Shipping collapses on the rise – Hanjin the latest to sink
Shipping companies world-wide are suffering from depressed freight rates caused by years of weakening demand—particularly from China—as global trade has slowed. The latest casualty is one of the largest to date, South Korea’s Hanjin Shipping (Hanjin), the country’s largest shipping firm and the world’s seventh-biggest container carrier, which was placed into receivership by a South Korean court on Wednesday after its financiers ended financial support.
Media outlets are reporting that some Hanjin vessels have been arrested and more are expected to be arrested by charterers, port authorities or other parties with maritime claims. Further, many of its ships have either been denied entry to ports as port authorities around the world worry that they will not be paid port fees or that the ships will be arrested and tie up busy berths for extended periods whilst the arrest proceedings play out.
In order to enable Hanjin to continue to effectively operate its business while it is restructured, it is likely that the Korean appointed receivers will soon start to seek recognition of the receivership in countries around the world, including Australia, under the UNCITRAL Model Law on Cross-Border Insolvency (Model Law) with the intention of seeking orders from the courts in those countries preventing the arrest of ships that enter their waters.
Australia has adopted and legislated the Model Law in the Cross-Border Insolvency Act 2008 (Cth) and Australian courts have recognised a number of foreign shipping insolvencies over recent years, including some other Korean shipping receiverships. However, our courts have made it clear that they will not lightly interfere with the rights of parties with maritime claims to arrest ships, a right which is at the heart of admiralty law.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.