Foreword

 

The Report on Trials 2010 of Guangzhou Maritime Court is the first judicial report that we have released to the public. It mainly analyzes the cases of maritime disputes tried by this Court throughout the year of 2010, and offers advice and solutions from a legal perspective. It aims to regulate the order of the shipping market and promote the sound growth of the shipping industry.

 

As Guangdong strives to establish itself as a maritime power in China, its marine economy becomes one of the major engines of social and economic development. The Outline of the Plan for the Reform and Development of the Pearl River Delta (2008-2020), approved by the State Council, clearly proposes to build the Pearl River Delta into an international shipping and logistics centre developing in a coordinated and complementary manner alongside Hong Kong and Macao. To contribute to the realization of this grand aim, Guangdong Province needs to speed up the structural optimization of its shipping and trading, and to promote the sound and sustainable development of the shipping industry. Furthermore, the shipping market needs to function in a good legal environment. Such an environment will provide superior and efficient maritime legal services and protection that benefit the scientific development of the marine economy and shipping industry.

 

Throughout 2010, we insisted on rendering judicial services for the people under the leadership of the CPC Guangdong Provincial Committee, and under the supervision and guidance of the Higher People’s Court of Guangdong and the Standing Committee of the Municipal People’s Congress of Guangzhou. We constantly improved maritime trials, carefully fulfilled our judicial function in maritime matters, and conducted surveys of and provided legal services for shipping companies; we handled maritime cases in accordance with law, properly resolved disputes, and played a positive role in the scientific development of the marine economy of Guangdong. On the above basis, we hereby present this report. It first analyzes the types, main characteristics and change in quantity of maritime disputes. Second, it discusses the current trend in the shipping industry and reveals new challenges and problems emerging in the shipping market. Last but not least, it analyzes dispute-prone areas in shipping and studies typical cases, and on this basis puts forward countermeasures and advice, which may be referred to for government decision-making, industrial development and business operation.

 

The report is prepared and released by this Court as a contribution to the national aim of building an international shipping and logistics centre. It is also an attempt to resolve social conflicts, innovate within social management, and promote fair and just law enforcement. If any problem or advice herein is inappropriate in any way, please feel free to point it out to us.

 

Guangzhou Maritime Court

January 2011

Table of Contents

 

I  History of Guangzhou Maritime Court

 

II  Basic Information on Maritime Trials

Largely affected by the financial crisis.

Highly linked to trading, logistics and other service industries.

Emergence of new cases.

A high proportion of dispute cases involved foreign, Hong Kong, Macao and Taiwan elements.

The proportion of cases in connection with marine resource exploitation was relatively small.

Cases were of distinct regional features.

 

III Active Response to the Risks to Shipping Industry Brought by the Global Financial Crisis

— Problems under the impact of the financial crisis and solutions we propose

Legal matters in handling cargo pile-up in ports

Impact of the financial crisis on shipbuilding

Impact of the financial crisis on the shipping & logistics industry

Impact of the financial crisis on the ship finance lease market

 

IV Regulating the Order of the Shipping Market

— Problems in goods carriage and port management and solutions we propose

Problems with package deal forwarding

Problems with cargo release without the presentation of original bill of lading

Problems with ship operations while berthing in dock

 

V Regulating the Labour Market

— Problems with seafarer management and solutions we propose

Problems with seafarer labour export and offshore dummy companies

Problems in ship operation safety and seafarer visa management

Problems with fair protection of rights and interests of labourers and employers

Problems with properly understanding and applying policies benefiting the common people

 

VI Regulating the Shipping Insurance Business

— Problems with the shipping insurance industry and solutions we propose

Problems in executing contracts for insurance

Problems with the credibility of insurance surveyors

Problems with inspection before acceptance of special cargo insurance

 

 

VII Protecting Eco-environment of Waters

— Problems in dealing with pollution of water resources and solutions we propose

Problems with actions taken by ship owners to minimize risk of pollution caused by accidents

Problems with pollution assessment techniques

Problems with pollution assessment mechanism

Problems with the plaintiff capacity of water management functional authorities

 

VIII Conclusions

 

 

 

 

I  History of Guangzhou Maritime Court

 

