Table of Contents
1. Accurately Defining the Applicable Premise of the “Unknown Clause” and Reasonably Determining the Carrier’s Duty of Care for the Cargo
——Chongqing Zhong Products Co., Ltd. v. Panama S Company 23
2. Applying International Shipping Practices and Determining the Insured’s Duty of Disclosure
——Singapore M International Pte. Ltd. and Myanmar Ying Co., Ltd. v. the Nanjing Property Insurance Company 25
3. Accurately Determining the “Warehouse to Warehouse” Clause and Clarifying Marine Insurance Compensation Liability
——J Group Co., Ltd. v. the Insurance Co., Ltd. Qingdao Branch et al. 27
4. Ascertaining and Applying German Law and Safeguarding the Rights of Ship Agency Company
——Taicang Foreign Shipping Agency Co., Ltd. v. German Z Shipping Co., Ltd. 29
5. Applying the International Regulations for Preventing Collisions at Sea and Reasonably Dividing the Proportion of Collision Liability
——Hong Kong Z Shipping Co., Ltd. v. Zheng and the Third-party Insurance Company 31
6. Innovating “Maritime Injunction plus Pre-Penalty Notice” Work Model and Effectively Ensuring Supply Chain Smoothness
——Zhejiang Wumou Co., Ltd. v. Hong Kong Lingmou Shipping Co., Ltd. et al. 33
7. Actively Fulfilling Obligations under the New York Convention and Recognizing and Enforcing a UK Arbitral Award
——Panama N Shipping Co., Ltd. v. Jiangsu S Import & Export Co., Ltd. 34
8. Innovating the Model for Arrest and Judicial Sale of Hazardous Chemical Ships and Safeguarding the Ecological and Environmental Security of the Yangtze River
——Case on Arrest and Judicial Sale of the M/V X 35
9. Flexibly Applying Maritime Preservation Measure and Facilitating the Realization of Parties’ Rights under Foreign Arbitral Awards
——HK F Marine Co., Ltd. v. Liberia S Shipping and Trading Ltd. 37
10. Legally Applying Special Procedure and Safeguarding the Rights and Interests of Shipbuilding Enterprise
——Yangzhou Ship Trading Co., Ltd. and Yizheng Shipbuilding Co., Ltd. v. Singapore S Pte. Ltd. 38
1. Accurately Defining the Applicable Premise of the “Unknown Clause” and Reasonably Determining the Carrier’s Duty of Care for the Cargo
——Chongqing Zhong Products Co., Ltd. v. Panama S Company
Facts
In May 2021, Chongqing Zhong Products Co., Ltd. (hereinafter “Zhong Company”) purchased over 36,000 tons of pine logs from abroad. The logs were loaded onto the M/V S owned by Panama S Company (hereinafter “S Company”) for transportation from the Port of Montevideo, Uruguay, to the Port of Taicang, China. The bills of lading indicated the consignee as “to order”, the notify party as Zhong Company, and stated “the aforementioned goods, apparent good order and condition, have been shipped on board at the port of loading to be transported to the port of discharge or a place near where the ship can safely reach, weight, measure, quality, quantity, condition, contents, and value unknown”. After the ship arrived at the port of discharge, Zhong Company, S Company, and the charterer made a joint sampling inspection and revealed issues such as decay, mold, and shortage of the logs. Zhong Company subsequently filed a lawsuit at the Court, requesting S Company to compensate for the loss and damage of the cargo.
Judgment
The Court held that although the bills of lading contained the statement “weight, measure, quality, quantity, condition, contents, and value unknown”, the logs in question were shipped in bulk as whole logs, and the bills of lading also described the goods as in “apparent good order and condition” and specified the exact number of pieces. S Company was fully capable of counting the quantity. Upon arrival, the goods were found to have mold and breakage in appearance, and a count revealed a shortage in the number of pieces. In the absence of evidence proving that any defects existed before loading, it should be presumed that the damage was caused by improper transportation by the carrier. Furthermore, after the ship departed, it returned to the port of origin for repairs due to rudder damage. The involved pine logs were unloaded and stored in the open air at a local yard for as long as six months, and the carrier did not provide special protective covering for the logs, therefore the carrier is liable for the damages that occurred during the period the they were under its care. The Court calculated the cargo loss using the depreciation rate method and, considering that part of the cargo was loaded on deck and should be at the shipper’s risk, held that S Company should bear 68.5% of the liability for the mold damage and shortage loss of the carried goods. After the first-instance judgment, neither party appealed. S Company voluntarily fulfilled the Court’s judgment within one month.
