approaches rather than attempt to give definitive answers to the issues arising. This is partly because the interaction and interplay between these diverse areas of law is still developing; and partly because the practical issues arising are typically intensely fact-sensitive.

Modification of recognition orders under CBIR
The basic provisions of CBIR are well known but merit a brief summary here. Article 20(1) of CBIR provides that upon recognition of a foreign proceeding that is a foreign main proceeding, subject to Article 20(2), (a) commencement or continuation of individual actions, or individual proceedings concerning the debtor’s assets, rights, obligations or liabilities is stayed; (b) execution against the debtor’s assets is stayed; and (c) the right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended. Article 20(2) provides relevantly that the stay and suspension referred to in Article 20(1) shall be the same in scope and effect as if the debtor had been made subject to a winding up order under the Insolvency Act 1986; and subject to the same powers of the court and the same prohibitions, limitations and exceptions and conditions as would apply under the law of Great Britain. Article 20(3) expressly excludes from the scope of Article 20(2) the right to take steps to enforce security over the debtor’s property or to take steps to repossess goods in the debtor’s possession under a hire-purchase agreement.