Extrapolating statistics from the bankruptcy of budget boxline The Containership Company (TCC) back in 2011, SeaIntel has warned in its weekly report that Hanjin Shipping’s creditors could seek damages from shippers on the transpacific trades for up to $300m.
“While plenty of shippers probably feel that they have suffered enough from the Hanjin situation, it would appear that Hanjin’s lawyers acting on behalf of Hanjin’s creditors might have an opportunity to seek liquidated damages from Hanjin’s shippers for a total sum ranging from $40m to $300m,” the Copenhagen-based container analysts said in a report out today.
Given than a bankruptcy court has clearly ruled that the service contracts, inclusive of the liquidated damages, are valid and enforceable, lawyers for the Korean line could argue that Hanjin’s shippers have not delivered as per the MQC.
The report’s author, Lars Jensen, a regular contributor on this site, worked for TCC two years prior to its bankruptcy.
Jensen noted Hanjin is approximately 10 times larger than TCC on the transpacific. This would in turn imply that if Hanjin’s customer case, and the behaviour in relation to the MQC, is comparable to TCC’s customer base, Hanjin could be looking to seek compensation of $75m for a pro-rated 2016/17 contract and $225m for the 2015/16 contract.
“This indicates a possible claim of $300m in liquidated damages,” Jensen wrote in what is shaping up to be a lawyer’s paradise in the coming months and years as clients fight Hanjin in the court rooms.
Jensen noted: “The sheer magnitude of such a potential claim also indicates a fundamental dysfunctionality in the industry, whereby contracts are agreed to, but both parties tacitly ignore the actual agreement and upholds a different set of ‘rules’. Notwithstanding the Hanjin issue, the liner shipping industry – carriers and shippers alike – do appear to be in need of a mentality shift in relation to enforceable contracts.”
By selecting to sue, Hanjin would, of course, also being tacitly admitting that it was exiting the transpacific trades for good. In a live Q&A session for Splash Chat last week Jensen posited that if Hanjin does survive it will only serve the intra-Asia trades.