Typical Significance
This case provides a good model for a better understanding and interpretation of “Unknown Clause” under the bills of lading in terms of carriage of logs at sea. The “Unknown Clause” is a special provision under the bills of lading by which carriers could exempt the liability of the loss and damage of cargo. Article 75 of the Maritime Code of the People’s Republic of China clearly stipulates that the carrier may make statements on the bills of lading if there is no appropriate means of checking the accuracy of the information of the cargo that has been provided. In light of this provision, the major premise for the application of “Unknown Clause” should be “having no appropriate means of checking”. In this case, the transported logs were shipped in bulk, and the bills of lading has recorded the number of pieces of the logs, therefore the carrier is able to count. The carrier failed to provide a reasonable explanation for the shortage of the cargo, and it was also found that during transport, the goods had been unloaded and left exposed in the open area for six months before being reloaded. The Court eventually held that the carrier was not entitled to exemption from liability by invoking the “Unknown Clause”. This case provides a guiding significance in promoting the order of the shipping market.
2. Applying International Shipping Practices and Determining the Insured’s Duty of Disclosure
——Singapore M International Pte. Ltd. and Myanmar Ying Co., Ltd. v. the Nanjing Property Insurance Company
Facts
In September 2019, Singapore M International Pte. Ltd. (hereinafter “M Company.”) purchased an oversized filling-line conveyor from Heng Equipment Co., Ltd. (hereinafter “Heng Equipment”) in China. The parties agreed that Heng Equipment would manufacture the machine and arrange for its transportation and insurance to Myanmar Ying Co., Ltd. (hereinafter “Ying Co.”). The machine was packed into 14 standard containers and 3 flat-rack containers. Upon arrival in Myanmar, Ying Co. discovered that the machine parts carried in the 3 flat-rack containers had suffered severe water damage, and filed a claim with the Nanjing Property Insurance Company (hereinafter “Insurance Company”). The Insurance Company refused to compensate on the ground that the insured had failed to fulfill its duty of disclosure with respect to the fact that the equipment was carried on deck. M Company and Ying Co. then filed suit to the Court, requesting the Insurance Company to pay the premium and the corresponding interest.
Judgment
The Court held that, under this marine insurance contract, the duty of disclosure is rested on the the policyholder and insured, Heng Equipment. According to international shipping practices, liner carriers usually draw up container stowage plans based on factors such as ports of call, ship stability, and draft, etc. Therefore, the fact that the flat-rack containers were placed on deck was not something Heng Equipment, as policyholder, would normally be expected to know. The bills of lading expressly recorded that the goods were packed into 14 standard containers and 3 flat-rack containers, and the insurance policy incorporated the bills of lading number. Under the management rules of the Insurance Company and industry norms, the insurer should have conducted prudent underwriting for such non-standard machinery. Moreover, stowing flat-rack containers on deck is a situation that insurers are normally expected to be aware of, yet the insurer failed to notice. The insurer therefore could not refuse indemnity on the ground of nondisclosure by the insured. On this basis, the Court held that the Insurance Company was obliged to compensate M Company. After the first-instance judgment, no appeal was filed.
Typical Significance
The policyholder’s or the insured’s duty of disclosure in marine insurance has long been a difficult issue in judicial practice, with divergent views in practice. In this case, the Court correctly applied international shipping practices and insurance industry norms, and based the findings of the fact, determined that the stowage of flat-rack containers on deck in this case was a fact that the insurer should have discovered through its underwriting. Accordingly, the policyholder was under no duty of disclosure in this regard. This judgment accurately delineates the scope of the policyholder’s or the insured’s duty of disclosure in marine insurance contract, strikes a balance between the interests of the insured and the insurer, and contributes to the sound development of China’s marine insurance market. The case was selected as one of the 2023 Typical Cases of Foreign-related Commercial and Maritime Trials by the High People’s Court of Jiangsu Province, and was published in Chinese Maritime and Commercial Law Reports (Vol. 4, 2024).
