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SembMarine unit acts to stop BNP's wind-up order
Goh Eng Yeow Wed, Nov 28, 2007 The Straits Times
THE escalating legal row over SembCorp Marine's (SembMarine's) huge foreign exchange losses has gone up a gear with a unit of the rig-builder filing a 'tit-for-tat' court action against BNP Paribas. Jurong Shipyard (JSL) applied for an injunction last Friday to stop BNP, a French bank, from serving a winding-up order. Such an order could, in theory, force JSL to close. BNP threatened the drastic action if it failed to get a payment of US$50.72 million (S$73.1 million) which it claimed were losses from JSL's forex trades.

JSL's defensive move - its injunction application is pending in the High Court - has led BNP to undertake not to file the winding- up petition, pending the outcome of the injunction bid. This will be heard on or after Jan 14.

BNP's move is partly legal brinksmanship as JSL - a thriving concern with over 2,200 workers - is under no real threat of being wound up. But the move also dramatically raises the stakes in the wrangle between SembMarine and the banks that were parties to JSL's forex trades.

SembMarine's position rests on the contention that the forex trades were 'rogue transactions' performed by former finance chief Wee Sing Guan without its authorisation.

That position will be tested in January's High Court hearing.

SembMarine will have to produce a 'precise factual and legal basis' for its claim that the trades between JSL and BNP were not binding; that they were rogue ones made by Mr Wee.

The proceedings will be closely watched by the other nine banks also involved in the trades which have not received payment for their forex losses.

BNP's hardball tactics were apparently triggered by a controversial move by JSL to pay US$115.45 million to Societe Generale to fulfil a pre-condition for closing rogue trades.

That payment, even though it was made without prejudice to JSL's position, surprised investors as the rig-builder had stated emphatically that it was not liable for any losses since they were unauthorised trades.

One lawyer said that BNP knew the chances of actually presenting JSL with a winding-up petition were highly remote. 'Legally speaking, it is an abuse of the process to present a winding-up petition over a disputed debt.'

And BNP would also have been aware that JSL could itself seek an injunction to restrain the bank from presenting a winding- up petition. this is precisely what the rig-builder is doing.

BNP may be aiming to force SembMarine to say at an early stage precisely what it meant when it claimed that Mr Wee's trades were 'unauthorised'.

And playing for time at the court hearing by insisting on letting independent auditor PricewaterhouseCoopers complete a probe first may not be an option for SembMarine. 'It will be interesting to see what JSL can produce to show that the BNP debt can be disputed on reasonable grounds,' said the lawyer.

JSL will have to perform a high-wire act as it tries to convince the High Court that it has no association with the trades Mr Wee made with BNP.

It will have to show that the debt can be disputed on reasonable grounds in order to get the injunction to restrain BNP from presenting its winding-up petition.

The consequences could be dire if it fails. The worst-case scenario could see it paying BNP the US$50.72 million, no strings attached, to avoid having a winding-up petition being served.

It certainly promises to be a nail-biting festive season for SembMarine's shareholders.

engyeow@sph.com.sg

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