When two systems collide - the intersection between cross-border insolvency protection and the Admiralty action in rem

Introduction

When the UNCITRAL Model Law on Cross-Border Insolvency (Model Law) was introduced into Australian law in 2008, Australian admiralty practitioners expressed concern that the legislation which enacted the Model Law into Australian law did not take into account its potential impact on the right to arrest a ship in Australia. The concern was that the Model Law would prevent parties from arresting ships in Australia, if the shipowner or charterer was the subject of foreign insolvency proceedings.

The recent Federal Court of Australia decision of Yu v STX Pan Ocean Co Ltd (South Korea), in the matter of STX Pan Ocean Co Ltd (Receivers appointed in South Korea) [2013] FCA 680 (Yu v STX Pan Ocean) has provided some much needed clarity around this issue in Australia.