George Moundreas & Co is targeting US-held assets of China's troubled HNA Group after London arbitration wins against Jinhai Intelligent Manufacturing, the former Jinhai Heavy Industry.
The Greek company, the broking operation of the shipowning family behind NGM Energy, holds final awards worth some $2.28m plus interest for unpaid commissions on five ultramax bulker newbuildings.
Now it is turning to the US to collect the money.
Newbuilding work has long since stopped at Jinhai, HNA's yard in Zhoushan, but HNA's parent has assets in the US.
However, to get at them, Moundreas has to persuade a US federal court that HNA's US activities make it subject to US jurisdiction. And that the group can be held responsible for the subsidiary's debt.
The dispute dates back to abortive contracts done in 2011 and 2012 for five ultramaxes that were to have been constructed for Greece’s Kyma Ship Management and Laskaridis Shipping. But arbitrations were only concluded last year. The ships were never built.
The 63,800-dwt Kyma ship was ordered in November 2011 for delivery in 2013 at a price of $27.85m and the four similar Laskaridis vessels were ordered in March 2012 for delivery in 2014 at $25.5m. The Laskaridis prices were later renegotiated to $24.8m.
'Excessive delay'
"During the course of 2012 and 2013, it became increasingly clear to Moundreas and to Laskaridis that Jinhai was in serious difficulties. There were reports of other buyers cancelling contracts for excessive delay," wrote sole arbitrator Lionel Persey QC in his September 2019 award decision on the Laskaridis ships. "Jinhai appeared to be in a dire financial position, was unable to pay the suppliers of services and materials or its workforce, and was unresponsive to communications regarding the projects. No progress at all was taking place towards construction of the vessels. "
By December 2013, the contracts were novated to HNA-controlled entities, Kyma and Laskaridis received their refunds, and the work was abandoned.
Moundreas was due commissions of 2% from the builder but was paid only on the owners' 10% down payments. Persey agreed with the broker that the novation of the contracts was a repudiatory breach of contract, and Jinhai owed $501,000 more on the Kyma ship and $1.78m on the others.
Moundreas is represented by maritime law veteran Michael Chalos in New York, instructed by the Hill Dickinson firm in London.
Moundreas director Pavlos Moundreas and his US lawyer Chalos were both reluctant to comment on the ongoing action, citing pending court motions on the jurisdictional issue.
Chinese courts
Lawyers defending HNA have argued that their client's activities, holdings, and court actions in the US are insufficient to establish jurisdiction in the Southern District of New York federal court. HNA investments such as hotelier Hilton Worldwide Holdings, Deutsche Bank and chipmaker Ingram Micro are all based elsewhere despite their activities in the district.
They also argue that because Moundreas is already pursuing the matter before a Chinese court, Moundreas should rely on China to resolve it.
"Moundreas can seek to obtain the relief it seeks here in the Chinese proceedings. Accordingly, the court should dismiss this action," wrote HNA's representative, Hogan Lovells lawyer Phoebe Wilkinson, in a motion to dismiss.
Moundreas is not alone in seeking HNA assets in the US. TradeWinds recently reported on efforts by New York-based Bravia Capital Partners and HNA's long-time transport finance connection Bharat Bhise, is seeking to claw back $25m from HNA affiliates including Bohai Leasing and container lessor Seaco in a lawsuit in the Southern District of New York federal court.