Guangzhou Maritime Court was established on 1 June 1984 under the Decision on the Establishment of Maritime Courts in Coastal Port Cities. It is one of the first six maritime courts in China. Originally, it was administered by the former Maritime Court Office of the Ministry of Transport, and had jurisdiction over the sea areas in Guangdong Province, Guangxi Zhuang Autonomous Region and Hainan Province. In 2000, the General Office of the CPC Central Committee and the General Office of the State Council relayed the Opinions of the Supreme People’s Court, State Commission Office for Public Sector Reform and Ministry of Transport on Adjusting the Administration of Dalian and the Other Five Maritime Courts, which provided that each of the six maritime courts was to be jointly administered by the party committee, government and higher people’s court of the province or municipality where the court was located. Accordingly, this Court has since been jointly administered by the CPC Provincial Committee, Provincial Government and the Higher People’s Court of Guangdong Province. As Haikou and Beihai now have their own respective maritime courts, this Court’s jurisdiction has been adjusted too. Currently we have jurisdiction over the trial of first instance of maritime dispute cases occurring within the 3,368 km coastline, 2,414 km island coastline, 420,000 km² sea areas and over 4,000 km navigable inland waters within Guangdong Province. With numerous ports, this jurisdiction is one of China’s regions with the most vigorous coastal shipping, ocean shipping and other marine economic activities.

 

To satisfy the growing need for trials, the Court is now divided into the Case Filing Chamber, Admiralty Tribunal, Maritime Tribunal, Tribunals of Shenzhen, Shantou, Zhanjiang and Jiangmen, Trial Supervision Division, Enforcement Division, Research Division, offices, Division of Politics, Discipline Inspection Office, Supervision Office, Judicial Police Detachment and Logistics Service Centre. We have in total 121 judges and staff, with the 55 judges each holding a bachelor's degree and 76.4% of them Master of Laws or higher. In view of the long coastlines under our jurisdiction, we have drawn support from the higher authorities and successively set up four detached tribunals in major coastal cities Shenzhen, Shantou, Zhanjiang and Jiangmen respectively to facilitate litigation and trials. The Shenzhen Tribunal was set up in 1993 as a pioneer detached tribunal among Chinese maritime courts, exercising jurisdiction over Shenzhen, Dongguan, and Huizhou etc.; Shantou Tribunal was set up in 1996, exercising jurisdiction over Shantou, Chaozhou, Jieyang and Meizhou etc.; Zhanjiang Tribunal was set up in 1997, exercising jurisdiction over Zhanjiang, Yangjiang and Maoming etc; Jiangmen Tribunal was set up in 2007, exercising jurisdiction over Foshan, Zhuhai, Jiangmen and Zhongshan etc. Since 2008, case filing circuit offices have been successively set up in places such as Nan’ao Island of Shantou and Bohe Port of Zhanjiang.

 

Ever since our establishment on 1 June 1984, we have been devoted to the development of marine economy; our judicial areas have been expanded, and the cases of maritime disputes we accept have been steadily increasing. By the end of 2010, we have handled 19,544 cases with subject matters amounting to nearly 20,000 million Yuan and involving more than 60 countries and regions. We have concluded a number of cases influential both at home and abroad, including the M.T. Mariner case which involved over 10 countries. CCTV presented a series of reports on the case with the title “The Most Significant Case after China’s Entry into the WTO”. The following charts illustrate the rapid growth of trials and enforcement conducted by this Court since 2000.

 

Figure 1: Cases entertained since 2000

 

 

Table 1: Comparison of cases entertained since 2000

Year	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010
Number of cases	1019	1226	1081	1306	1097	1411	1136	1489	1587	1579	1325
Growth (%)		20.31	-11.83	20.81	-16.00	28.62	-19.49	31.07	6.58	-0.50	-16.09

 

Figure 2: Subject matter values of cases entertained since 2000

Table 2: Comparison of subject matter values of cases entertained since 2000

Year	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010
Subject matter value of cases (Thousand Yuan)	1167480	988510	1149260	1531820	2334310	2262410	1305870	1173070	1581670	2412640	2588010
Growth (%)		-15.33	16.26	33.29	52.39	-3.08	-42.28	-10.17	34.83	52.54	7.27

 

 

Figure 3: Cases closed since 2000

Table 3: Comparison of cases closed since 2000

Year	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010
Number of cases closed	1062	996	1100	1266	899	1479	1215	1348	1624	1604	1404
Growth (%)		-6.21	10.44	15.09	-28.99	64.52	-17.85	10.95	20.47	-1.23	-12.47

 

 

 

 

 

 

 

Figure 4: Enforcement cases since 2000

 

Table 4: Comparison of enforcement cases since 2000

Year	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010
Number of cases closed	389	278	307	337	235	344	284	378	359	351	281
Growth (%)		-28.53	10.43	9.77	-30.27	46.38	-17.44	33.10	-5.03	-2.23	-19.94

