On 16 October 2018, a new Corporate Restructuring Promotion Act("CRPA") was promulgated, with immediate effect. The CRPA was first enacted in 2001 as a response to the Financial Crisis that began in 1997, causing hundreds of businesses in Korea to close down. Concerned that bankruptcies of larger companies may lead to bankruptcies of lender financial institutions, the CRPA was enacted as a temporary measure to facilitate speedy restructuring of larger businesses, while allowing the businesses to continue operation under supervision of creditor financial institutions.
This is the second instalment in a series on the US cross-border insolvency statute, Chapter 15 of the Bankruptcy Code, which took effect 11 years ago (for further details please see "Chapter 15 at 11: Bankruptcy Code's cross-border insolvency law approaches 11th anniversary").
On September 9, 2016, Hanjin Shipping Co. won a ruling protecting its assets in the U.S. against creditors, while the shipping line proceeds with its reorganization in South Korea. Hanjin filed for relief under Chapter 15 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey (U.S. Bankruptcy Court Judge John K. Sherwood in Newark, N.J.).
On September 12, 2016, the Bankruptcy Division of the Seoul Central District Court in charge of the rehabilitation proceedings of Hanjin Shipping Co., Ltd. amended the initial schedule of the rehabilitation proceedings as follows:
Submission of List of Creditors (by receiver): On or before October 10, 2016
Submission of Secured and/or
Unsecured Rehabilitation Claims (by creditors): October 11 – October 25, 2016
Investigation of the Reported Rehabilitation Claims: October 26 – November 15, 2016
News of the bankruptcy of one of the world’s largest ocean carriers, Hanjin Shipping Co., Ltd. (Hanjin), continues to have a ripple effect globally, creating legal entanglements and disrupting company supply chains. Some ports, terminals, stevedores, truckers and rail carriers have refused to service Hanjin vessels and containers for fear of not getting paid.
On September 1, 2016, a rehabilitation procedure was commenced in the Seoul Central District Court in respect of Hanjin Shipping Co., Ltd (Hanjin). This action followed many months of discussions between Hanjin and its creditors (both local and international) designed to reach a consensual restructuring, as a result of which various creditors had voluntarily agreed to postpone exercising claims. Such agreement was eventually suspended on August 30, 2016 following notice to Hanjin that such creditors were unable to continue their support.
Background
As Venable has previously reported, Hanjin Shipping Co. Ltd. (Hanjin) recently filed for court receivership in South Korea. Immediately thereafter, Hanjin sought protection by filing for recognition of the South Korean proceeding pursuant to Chapter 15 of the U.S. Bankruptcy Code.
Recent Events
The federal district court in New Jersey recently denied an appeal by maritime creditors of Hanjin to lift bankruptcy protections and allow arrest of Hanjin's vessels in and near U.S. ports. The federal district court judge agreed with the bankruptcy judge's grant of blanket protection to Hanjin and directed creditors of Hanjin to file claims in the Korean bankruptcy proceeding. Those claims are now due by October 25, 2016 in the Korean proceedings, according to an amended order issued by the Korean judge.
The fact that the receiver appointed for Hanjin, Mr Tai-Soo Suk, quickly took steps to extend to the UK the protection afforded by the Korean rehabilitation proceedings, was of little surprise, as England is likely to be the forum where the majority of creditors will have to bring proceedings to recover debts or claim damages for breach of contract.
The U.A.E and Republic of South Korea have not entered into a bi-lateral treaty under which they are obliged to recognise each other's court orders or judgments. The U.A.E rarely recognises/enforces the judgment of foreign courts where there is no such treaty in place