Fri, 02 September, 2016
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.
Nevil Phillips is a highly regarded barrister whose practice extends across the full spectrum of shipping and commercial law and who is consistently ranked as a Leading Junior in both domestic and international legal directories. He has recently featured as successful counsel in a number of high profiles cases, including SBT Star Bulk and Tankers (Germany) GmbH Co KG v Cosmotrade SA (The Wehr Trave),Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd and Libyan Navigator Ltd v Lamda Maritime Holdings Sp. z.
Wed, 31 August, 2016
Koye Akoni was recently interviewed for the Profiles section of the September edition of Counsel Magazine.
To view the full interview please click here.
Wed, 31 August, 2016
For our latest opportunities, please click here.
Thu, 25 August, 2016
We wish him well in his move to the Caribbean and are delighted that he will remain as a Door Tenant of Chambers. Peter will continue to act for the respondents in the forthcoming Supreme Court case of Fulton shipping v Globalia Travel (The New Flamenco).
Wed, 17 August, 2016
Quadrant Chambers is delighted to announce the publication of the Shipping Chapter of the Chambers & Partners Practice Guide. The chapter was co-authored by Quadrant Members Simon Rainey Q.C., Stephanie Barrett, Claudia Wilmot-Smith and Andrew Carruth.
A copy is available to read via the attached link.
Thu, 11 August, 2016
Guy Blackwood QC acted on behalf of the successful underwriters in this appeal, in which the Court of Appeal considered the interplay between insured perils and excepted perils under the Institute War Clauses.
On 13 August, 2007 the vessel “B Atlantic” was detained in Lake Maracaibo, Venezuela. She had loaded a cargo of coal, destined for shipment to Italy, when during a second divers’ inspection some 132kg of cocaine was discovered attached to the vessel’s hull. The vessel was detained and subsequently abandoned by her Owners, who claimed for a constructive total loss and for sue & labour expenses under war risks cover.
At first instance, Mr Justice Flaux held that the detention of the vessel was caused by an insured peril, malicious acts of the drugs smugglers, and held that the standard war risk exclusion for detainment by reason of infringement of any customs regulation, clause 4.1.5, did not apply when the infringement was no more than the “mere manifestation” of third parties’ malicious acts.
The Court of Appeal handed down judgment on 1 August 2016 unanimously overturning Flaux J (Christopher Clarke LJ, Sir Timothy Lloyd and Lord Justice Laws). The Court of Appeal held that the loss was caused by both the concealment of the drugs and the detention. The Court also held that clause 4.1.5 should not be read as being subject to the “mere manifestation” limitation imposed by Flaux J, for 7 main reasons.
In the circumstances, underwriters’ appeal succeeded and Owners’ claim failed.
Please click here for a copy of the judgment.
Fri, 22 July, 2016
In an article published in Tradewinds, Gemma Morgan and Matthew Montgommery from Holman Fenwick Willan discuss the issues facing shipowners and operators in relation to cyber security. A copy of the article is avialable to read via the attached link.
Wed, 20 July, 2016
The Supreme Court has held (by a majority of four to one) that the use of a “collateral lie” – referred to in previous cases as a “fraudulent device” – does not lead to forfeiture of an insurance claim.
A collateral lie is, as Lord Sumption held: “a lie which turns out when the facts are found to have no relevance to the insured’s right to recover. The question is whether the insurer is entitled to repudiate a claim supported by a false statement, if the statement was irrelevant, in the sense that the claim would have been equally recoverable whether it was true or false.”
In Versloot Dredging BV and Another v HDI Gerling Industrie Versicherung AG and others  UKSC 45, the assured had told a lie which was irrelevant to the facts of the claim. Essentially, he had speculated about one aspect of the relevant marine casualty (whether an alarm had sounded and why the crew had not investigated it), but had presented this speculation as if he had been told it by the crew. Popplewell J at first instance held that this was a reckless untruth. Ultimately, not only was the speculation confirmed by the master, but – more importantly for present purposes – the sounding of the alarm and the crew’s reaction to it were utterly irrelevant to the merits of the claim.
Popplewell J at first instance ordered that the claim, which was otherwise entirely good, was forfeit due to this reckless untruth. He expressed his regret at this disproportionately harsh sanction. Forfeiture was confirmed by a unanimous Court of Appeal, with Christopher Clarke LJ giving the judgment of the court (with, it is fair to say, rather less regret being expressed).