3. Accurately Determining the “Warehouse to Warehouse” Clause and Clarifying Marine Insurance Compensation Liability
——J Group Co., Ltd. v. the Insurance Co., Ltd. Qingdao Branch et al.
Facts
J Group Co., Ltd. (hereinafter “J Company”) insured its tapioca chips imported from Thailand under marine cargo transportation “all risks” insurance. The tapioca chips were transported by the M/V S, which arrived at the discharge port, Lianyungang, China, on May 22, 2021. On June 11, 2021, J Company received a notice from the shipowner that the tapioca chips that had not been unloaded from cargo hold No.7 had been soaked due to water ingress into the hold, resulting in partial damage to the goods. J Company immediately filed a claim against Insurance Co., Ltd. Qingdao Branch (hereinafter “Insurance Company”), but the two parties failed to reach an agreement on the amount of goods damage. To mitigate the losses, J Company opted to auction the damaged tapioca chips. The auction was organized and conducted by the Insurance Company. The damaged tapioca chips were successfully bid on by a third-party company, a Guangzhou Company. However, due to the continuous deterioration of the goods’ quality, the Guangzhou Company refused to take delivery. Consequently, the damaged tapioca chips remained stranded at the port yard until the initiation of the present lawsuit, ultimately resulting in the total destruction of the goods. J Company filed a lawsuit regarding the losses and damages involved in the case, demanding that the Insurance Company compensate for losses and damages including the value of the goods and terminal storage fees, totaling over RMB 860,000.
Judgment
The duration of liability under the marine cargo insurance policy in this case is “Warehouse to Warehouse.” Accurately determining the “Warehouse to Warehouse” clause is the key to dividing insurance liability. The Court, after comprehensively considering the evidence such as the involved insurance contract clauses, the parties’ email correspondence, and industry practices, rendered a judgment in accordance with the law that the date of auction of the damaged tapioca chips shall be deemed as the date of arrival at the destination for distribution or allocation. At this point, the insurance coverage period shall terminate, and the Insurance Company shall not be liable for compensation for any cargo damages occurring after the auction. Meanwhile, the judgment clarified that following the occurrence of an insured event, the owner of the goods has a duty to promptly take reasonable measures to mitigate losses based on the characteristics of the damaged goods. This duty to mitigate losses does not transfer to the Insurance Company by virtue of its participation in the disposal of the goods. After the judgment was issued, both parties accepted it and did not appeal. The parties involved in the two related maritime cargo transportation cases therefore also reached settlements concurrently.
Typical Significance
Due to the numerous uncertainties inherent in maritime transportation, goods damage occurs frequently. Owners of the goods can transfer this risk by purchasing marine cargo transportation insurance. Upon the occurrence of an insured event, the insurance company is obligated to provide compensation based on the value of the damaged goods and may assist the owner of the goods in organizing an auction of the goods to mitigate losses. This case accurately determines the period of coverage under “Warehouse to Warehouse” clause and clarifies that after an insured event occurs, the cargo owner must promptly take reasonable measures to mitigate losses based on the characteristics of the damaged goods. Furthermore, the cargo owner’s duty to mitigate losses remains unchanged even if the insurer participates in the disposal of the goods.This adjudication reasonably determines the scope of the insurer’s liability, effectively safeguards the order of the marine insurance market, and establishes a guiding precedent with significant referential value for the judiciary. This case has been selected for inclusion in the Case Database of People’s Courts and published in the Chinese Maritime and Commercial Law Reports (Vol. 4, 2023).
4. Ascertaining and Applying German Law and Safeguarding the Rights of Ship Agency Company
——Taicang Foreign Shipping Agency Co., Ltd. v. German Z Shipping Co., Ltd.
