Impounded Chinese cruise liner released in South Korea

Reuters News
Posted: Sep 16, 2013 11:55 AM
Impounded Chinese cruise liner released in South Korea

By Jack Kim and Pete Sweeney

SEOUL/SHANGHAI (Reuters) - A Chinese cruise liner was allowed to leave a South Korean island on Monday, three days after it was impounded there over a commercial dispute that left hundreds of passengers stranded, state media said.

The Henna set sail early in the evening after its owner HNA Tourism put up a 3 billion won ($2.76 million) bond to lift an order from a South Korean court to impound it on behalf of a Chinese creditor, China's official Xinhua news agency reported.

Passengers were not informed about what was going on until 20 hours after the ship was held during a stop in the South Korean island of Jeju on Friday, the official Daily China had said.

Two passengers suffered heart attacks in the days that followed, Chinese media reported.

A total of 1,119 passengers have already been flown back to China at the cruise operator's expense and compensated, media reports added.

The China Daily said HNA Tourism had reported the incident to the Ministry of Foreign Affairs and the National Tourism Association and may seek damages from the creditor Shagang Shipping Co Ltd.

HNA Tourism is run by the HNA Group, which also owns Hainan Airlines among other subsidiaries.

Shagang Shipping is a Hong Hong-registered company that was previously linked to mainland-listed Jiangsu Shagang Co Ltd but now operates independently.

Shagang Shipping took action against HNA after it was awarded $58 million against an HNA offshoot, Grand China Shipping (Hong Kong), following an arbitration hearing in London over outstanding lease payments on a 180,000 deadweight tonne iron ore and coal carrier leased to Grand China.

China is a signatory to a New York convention which recognizes arbitration awards in foreign jurisdictions such as London or New York.

But they were sometimes hard to enforce in China partly because of the weakness of the Chinese court system and the difficulty of proving assets were owned by the debtor company, legal experts said.


The carrier was chartered at the height of the shipping boom, but Grand China stopped making lease payments after the shipping markets collapsed in late 2008. The decline in shipping rates has hit both Chinese shipbuilders and operators hard thanks to massive over capacity.

The HNA Group has had similar legal trouble over shipping payments in the past, as have other Chinese ship operators.

In 2011, Greek and Norwegian shipping companies accused Grand China Logistics, another HNA Group subsidiary, of withholding payments on chartered vessels, and in the same year China Cosco Holdings temporarily halted charter payments to force renegotiation of contracts it deemed overpriced.

A statement from Shagang on Saturday describing the cause of the conflict said it was concerned about the welfare of the passengers, but that Shagang would continue to pursue its claims against the HNA Group.

Officials in Jeju said they regretted the incident, but were not worried the seizure would damage its reputation as a major tourist destination.

"Our position is that it was an unfortunate incident but we have been acting under the decision of the judiciary according to the law," said one official. "We are not concerned about any impact on Chinese tourists visiting our province."

($1 = 1087.0250 Korean won)

(Additional reporting by Keith Wallis and Chen Yixin, and Ben Blanchard in Beijing; Editing by Ron Popeski and Andrew Heavens)