In the Supreme Court, the Appellants challenged forfeiture for a collateral lie/fraudulent device at common law, and on the basis of Article 1 of Protocol 1 of the ECHR (“A1P1”). Lord Sumption, with whose judgment Lord Clarke, Lord Hughes and Lord Toulson agreed (although each added their own judgment), held that the common law did not impose a sanction of forfeiture in respect of collateral lies. He said that “even the law of insurance is concerned more with controlling the impact of a breach of good faith on the risk than with the punishment of misconduct. The extension of the fraudulent claims rule to lies which are found to be irrelevant to the recoverability of the claim is a step too far. It is disproportionately harsh to the insured and goes further than any legitimate commercial interest of the insurer can justify.” Because of his findings on the common law, he held that he did not need to consider the Article 1 of Protocol 1 arguments. Lord Mance, in the minority, said that forfeiture should be imposed at common law.
Tue, 19 July, 2016
The Privy Council handed down its decision today in the Cape Bari  UKPC 20, the first appellate case since 1897 to consider the issue of whether and in what circumstances the Owners of a vessel may be found to have contracted out of their statutory right to limit their liability (a right now governed by the Convention on Limitation of Liability for Maritime Claims 1976).
Luke Parsons Q.C. and Paul Henton acted for the Owners, who were successful before the Court of Appeal of the Bahamas and in the Privy Council in arguing that they had neither waived nor contracted out of their right to limit their liability when they signed up to the Conditions of Use of the appellant, a Bahamian oil terminal. The decision will now become the leading authority on contracting out of tonnage limitation regimes, and is also of wider importance for the guidance it offers on the question of contracting out of legal and statutory entitlements more generally.
A copy of the Judgment of the Privy Council is available here.
Wed, 13 July, 2016
The Court of Appeal handed down its judgment today in Mitsui & Co Ltd v Beteiligungsgesellschaft LPG (The Longchamp)  EWCA Civ 708. Simon Croall QC and Paul Toms represented the successful cargo interests in challenging the decision of Stephen Hofmeyr QC (sitting as a Deputy High Court Judge) that certain expenses incurred during the period of negotiation with Somalian pirates were allowable in general average under Rule F of the York-Antwerp Rules 1974.
The case is the first time the English Courts have had to determine the scope and meaning of Rule F since it was introduced in 1924.
The Longchamp was seized by Somalian pirates in January 2009. The shipowners negotiated with the pirates for a period of 51 days during which the ransom demanded was reduced from an initial demand of US$6 million to US$1.85 million, which was paid by the shipowners.
The shipowners argued that their crew-related expenses and the cost of bunkers consumed in that period were allowable in Rule F because those expenses had been incurred “in place of another expense which would have been allowable as general average” within the meaning of Rule F. The saved expense was said to be the initial ransom which had it have been paid on demand would have been allowable under Rule A.
This argument was accepted by the Judge but rejected unanimously by the Court of Appeal. Lord Justice Hamblen, giving the main judgment of the Court, held that Rule F was not engaged since in a ransom situation there was no available course of action other than that in fact taken by the shipowners, namely to negotiate and agree a ransom and pay it to effect release of ship, crew and cargo.
He said "…payment on demand is simply a different way of going about the same course of action and not a true alternative course of action. Whether or not the ransom is paid on demand there will still be a negotiation, there will still be delay, there will still be the incurring of vessel and crew running costs during the period of delay… Is a short negotiation with pirates for payment of ransom leading to the release of the vessel a different course of action to a long negotiation with pirates to the same ends? In my judgment it is not; both fundamentally involve doing the same thing".
The decision notably gives further insight into how Rule F should be applied in practice.
It also establishes that where the preservation from peril of the property involved in the adventure is an effective cause of the incurring of expenditure (or the making of a sacrifice), that expenditure (or sacrifice) is allowable under Rule A even if there were other causes or purposes for which the expenditure was incurred or the sacrifice made. In other words, the preservation from peril of the property need not be the predominant or exclusive purpose for that expenditure (or sacrifice) to be allowed under Rule A.
A copy of the judgment can be found by clicking here.