Facts
German Z Shipping Co., Ltd. (hereinafter “Z Company”) is a partnership enterprise registered in Germany. From June to November 2019, Z Company commissioned Taicang Foreign Shipping Agency Co., Ltd. (hereinafter “Agency Company”) as the port agent of multiple foreign ships, arranging ships to berth at Chinese ports for unloading. That cost agency fees of over RMB 3 million, which Z Company has yet to pay. On January 17, 2020, Z Company advanced a payment of over RMB 4 million to a third-party company in Yangzhou for other business purposes, but the payment was never offset against actual business transactions. On March 4, 2020, Z Company was dissolved and deregistered. For the agency fees, the Agency Company filed a lawsuit at the Court. After accepting the case, the Court, upon the Agency Company’s application, legally preserved the advance payment remaining in the third-party company in Yangzhou. During the proceedings, the Court commissioned the Center for Proof of Foreign Law of East China University of Political Science and Law to investigate whether a deregistered German company could be a defendant in litigation under German law. According to German law, if there are evidences indicate that after a company’s deregistration, the partnership property or the claims of obligatory right still exist, then the liquidation process has not been terminated, and the partnership name has not been dissolved.
Judgment
The Court, after reviewing the facts of the case, determined that Z Company was a German partnership enterprise that had been deregistered. In accordance with Article 14 (1) of the Law of the People’s Republic of China on the Application of Law to Foreign-related Civil Relations and Article 14 of the Interpretation of the Supreme People’s Court on Certain Issues Concerning the Application of the Law of the People’s Republic of China on the Application of Law to Foreign-related Civil Relations (I), the capacity for civil rights of the Z Company should be determined in accordance with the law of its place of establishment, i.e., German law. During the litigation, the Court lawfully imposed preservation measures on Z Company’s assets in China. According to the relevant provisions of the German Commercial Code, when a partnership company is dissolved, if there are evidences indicate that partnership property or the claim of obligatory right still exist, then the liquidation process has not been terminated, and the partnership name has not been dissolved, the partnership company may participate in passive lawsuits. Therefore, the Court held that Z Company should pay the Agency Company over RMB 3 million agency fees and interest. After the judgment took effect, the Agency Company received full compensation from the prepayment that remained in the third-party company before the deregistration of Company Z, which was preserved by the Court.
Typical Significance
This case is a typical example that the Court commissioned a specialized institution to ascertain foreign laws. In this case, the application of law involved two issues: first, the determination of the applicable law for the civil capacity of the German company; second, the determination of the applicable law for the ship agency contract. The Court held that the capacity for civil rights of the German company should be governed by German law, while the dispute concerning the ship agency contract should be governed by Chinese law. The Court, in accordance with German law, held that even if a German partnership enterprise has been dissolved, it still retains the status as a defendant, and thus made the judgment in favour of the Agency Company. This case, through accurate investigation and correct application of German law, demonstrates the equal protection of the legitimate rights and interests of both Chinese and foreign parties, and also enhances the credibility of Chinese maritime adjudication.
5. Applying the International Regulations for Preventing Collisions at Sea and Reasonably Dividing the Proportion of Collision Liability
——Hong Kong Z Shipping Co., Ltd. v. Zheng and the Third-party Insurance Company
Facts
On May 20, 2018, the Chinese-flagged bulk carrier M/V A, owned by Zheng, loaded 4,900 tons of bulk cement in Dalian and departed from Dalian Port bound for Wenzhou Port. On May 21, 2018, the Panamanian-flagged bulk carrier M/V B, owned by Z Shipping Co., Ltd. (hereinafter “Z Shipping”), loaded over 46,000 tons of coke and departed from Lianyungang Port. At approximately 5AM on May 22, 2018, the above two ships encountered each other in the southern Yellow Sea. When in sight of one another, the distance between the two ships was approximately 3 nautical miles, with M/V B located about 3 degrees abaft the starboard beam of M/V A. And M/V A mistakenly identified M/V B as an overtaking ship. When the distance between the two ships was approximately 1 nautical mile, both ships continued on their courses and speeds without taking evasive action. It was not until the distance narrowed to 0.4 nautical miles that M/V B began to turn left, while M/V A turned left and stopped, then reversed. When the distance between the two ships was only 0.17 nautical miles, the chief officer of M/V B made repeated calls to M/V A on the VHF radio but received no response. Subsequently, the two ships collided. The collision resulted in varying degrees of damage to both ships’ hulls. M/V B incurred losses including, but not limited to, repair costs, survey fees, and charter hire losses, while M/V A incurred losses including, but not limited to, repair costs, off-hire losses, and maintenance expenses. The insurance company of M/V A had already compensated its owner, Zheng, for part of the losses and damages. Before the Court, the central dispute concerns whether the two ships constitute a crossing situation or an overtaking situation.
