Members are advised to note that Daebo International Shipping Co. Ltd. of Korea has reportedly filed an application for rehabilitation proceedings on 11 February 2015. This will have an impact on all creditors and debtors to Daebo, and members should review any open position or account they may have in relation to business dealings with this company.
The Association is grateful for the input of Messrs. Choi & Kim towards this update.
Korean rehabilitation proceedings
The Association has been advised by Messrs. Choi & Kim that Daebo International Co. Ltd. of Korea has filed for rehabilitation proceedings on 11 February 2015.
Members may have already had some experience of this procedure following a number of high profile bankruptcies and reorganisations in Korean shipping following the financial crisis in 2008.
It is important to note that while this procedure has similarities to bankruptcy proceedings, it is intended to allow the company to ultimately survive and continue operation (albeit in a re-structered form). It is therefore similar, in some ways, to the Chapter 11 proceedings in the United States.
Should the court grant the pettition, it will mean that Daebo's position in Korea is protected and all further dealings by the company will be subject to regulation by the court. All legal action will be stayed, too. Such order has effect within the jurisdiction of the Republic of Korea. It may be that foreign jurisdictions will give recognition to these proceedings (in the United States that would be by way of Chapter 15 proceedings), but that would be a matter for further specific legal action in each and every other jurisdiction.
A receiver would typically be appointed by the court and a timetable would be set for the further progress of the procedure. Claimants / creditors against Daebo would be requested to file their claims to the receiver, and should they be rejected then the claim must be brought to the court to determine.
Any member that may be affected by this event should follow developments closely and will probably need to retain the services of a suitably qualified Korean lawyer to assist with the preparation and filing of any claims in Korea.
Whether it is possible to pursue claims in a jurisdiction other than Korea would depend on the facts as well as any steps taken to gain foreign recognition of the Korean proceedings.
Unpaid third party claims
Members may find that they are contacted by third parties who claim they are owed sums by Daebo, but are now seeking to make a claim on the member. This could be for matters such as the following:
- unpaid bunker supplies
- port and pilotage dues
- lien claims on outstanding hire and freight
- cargo claims
- other contractual or tortious indemnity claims
Whether or not it is possible for a third party to successfully pass on such claims to a member will depend on the facts, the underlying contracts, commercial leverage as well as the jurisdiction(s) in which legal action may be taken.
Particularly significant is the risk of action by unpaid bunker suppliers, and in the past it has been prudent to tackle these situations proactively.
Should members have concern that they may be exposed to such a risk then they are advised to make contact with the Association soonest.
Commercial risk management
Members who have any open position with Daebo should urgently check the same and assess the current state of performance and what further performance obligations may still be due. That includes checking against any unexpired charterparty periods as well as any due payments for hire, freight or other sums.
Caution: absent clear charterparty terms, it is unlikely that the mere fact that Daebo has filed this petition will be sufficient to amount to a repudiatory breach of the charterparty or otherwise allow it to be terminated. Careful legal analysis will be required before taking further steps in relation to any open contractual position or future positions.
As for open accounts from completed fixtures, or claims, these will also need to be reviewed so that an assessment can be made as to how this development will have an impact on such claims.
If a vessel recently bunkered, say within the last three months, and the bunkers were to have been for the account of Daebo, then the position should be checked pro-actively as to whether or not there is a risk of an unpaid supplier's claim.
For vessel specific enquiries, members are asked to contact their usual Skuld business unit.