The Supreme Court issued its much-anticipated ruling yesterday in the First Circuit case of Mission Product Holdings, Inc. v. Tempnology, LLC, resolving a circuit split that had developed on “whether [a] debtor‑licensor’s rejection of an [executory trademark licensing agreement] deprives the licensee of its rights to use the trademark.” And it answered that question in the negative; i.e., in favor of licensees.

When it comes to offsets, bankruptcy law provides for two distinct remedies: (1) setoff and (2) recoupment.

Setoff allows a creditor to reduce the amount of prepetition debt it owes a debtor with a corresponding reduction of that creditor’s prepetition claim against the debtor. The remedy of setoff is subject to the automatic stay, as well as various conditions under § 553 of the Bankruptcy Code — including that it does not apply if the debts arise on opposite sides of the date on which the debtor’s case was commenced.

As the bankruptcy of OW Bunker has shown, insolvency in a shipping context can cause significant, far reaching and immediate legal uncertainty. The interaction of insolvency procedures, jurisdictional issues, and the complex web of contractual relationships involved in shipping insolvencies creates unique practical and legal challenges. In this Briefing, we consider from a Hong Kong perspective some of the practical issues that commonly arise.

Insolvency in the Hong Kong Courts