Judgment
Article 15 of the International Regulations for Preventing Collisions at Sea (1972) provides that when two ships are crossing, the other ship on the starboard side of the own ship shall give way and take evasive action. The Court found that the present case falls under the situation of two ships crossing each other. On the basis of the facts and the provisions of the international convention, the Court determined the liability ratio of the two ships and held that Zheng is obliged to compensate Z Shipping for the losses of M/V B totaling over RMB 10 million plus interest, Z Shipping to compensate Zheng for various losses of M/V A totaling over RMB 100,000 plus interest, and Z Shipping to pay the insurance company part of the repair costs for M/V A. After the first-instance judgment, no party filed an appeal.
Typical Significance
This case is a typical example of a dispute over liability for damage from ship collision concluded by applying the International Regulations for Preventing Collisions at Sea (1972) . By interpreting and applying the relevant provisions of the Convention, the Court determined that the encounter situation between the two ships involved was a situation of meeting at a large angle or perpendicular crossing, rather than overtaking, thereby establishing the evasive obligations of the two ships. It was confirmed by this case that, as to comprehensively and accurately determine the proportion of responsibility, it is necessary to determine the encounter situation of the ships as well as the evasive obligations of the ships, then to analyze whether the ship has taken the most beneficial actions for collision avoidance at each stage of the collision situation and determine the ship’s responsibility for collision avoidance, and finally to examine whether there are any other faults related to the accident during the operation of the ship. The case is of strong guiding significance for similar cases, and has been included in the Case Database of People’s Courts.
6. Innovating “Maritime Injunction plus Pre-Penalty Notice” Work Model and Effectively Ensuring Supply Chain Smoothness
——Zhejiang Wumou Co., Ltd. v. Hong Kong Lingmou Shipping Co., Ltd. et al.
Facts
Zhejiang Wumou Co., Ltd. (hereinafter “Wumou Company”) imported a batch of over 40,000 tons of steel billets worth nearly US$30 million from Russia. During the transportation of the goods, Wumou Company obtained the full set of original bills of lading. After the goods arrived at Taicang Port of Jiangsu Province, the ship incurred high demurrage charges due to port congestion and other issues, and the carrier refused to deliver the goods on the grounds of a dispute regarding liability for the said costs. Wumou Company argued that, the carrier, Hong Kong Lingmou Shipping Co., Ltd. (hereinafter “Lingmou Shipping Company”) had no right to refuse to deliver the goods on the ground that costs under the charter party had not been paid. Given the prolonged storage of the steel billets at the port would incur high storage costs, and the significant price fluctuations of steel billets due to international circumstances, Wumou Company made an application before the Court to request Lingmou Shipping Company immediately delivering the goods.
Result
Through the Court’s coordination, Lingmou Shipping Company delivered most of the steel billets under the bills of lading to Wumou Company. However, Lingmou Shipping Company still refused to release the remaining more than 1,500 tons of steel billets based on its own interests. To protect the lawful rights and interests of Wumou Company, the Court initiated a maritime injunction review procedure. Through written inquiries and online hearings, the Court issued a maritime injunction requiring Lingmou Shipping Company to immediately deliver the remaining more than 1,500 tons of steel billets under the No. 1/J bills of lading to Wumou Company. In order to ensure the effectiveness of the enforcement of the maritime injunction as well as minimize adversarial conflicts and societal costs, the Court preemptively issued a “Pre-penalty Notice” and warned the Lingmou Shipping Company that failure to deliver the goods within the specified timeframe would result in coercive measures including fines and detention. Ultimately, Lingmou Shipping Company voluntarily delivered the remaining steel billets to Wumou Company.
