URGENT COURT APPLICATION RESULTS IN RECOGNITION IN SA OF US BANKRUPTCY LAW
A court order granted late last year in response to an urgent application from corporate lawyers Bowman Gilfillan, acting on behalf of Overseas Shipholding Group, created new law in South relating to cross-border insolvency cases.
Claire van Zuylen, a partner at Bowman Gilfillan, explained that Overseas Shipholding Group (OSG), listed on the New York Stock Exchange, is one of the world’s largest oil tanker operating companies with over 118 vessels and assets of $4.15 billion.
“On 14 November 2012, OSG and its subsidiaries went into bankruptcy in the USA under chapter 11 of the US Bankruptcy Code. OSG was however concerned that its vessels, which often passed into South African territorial waters and ports could be arrested by local or foreign creditors, particularly on a “sister ship” basis. We acted for OSG and its 180 subsidiaries in an urgent court application, granted on 7 December 2012,” she explained.
Bowman Gilfillan’s application was to recognise the US bankruptcy in South Africa, and to apply with full effect the automatic stay provided for in section 362 of the US Bankruptcy Code in relation to OSG and its subsidiaries and assets. The firm also applied for a stay in South Africa against the commencement or continuation of judicial, administrative or other action or proceeding against OSG.
Said Ms van Zuylen: “The matter was extremely urgent and the time from taking instructions, drafting and amending papers, to obtaining the order, was a week. The order made new law in South Africa. Previously our courts have, on a cross-border insolvency basis, only been prepared to recognise foreign liquidators or administrators and to give them certain powers in South Africa.
“This order now sets the precedent for the recognition of the bankruptcy itself (where no administrator is appointed), and the application of certain provisions of the foreign bankruptcy law.”
The service of the order was also unique – not only on ship masters and port captains, but also on all the Registrars of High Courts (in case arrest applications were brought for issue), on all the sheriffs of the court, and on all the shipping attorneys’ firms so that they would have to cease any proceedings they may have been preparing.
OSG’s New York bankruptcy lawyers, Cleary Gottlieb Steen & Hamilton LLP in New York, said “Our thanks to local counsel -- we could not have obtained this excellent result without the hard work and quick thinking of the legal team at Bowmans.”
The team comprised: Claire van Zuylen, partner, Sizwe Msimang, senior associate (Insolvency and Bankruptcy), James McKinnell, partner (Litigation), Craig Cunningham, partner and Umaymah Salasa-Khan, associate (Litigation).