Chinese Bribery, Torture Claims Overshadow U.K. Court Ruling

(Bloomberg) -- HNA Group Company Ltd. lost a top court ruling in a long-running dispute with Shagang Shipping Co. that has been overshadowed by dueling allegations of torture and bribery.

The U.K. Supreme Court ruled on Wednesday that HNA, a Chinese conglomerate, owed $68.6 million to Shagang in a decision that narrowly focused on how judges should review evidence of bribery and torture.

The case between two Chinese companies in financial difficulties -- Shagang Shipping is in liquidation and HNA is undergoing a government-led restructuring -- is more notable because of the allegations that underline what was otherwise a mundane shipping dispute.

The dispute arose out of a 2008 contract -- governed under U.K. law -- for the charter of a ship.

Shagang first sued HNA in 2012, and since then a bizarre case has unfolded before the British courts. HNA argued the contract was the result of a bribe, rendering the whole deal unenforceable.

HNA's based the bribery allegations on confessions made by three people during an investigation by the Chinese Public Security Bureau. Shagang, however, argued that the confessions were inadmissible because they were obtained by torture.

Lawyers for Shagang and HNA declined to comment. HNA didn't immediately respond to requests for comment.

The trial court judge ruled in 2016 that he didn't find enough proof to back up the bribery allegations against Shagang, but that he couldn't rule out torture either. That muddled language led the court of appeal to order a new trial on some issues.

But the Supreme Court on Wednesday ruled that although it would have been “more satisfactory” to address the confessions in greater detail, the judge didn't have to review the torture claims once he found that no bribery took place.

HNA is one of the Chinese conglomerates facing liquidity risks following a debt-fueled global shopping binge. Its airline business has been heavily hit by the Covid-19 pandemic this year which triggered a virtual shutdown of the aviation industry.

Earlier this year, Chinese authorities announced the government would start taking control of the group, likely paving the way for speedy asset disposals and boosting HNA's ability to repay about $75 billion of debt. The firm and its subsidiaries have about $2.3 billion of outstanding local and offshore bonds due over this and next year, Bloomberg-compiled data show.

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