CROSS-BORDER INSOLVENCY AND SHIP ARRESTS

A recent flurry of major international shipping companies initiating proceedings for protection from creditors (eg, US Chapter 11 proceedings and South Korean rehabilitation orders) has highlighted the rights of creditors to arrest maritime property in South Africa as a mechanism to sidestep these proceedings. South Africa is well known for having a liberal arrest regime, and the insolvency provisions are no exception. The legislation states that any property arrested or security put up in South Africa for a maritime claim will not vest in a trustee in insolvency and will not form part of the assets to be administered by a trustee or liquidator. It goes on to state that no proceedings in respect of the arrested property may be stayed by reason of any sequestration or winding-up of the owner.