Introduction

South Korea’s Hanjin Shipping Co. (“Hanjin”) was once the world’s seventh-largest container carrier until its recent bankruptcy in late August 2016, which is expected to bring about numerous upcoming litigations and arbitrations between cargo owners, shippers, freight forwarders and suppliers who have contracted with Hanjin or were once in supply chains in which Hanjin was involved. 

In the wake of the Hanjin crisis, terminal operators have been using various methods to protect their interests, in fear that they will not get paid by the insolvent Hanjin eventually. For instance, there are news reporting that Hanjin’s major local port partner, the Hong Kong International Terminals (“HIT”), has been charging an additional “ransom” fee (as security deposit) from shippers and forwarders of Hanjin cargoes. As one can imagine, this may easily result in significant delivery delays and even disruptions to the supply chain in the event that shippers and forwarders are unwilling to pay. From a legal point of view, are terminals or port operators allowed to impose such additional payment obligation on shippers and freight forwarders? Or to put it in another way, can the affected shippers and freight forwarders commence legal proceedings against the terminal operators restraining them from doing so?

A recent Dutch decision

On 2 September 2016, a court in the Netherlands (Case no.: C/10/509258 / KG ZA 16-1005) has considered this issue and has ruled in favour of shippers and freight forwarders against the Europe Container Terminals (“ECT”), a Rotterdam container terminal operator which is owned by Hong Kong’s Hutchison (the “Dutch Decision”). 

The proceedings were brought by various Dutch shipper organisations including EVO, TLN, Fenex and Fenedex (the “Plaintiffs”) against ECT shortly after Hanjin’s receivership has commenced. In gist, the Plaintiffs applied for an injunction against the ECT in the Rotterdam Courts because ECT was charging for a release fee of €1,000 per dry container of Hanjin and a release fee of €1,500 per special unit of Hanjin (such as flat-racks and reefers) from their members. “That is almost three times the terminal handling charges...”, said a supply chain director of a major German cargo owner, “what is the administrative charge, and how can they justify that?”.

After hearing the parties’ submissions, the judge ruled in favour of the Plaintiffs and pronounced that fixed release fees of approximately €1,000 to €1,500 per cargo, being charged by ECT on Hanjin cargoes held at the terminal, were unlawful. Accordingly, it ruled that ECT only allowed to charge the actual handling costs plus a surcharge of €25 per cargo (reported by Lloyd’s Loading List). Nevertheless, it also held that ECT may still apply a “lien” (i.e. the right to keep possession of property belonging to another until a debt has been paid) against the Hanjin cargoes, if there a due but unpaid debt owed to the ECT.

The Plaintiffs are in general happy about the ruling of the Dutch Courts and are of the opinion that it is a step in the right direction. Having said that, it is unclear how wide the Dutch Decision will apply. EVO, one of the plaintiffs, indicated that only members of the four Plaintiff shipper associations could claim benefits of the award, and that the shippers or forwarders so affected must demonstrate, in addition to the usual conditions for exempting cargoes at ECT, that they are members of at least one of the Plaintiffs. Accordingly, it is likely that the Dutch Decision would only apply to members of the Plaintiffs’ associations. That said, it is believed that more and more shipper groups will take out similar legal actions in their own jurisdictions to protect their interests.

The situation in Hong Kong

Recently, the Hong Kong Shippers’ Council (“HKSC”) has also expressed its “outrage” towards similar behaviours of HIT. As reported by Lloyd’s List, the HKSC has received hundreds of complaints from its members and importers that HIT has forced them to pay an extra amount of HK$10,000 – HK$15,000 before they can take their Hanjin containers. 

“This arrangement is not acceptable as cargoes belong to shippers, the beneficial cargo owners are not shipping lines,” said Willy Lin of HKSC, “The terminal operators cannot have a lien over cargoes, they have no right to withhold containers and ask shippers to pay what are owed to them by the shipping lines”. The HKSC has also indicated to the press that it has consulted its legal advisers and is considering legal action against such “unacceptable” moves.

Responding to the HKSC’s allegations, HIT issued the following statement on 15 September 2016:

“HIT has offered special arrangements to minimise the impact to shippers and forwarders, and to assist the logistics industry to get through this difficult time. Representatives from the logistics industry, the Transport and Housing Bureau, and the member for the Legislative Council’s Transport constituency held a meeting yesterday to follow up on the Hanjin incident. HIT’s representative clearly stated in the meeting that HIT has put in place extra resources to provide emergency services to respond to the Hanjin incident.”

According to HIT, it has already released the handling details on the retrieval and return of Hanjin cargoes. So far, that has been no legal proceedings commenced against HIT in respect of the additional Hanjin cargoes handling charges.

Will the Dutch Decision be applicable in Hong Kong?

As mentioned above, the Dutch decision will only apply to members of the Plaintiff shippers associations. Therefore, parties who are aggrieved against HIT must commence legal proceedings in Hong Kong if they wish to obtain an order to prohibit HIT from charging additional fees for handling Hanjin cargoes. Similar to the Dutch Decision, it is unlikely that HIT would have legal basis to impose such additional charges on cargo owners and freight forwarders unless there is a contract between them, or the bill of ladings between the shippers and the cargo owners allowing HIT to apply such additional charges. This is because whether collection of an additional “release fee” is permissible should depend on the terms of the bill of ladings and/or commercial agreements made between the relevant parties on each occasion.

That said, before any judgment or injunction can be obtained from the Hong Kong court, there seems to be nothing which the shippers or forwarders could do to stop HIT from charging such additional fees for releasing Hanjin cargoes.

In the meantime, given that litigation may take time, the HKSC is of the view that the affected shippers and cargo owners in Hong Kong should still pay the “ransom” fee to HIT first to avoid delay in the collection of the cargoes and creation of further troubles such as cargo damage.

For enquiries, please contact our Litigation & Dispute Resolution Department:

E: shipping@onc.hk

T: (852) 2810 1212

W: www.onc.hk

F: (852) 2804 6311

19th Floor, Three Exchange Square, 8 Connaught Place, Central, Hong Kong

Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.