* Impounded cruise ship Henna had been due to depart at 3 p.m. yesterday, South Korean time, but its release was delayed

    * Passengers flown home at company expense

    * Ship seized on behalf of HK-based creditor in commercial dispute

    * Shagang Co. suing HNA Group subsidiaries for US$58 million

    A CHINESE cruise boat impounded in South Korea over a commercial dispute with another Chinese firm was awaiting release and clearance for departure yesterday, an official on the South Korean island of Jeju said.

    The vessel, the Henna, had been due to leave mid-afternoon after its owner HNA Tourism put up a 3 billion won (US$2.76 million) bond and it was unclear what was delaying the departure. But the South Korean judge overseeing the case in Jeju had yet to give the go-ahead, an official in the island province said.

    “The judge has yet to instruct the lawyer (for the cruise ship company) to go to his bank and deposit the bond money,” the official said by telephone.

    Official Chinese media have reported that 1,119 passengers aboard the Henna were flown from Jeju to China at the cruise operator’s expense following Friday’s seizure. HNA Tourism offered all of the passengers 2,000 yuan (US$327) in compensation, or a free ticket on the Henna for use in the coming year.

    The 223-meter liner departed Tianjin on Wednesday for a six-day voyage with 1,659 passengers and 650 crew on board. It was due to leave Jeju for Incheon on Friday before it was seized.

    HNA Tourism is run by the HNA Group, which also owns Hainan Airlines and other subsidiaries. A spokesman for HNA Tourism declined to comment on the report of the ship’s release.

    The creditor is Shagang Shipping Co., a Hong Kong-registered company that was previously related to mainland-listed Jiangsu Shagang Co. but now operates independently.

    Shagang Shipping took action against HNA after it was awarded US$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 tons iron ore and coal carrier leased to Grand China.

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

    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 the renegotiation of contracts it deemed overpriced.

    The arbitration award covered lease payments that Grand China should have paid up to the end of the charter.

    Claims have been pursued in U.S. courts against Grand China Shipping (Hong Kong), with Grand China Logistics Holdings (Group), Grand China Shipping (Yantai) HNA Group and Ocean Container Trading (Hong Kong) all named as co-defendants, among other HNA subsidiaries, because they guaranteed or indemnified debts incurred by Grand China Shipping (Hong Kong).

    Calls to Shagang Shipping for comment regarding the release of the ship were not answered. A statement from Shagang on Saturday describing the cause of the conflict said it was concerned about the welfare of the passengers, but said Shagang would continue to pursue its claims against the HNA Group.

    Chinese media reported that two passengers had suffered heart attacks while the ship was impounded. China Daily said HNA Tourism didn’t inform passengers of the seizure for 20 hours, as hundreds of remaining passengers and crew members remained in South Korea waiting to return home.

    During the detainment, HNA Tourism said free entertainment and food were provided to all passengers on board. In addition, a 24-hour hotline was released to the public Saturday and an emergency team was established to work out a solution. But some passengers said the services they were offered were not as the company had claimed. A passenger surnamed Liu from Guangzhou said that services required payments in the first 20 hours of the seizure.

    Some of the passengers were also not satisfied with the compensation offered by HNA Tourism. A passenger surnamed Huang, who flew back to Beijing on Sunday, said the compensation could not make up for his losses, but he chose to fly back because he had to return to work.

    Henna’s operator issued a statement criticizing Shagang Shipping’s cruise ship seizure, which “in fact restricted the personal freedom of those on board and severely infringed upon the rights of innocent passengers.” The operator reserved the right to seek damages from Shagang Shipping.

    Hao Junbo, a lawyer in Beijing, was quoted by China National Radio as saying it is rare for a cruise liner to be detained, because usually only cargo ships are seized over such legal disputes.

    Dai Bin, head of the China Tourism Academy, said no commercial dispute should infringe upon tourists’ legal interests.

    China is a signatory to a New York convention that recognizes arbitration awards in foreign jurisdictions.

    China Daily reported that HNA Tourism had reported the incident to the Ministry of Foreign Affairs and the National Tourism Association and may seek damages from Shagang, quoting a statement distributed by HNA Tourism to local media.

    Officials in Jeju said they regretted the incident, but weren’t worried that 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.”

    (SD-Agencies)