Typical Significance
This case marks the first maritime injunction issued by the Nanjing Maritime Court since its establishment. Recognizing the urgency of the situation, the Court proactively coordinated with the respondent to voluntarily deliver the majority of the goods upon receiving the application for the maritime injunction. The Court promptly issued the injunction and fully leveraged the function of the “Pre-penalty Notice” to urge the respondent to voluntarily fulfill their legal obligations. The case made full use of advisory reminders, sanctions for dishonesty, and commendation for integrity to facilitate the enforcement of the maritime injunction. It embodies the judicial philosophy of “treating the case as if it were my own”, assists enterprises in overcoming difficulties, and effectively optimizes the rule-of-law-based business environment.
7. Actively Fulfilling Obligations under the New York Convention and Recognizing and Enforcing a UK Arbitral Award
——Panama N Shipping Co., Ltd. v. Jiangsu S Import & Export Co., Ltd.
Facts
On September 29, 2019, the applicant, Panama N Shipping Co., Ltd. (hereinafter “N Company”), as the shipowner, and the respondent, Jiangsu S Import & Export Co., Ltd. (hereinafter “S Company”), as the charterer, entered into a charter party. A dispute subsequently arose between N Company and S Company concerning this agreement, prompting N Company to initiate arbitration in London. On June 23, 2020, the arbitrator issued an arbitral award over the dispute concerning the charter party. On July 1, 2020, the arbitrator issued a memorandum of correction to the arbitral award, amending the date of the charter party in the original award. N Company then applied to recognize and enforce the arbitral awards before the Court.
Result
After review, the Court held that, based on Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter “New York Convention”), the grounds for refusing recognition and enforcement of a foreign arbitral award mainly fall into two categories: (1) grounds that require the respondent to raise objections and provide supporting evidence, such as invalidity of the arbitration agreement or procedural defects; and (2) grounds that require courts’ ex officio reviews, including the arbitribility of the subject matter and whether the recognition or enforcement of the arbitral award would be contrary to the public policy of the country where recognition and enforcement is sought. In this case, S Company neither presented a defense nor conducted cross-examination, and it raised no objections regarding the validity of the arbitration agreement, the appointment of the arbitrator, the composition of the tribunal, or any procedural defects, or any grounds for refusal of recognition and enforcement. Despite of this, the Court held that, the dispute arose from the charter party amenable to arbitration, and the recognition and enforcement of would not contravene China’s public policy. Accordingly, the Court held that the foreign arbitral award should be recognized and enforced. During the enforcement procedure, N Company applied to add Che, the sole shareholder of S Company, as a judgment debtor. Through explaining the legal consequences and underlying causes of enforcement to Che, the Court facilitated a settlement agreement, enabling N Company to obtain timely compensation.
Typical Significance
This case exemplifies how maritime judiciary serves the Belt and Road Initiative. The applicant is a Panamanian company, and Panama was the first Latin American country to sign a memorandum of understanding on the Belt and Road Initiative. In accordance with Article Ⅴ of the New York Convention, the Court granted the application after its judicial review. This reflects the open judicial approach of Chinese courts in adhering to international convention obligations and safeguarding the international commercial order. During the enforcement proceeding, the Court adjusted the method of enforcement, and facilitated a settlement effectively and struck a balance between the parties, reflecting the commitment of Chinese courts to supporting the high-standard opening up.
