Hong Kong company Shagang Shipping has successfully obtained an order for the arrest of the HNA Group controlled vessel MV Bulk Peace from the Western Australia District Registry. The move is part of a long-running legal campaign seeking US$66.4m from HNA Group, which has failed to honor its guarantee and comply with its contractual obligations surrounding the 2008 hire of the vessel MV Dong-A Astrea.
To enforce various international court orders and arbitration awards, Shagang Shipping has already successfully arrested three ships, including the same ship in India in March 2011 as well as the cruise ship MV Henna in September; obtained a winding up order against the HNA company Grand China Shipping and on 7 March was granted a subpoena from the Southern District Court of New York requiring seven US and Chinese banks affiliated to HNA to provide details of the group’s financial transactions.
A Shagang Shipping spokesperson said: “We are shinning a light on HNA and locating all of HNA's assets to enforce our claims. Whether these assets are heavily financed and backed by complicated leveraged transactions or not, we are examining them all closely. It is well reported that HNA relies on complicated lines of credit in order to aggressively expand and invest in aviation, shipping and hotels. But if HNA Group truly has unlimited access to such lines of credit we do not understand why they are going to such great lengths to avoid and delay honouring their contractual obligations to their business partners."
He added: “HNA Group has ignored court orders and walked away from negotiations. Shagang is aware that its various subsidiaries such as Grand China Logistics Holdings (Group), Grand China Shipping (Yantai), Grand China Shipping (Hong Kong) Company Limited (now in liquidation), Ocean Container Trading (Hong Kong) and others are being sued around the world. Legal actions such as arresting ships have so far proved the only way of forcing HNA to settle its debts, but the company is simply delaying the inevitable.”
A High Court hearing in London is scheduled for 9 February 2015.
The claims arise from 2008 when Shagang Shipping chartered a capesize bulk carrier MV Dong-A Astrea, owned by Dong-A Tankers, to a HNA Group company, Grand China Shipping Company Limited, in 2008 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 ceased payment.
According to Shagang Shipping, at the time the charter was agreed, HNA Group Company Limited provided a guarantee to Shagang Shipping promising the faithful performance of the charter, and even agreed to stand in as the charterers if Grand China Shipping did not perform. Despite many demands from Shagang Shipping, the HNA Group Company Limited has refused to honor its promises. This has meant that Shagang Shipping was not being paid $52,500 US dollars per day, whilst Grand China Shipping continued to trade the vessel at a huge expense to Shagang Shipping.
Over the course of about two years Shagang Shipping won five arbitration awards for unpaid hire for more than US$18 million, but Grand China Shipping still refused to honor those arbitration awards, until enforcement measures were taken against it. In November 2012 Shagang Shipping was awarded damages of about $58 million. Even then however, neither Grand China Shipping nor HNA Group Company Limited paid, but instead sought to appeal to the decision, which was denied by the English High Court. Due to its 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 2013.
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