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Chinese Cruise Ship Arrested in South Korea; 2,300 People Onboard

By MarEx 2013-09-16 12:34:00

Photo: The vessel as Pacific Sun in 2007.

Update: Impounded cruise ship Henna was able to depart the South Korean island of Jeju later on Monday evening (local time) following delays, after being held for three days.

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A Chinese cruise ship impounded in South Korea over a commercial dispute with another Chinese firm was awaiting release and clearance for departure on Monday.

The Henna had been due to leave mid-afternoon after its owner put up a US$2.76 million bond and it was unclear what was delaying the departure. But the South Korean judge overseeing the case had yet to give the official go-ahead.

1,119 passengers aboard the Henna have already been flown to China at the cruise operator's expense following Friday's seizure; Passengers were also compensated for the inconvenience. There were a total of 2,300 passengers and crew aboard the ship at the time of its arrest.

The ship had been ready to leave after HNA Tourism, the vessel's owner, posted the bond to lift an order from a South Korean court to impound it on behalf of a Chinese creditor. The creditor is Shagang Shipping Co Ltd, a Hong Hong-registered company that was previously related to mainland-listed Jiangsu Shagang Co Ltd, but now operates independently.

A spokesman for Shagang Shipping released the following statement regarding the incident:

“The arrest is a consequence of HNA's failure to comply with their contractual obligations, and to settle the US$58 million plus which they owe to Shagang Shipping. We were completely satisfied that the arrest of the vessel in Korea had been in strict accord with Korean law. This type of arrest to obtain security for claims is common in most maritime jurisdictions including the US, UK and China.”

He continued on with the background leading to the ship’s arrest:

“The dispute arose in 2008 when Shagang Shipping chartered a bulk carrier the ‘DONG-A ASTREA ‘, owned by Dong-A Tankers in Korea, to Grand China Shipping Company Limited, a subsidiary of HNA Group company, for a period of about seven years. However, Grand China Shipping only paid hire in accordance with the terms of the contract for the first five months and then stopped paying. Over the course of two years, Shagang Shipping was forced to obtain six arbitration awards against Grand China Shipping, and then to enforce the awards in order to get paid. More important, Shagang Shipping still has claims of over US$58 million against HNA.

Due to their financial circumstances and failure to meet their debts to a number of creditors, Grand China Shipping was wound up by the Hong Kong Court in the spring of this year. Shagang Shipping is now pursuing HNA as HNA made a commitment to guarantee Grand China Shipping's performance of the charter party. We will continue to press our claims under the guarantee against HNA.”  

He lastly stated: “HNA Group Company Limited have continued to resist their obligations, whilst hiding behind a very complex corporate structure which prevents creditors from attaching their assets through layers of companies incorporated around the world. As the injured party in this dispute, we were left with no option but to identify and seize an HNA asset, such as the M/V Henna, which was done extremely efficiently in Jeju last Friday, and we hope this action will bring HNA to their senses so that the parties can finally settle the case.”

Chinese media reported that two passengers had suffered heart attacks while the ship was impounded. Passengers were reportedly not informed of the seizure by HNA tours for roughly 20 hours. Hundreds of remaining passengers and crewmembers remained in South Korea waiting to return home.

HNA Tourism had reported the incident to the Ministry of Foreign Affairs and the National Tourism Association and may seek damages from Shagang. 

Henna is a Holiday-class cruise ship operated by Star Cruises for the Chinese company HNA Tourism Cruises and Yacht Management around the Korean peninsula. At 47,000 tons, Henna is a medium-sized ship, and is the first and largest luxury cruise liner in mainland China, with 739 passenger cabins and a maximum passenger capacity of 1,965, including nine suites with balconies, 432 ocean-view staterooms and 298 interior staterooms. In September 2012, new owner HNA Tourism Cruises renamed the ship Henna; she made her maiden voyage under Chinese ownership on January 26, 2013 from Sanya and Tianjin in China, to South Korea and Vietnam.