8. Innovating the Model for Arrest and Judicial Sale of Hazardous Chemical Ships and Safeguarding the Ecological and Environmental Security of the Yangtze River
——Case on Arrest and Judicial Sale of the M/V X
Facts
The M/V X is a Hong Kong-registered hazardous chemical ship. Due to the shipowner’s default on a loan of over RMB 45 million to a financial company, the company latter applied for the arrest of the ship. On December 8, 2020, the Court granted the application. When the ship was seized, there were 19 crew members still on board, including 5 Myanmar nationals. The ship was also carrying over 1,600 tons of hazardous chemical acetyl butyl ester, which has flammable properties. During the subsequent legal proceeding over the dispute, the financial company applied for the judicial sale of the ship on the grounds that the shipowner had failed to provide security upon the expiration of the arrest period, and that the judicial sale of the ship was necessary to prevent the escalation of costs and depreciation of the ship’s value during the extended arrest, thereby facilitating the prompt realization of the interests of all parties involved. The shipowner also explicitly expressed its inability to continue maintaining custody of the ship and submitted a letter of consent to judicial sale. On August 20, 2021, the Court allowed the judicial sale of M/V X. On April 19, 2022, the ship was successfully sold for RMB 26 million.
Result
Due to the absence of a designated anchorage for chemical ships in the Jingjiang Port area of the Yangtze River, after the arrest of ship, the Court actively coordinated with the owner of the hazardous chemicals, the terminal company, the tank cleaning company, border inspection authority, customs, and other relevant departments to relocate the ship. The ship was first moved to a terminal company in Changshu Port for cargo discharge and tank cleaning, and subsequently relocated to a dangerous goods anchorage in Taicang Port for safekeeping. Concurrently, the Court considered the welfare of the Myanmar crew members, such as the provision of essential supplies and ensuring the payment of outstanding wages. Facing challenges including the lack of a designated crew-change port within Jiangsu Province and no direct flights to Myanmar, the Court contacted the maritime safety administration, border inspection authority, foreign affairs department, and etc. to develop and execute a plan for the crew change and eventual repatriation of the seafarers. Following the successful judicial sale of M/V X, the Court approved, upon the buyer’s application, the ship’s further relocation to Zhenjiang Wufengshan Shipyard for its final delivery. On May 12, 2022, the Court coordinated the buyer, the former shipowner, and the custodian company for the handover of the ship’s certificates, remaining bunkers, sewage, and etc., and the physical transfer of the ship was also supervised by the Court remotely. The parties were also guided to sign a handover confirmation, and an online record of the delivery.
Typical Significance
The Yangtze River, as the mother river of the Chinese nation, is a vital strategic water source, a significant ecological treasure, and a golden waterway in China. In this case, the prolonged detention of a foreign ship carrying hazardous chemicals posed a direct threat to the ecological security and environmental protection of the Yangtze River waters. During the proceedings, the Court actively sought support from multiple departments, promptly implemented safety management and emergency response measures, thereby avoiding the significant safety hazards associated with the long-term storage of hazardous chemicals on board. Addressing the challenges of crew rotation and repatriation for foreign seafarers, the Court actively explored several mechanisms: a humanitarian assistance mechanism, a cash security mechanism for foreign crew wages, and a government-judiciary coordination mechanism. These efforts were aimed at safeguarding the interests of the foreign crew members to the greatest extent possible, demonstrating the compassion toward them. By upholding the principles of good-faith and civilized justice to protect public safety and prevent accidents in accordance with the law, this case also effectively safeguarded the security of the Yangtze River waters. It stands as a concrete practice of the People’s Courts in providing judicial services for the “greater protection of the Yangtze River” and facilitating the green development of the Yangtze River Basin. This case was selected as one of the Top Ten Typical Cases of the High People’s Court of Jiangsu Province in 2021.
9. Flexibly Applying Maritime Preservation Measure and Facilitating the Realization of Parties’ Rights under Foreign Arbitral Awards
——HK F Marine Co., Ltd. v. Liberia S Shipping and Trading Ltd.
Facts
In August 2021, Liberia S Shipping And Trading Ltd.(hereinafter “S Shipping”) and HK F Marine Co., Ltd. (hereinafter “F Marine”) entered into a voyage charter party. Subsequently, a dispute arose between the two parties concerning off-hire issues during the charter period, which was submitted to arbitration in London, England in accordance with the Rules of London Maritime Arbitrators Association (LMAA). In January 2023, the arbitration tribunal issued a Final Award in favor of F Marine, ordering S Shipping to immediately pay the charter hire and corresponding interest to F Marine. However, S Shipping failed to comply with the arbitral award. On March 8, 2023, M/V A, owned by S Shipping, arrived at Zhangjiagang to discharge. Upon learning of this, F Marine applied to the Court for ship arrest and provided a corresponding letter of guarantee and cash security.
