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Struggling shipping companies seek US protection
International shipping companies are seeking bankruptcy protection by lodging cash with American law firms to take advantage of US laws, according to a report in the UK's Financial Times.
Global shipping: seeking safety in Chapter 11 harbour
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To gain protection against lenders, shipping companies are seeking to use the tactics of Greece’s Omega Navigation and the Netherlands’ Marco Polo Seatrade.
The companies were accepted into the US Chapter 11 bankruptcy process as Marco Polo had deposited cash with Texas-based firm Bracewell & Giuliani, who represented both groups
Expensive procedures
Chapter 11 specifically emphasises the need for companies to continue operating during restructuring, far more so than many other bankruptcy laws. This has outweighed many foreign ship-owners’ previous reluctance to use the comparably expensive US legal procedures.
The decision has led many to believe that the mainly European banks that finance shipping will be forced to acquiesce to less favourable settlements, which will ultimately buy struggling companies more time.
Cash deposits
Frank Dunne, maritime law expert and chairman of London-based global law firm Watson Farley & Williams, told the newspaper that the number of companies depositing cash with their lawyers ‘to provide a contentious basis for claiming protection of the US Bankruptcy Court’ is increasing.
Another leading maritime lawyer, who declined to be named, stated: ‘New York lawyers are telling us, “If you just have $1 on account with us, a US court will take jurisdiction.”’ He also told the paper that he found the attitude of US judges to be ‘very surprising’ as they are willing to take jurisdiction over cases with no real commercial link to the US.
