There has been much confusion regarding Hanjin’s legal position following its application for bankruptcy protection lodged with a South Korean Court.

As Hanjin’s major assets, namely its ships, are stranded at ports around the world, International law firm Clyde & Co compiled a report highlighting how international courts have interpreted the bankruptcy protection order based on established legal agreements between countries. The report made special mention of the courts in the UAE as there are no bilateral agreements to recognise court orders or judgments with South Korea:

The UAE and Republic of South Korea have not entered into a bilateral treaty under which they are obliged to recognise each other’s court orders or judgments. The UAE rarely recognises or enforces the judgment of foreign courts where there is no such treaty in place, according to a report published by international law firm Clyde and Co.

The rehabilitation proceedings and bankruptcy protection obtained by Hanjin in the Republic of South Korea are, therefore, unlikely to be recognised and enforced in the UAE. In addition, under UAE law, there are no equivalent provisions to the Korean rehabilitation proceedings, and so Hanjin will be unable to obtain a court order from a court in the UAE granting similar relief.

Accordingly, there is nothing stopping Hanjin’s creditors from arresting a Hanjin-owned vessel (and in certain circumstances a Hanjin-chartered vessel), as security for their claims, in the UAE, provided there are grounds for an arrest under the UAE Maritime Code.

Given the litigation risk in the UAE, the risk to creditors is that a UAE Court may take jurisdiction over the underlying dispute. This could actually work in the creditors’ favour because it may take the debt owed to the creditors out of the Korean rehabilitation proceedings, as the security, depending on the form that it is provided in, may be considered as not being a part of Hanjin’s assets. Hence any judgment the creditors may obtain in the UAE would be enforceable against that security.