Judgment
Upon review, the Court held that F Marine’s application for ship arrest was complied with the statutory provisions. Accordingly, the Court ordered the arrest on the second day after receiving the application. Following the arrest of the M/V A, S Shipping proactively engaged with F Marine regarding the fulfillment of the arbitral award. Ultimately, under the Court’s guidance, the parties reached a settlement agreement and fully performed their obligations within one week, M/V A was released from arrest successfully. The parties mutually agreed within a settlement to amend the arbitration clause to institute legal proceedings in the Court for any future disputes.
Typical significance
This case is a typical example about maritime “Fengqiao” Experience, which facilitates substantial settlement of international maritime disputes. The Court, in the absence of precedents to follow, conducted a systematic interpretation of the legal provisions concerning ship arrest and determined that the applicant is entitled to file an application for ship arrest to the Court at the place where the property is located, during the period between the rendering of a foreign arbitral award and the application to the Court for its recognition and enforcement. The ship arrest effectively advanced the substantive and efficient enforcement of the international maritime arbitral award. By effectively leveraging the unique advantages of mediation, known as Eastern Experience, the Court facilitated the parties’ expeditious consensus on the fulfillment of the arbitral award. This also promoted the parties who involved in international shipping disputes to realize their rights under the international arbitral award at a relatively low cost. The Court’s efficient and pragmatic attitude garnered the parties’ trust and fully extended the benefits of China’s diversified maritime dispute resolution system to both domestic and foreign parties alike. This case has significantly enhanced the credibility and international influence of China’s maritime adjudication and was selected as one of the Top Ten Typical Cases of the High People’s Court of Jiangsu Province in 2023.
10. Legally Applying Special Procedure and Safeguarding the Rights and Interests of Shipbuilding Enterprise
——Yangzhou Ship Trading Co., Ltd. and Yizheng Shipbuilding Co., Ltd. v. Singapore S Pte. Ltd.
Facts
Applicants Yangzhou Ship Trading Co., Ltd (hereinafter “Trading Company”) and Yizheng Shipbuilding Co., Ltd. (hereinafter “Shipbuilding Company”), as co-builders, entered into two shipbuilding contracts with respondent Singapore S Pte. Ltd. (hereinafter “S Company”). The contracts stipulated that the former would construct two barges for the latter. Payment terms were 10% of the contract price to be paid three business days after the contract was signed, with the balance to be paid two days prior to delivery. Following completion of the two barges, the Trading Company and the Shipbuilding Company registered the ships under the name of a Marshall Islands company at S Company’s request. However, S Company failed to pay the construction fees as agreed. Giving the fact that S Company refused to repay its due debts, the Trading Company and the Shipbuilding Company made an application before the Court to realize its possossory lien on the two barges.
Judgment
The Court conducted a thorough review of the evidence of the case and inquired the parties, fully safeguarding the litigation rights and equal status of both Chinese and foreign parties. Based on the findings of fact, the Court promptly and legally permitted the judicial sales of the two barges involved in this case. The court also confirmed that the claims of the Trading Company and the Shipbuilding Company would be prioritized for repayment from the proceeds of the sales.
Typical Significance
As the international shipbuilding market continues fluctuating, when ship prices decline or when the charges against the ship become substantial, shipbuilding companies will face significant risks of default or even abandonment by ship buyers. This case fully leveraged the efficiency of the special procedure with regard to realizing security rights. Bearing in mind the need to equally safeguard the litigation rights of Chinese and foreign parties, the Court quickly ascertained the facts regarding the performance of the shipbuilding contract, and held that the Chinese shipbuilding enterprise’s right to enjoy a possessory lien on the foreign ship which was temporarily registered in the Marshall Islands. It also held that this possessory lien was not affected by other judicial preservation measures such as seizure and detention against the same ship initiated by third parties. The timely decision of the Court effectively protected the legitimate rights and interests of the Chinese shipbuilding enterprise.