 

Figure 5: Subject matter values of enforcement cases since 2000


Table 5: Comparison of subject matter values of enforcement cases since 2000

Year	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010
Subject matter value of cases (Thousand Yuan)	298550	311900	370190	468470	597170	383760	339550	148180	113150	188140	928830
Growth (%)		4.47	18.69	26.55	27.47	-35.74	-11.52	-56.36	-23.64	66.27	393.69

 

 

II  Basic Information on Maritime Trials

 

In 2010, we insisted on rendering judicial services for the people under the leadership of the CPC Guangdong Provincial Committee, and under the supervision and guidance of the Higher People’s Court of Guangdong and the Standing Committee of the Municipal People’s Congress of Guangzhou. We constantly improved maritime trials, actively fulfilled our judicial function in maritime matters, and promoted the progress of maritime trials. Throughout the year, we accepted 1,585 cases (including 260 cases carried over from the previous year), of which 1,409 were closed. The closing ratio was 88.58%, up 2.48% on a year-over-year basis. The subject matters of the closed cases valued 3,167 million Yuan, increasing by 1.08 times compared to the previous year; 283 enforcement cases were closed, and the enforcement closing ratio was 95.9%, up 10.74% year over year.

 

Cases we entertained mainly fell into the following types: 154 cases of disputes arising out of carriage of goods by sea (coastal), accounting for 19.9% of the first instances of maritime cases; 138 cases of disputes arising out of freight forwarding contracts, accounting for 17.8%; 73 cases of disputes arising out of ship contracts (sale, financing, repairs, shipbuilding, chartering and mortgage etc.), accounting for 9.4%; 69 cases of disputes arising out of seafarers labour contracts, accounting for 8.9%; 55 cases of disputes over damages for pollution caused by vessel or port operations, accounting for 7.1%; 37 cases of disputes over damages for ship collision, accounting for 4.8%; 29 cases of disputes arising out of marine insurance contracts, accounting for 3.7%; 20 cases of disputes over personal injury or death at sea, accounting for 2.6%; 12 cases of disputes over port operations, accounting for 1.6%. Through analysis, these cases were found to have the following characteristics:

 

— Largely affected by the financial crisis. In 2010, the number of cases of ship contract disputes soared to 73, with the value of subject matters amounting to 1,440 million Yuan. In many cases of disputes over shipbuilding, the dispute arose when the shipowner, due to a lack of funds, cancelled the shipbuilding order or requested to adjust the price or change the term of payment or the contracted ship type. The number of cases of ship chartering disputes sharply increased from 3 in 2009 to 34 in 2010, mostly caused by the charterer’s failure to timely pay the shipowner or the crew as a result of broken capital chain and deteriorating financial conditions; disputes also arose over ship finance lease, which had been rare before. Furthermore, among disputes over ship repair, there were cases in which the shipyard initiated proceedings and requested the court to auction off the repaired ship to pay off debts when the shipowner defaulted on repair charges. Likewise, under the continuous impact of the financial crisis, shipping enterprises were constantly faced with operation problems such as declining freight rates, reduced orders and freight arrears, while port enterprises were faced with lower throughput, cargo pile-up and port charge arrears; consequently, there was a sharp increase in proceedings in connection with disputes over arrears of freight/port charges or non-delivery taking.

 

— Highly linked to trading, logistics and other service industries. Since China’s entry into the WTO, the government has gradually opened up the trading, logistics, intermediary and other service markets; consequently foreign trade agencies have been flourishing. As the Asian Games were hosted by Guangzhou in 2010, more resources were input into the city’s infrastructure, thus promoting its trading, shipping, logistics and other service industries. Such growing business gave rise to a large increase in disputes arising out of forwarding contracts in 2010. Cases of such disputes numbered 138, accounting for 17.8% of all cases. Note that as the shipping market and logistics develops, there have been changes in the business scope and service modes of forwarders. In some forwarding contracts that gave rise to a dispute, package deal forwarding was agreed as the mode of forwarding. In these contracts, traditional forwarding was replaced by package deal forwarding, which covered on-site pick-up, road transport, loading and delivery. These changes pose a new challenge to the application of law.

 

— Emergence of new cases. Over the past three years, the Court has entertained 141 cases of maritime disputes other than disputes in connection with maritime tort and maritime contracts. A number of new types of cases have emerged. Examples are disputes arising from marine construction technology contract and contract for setting of navigation marks, as well as disputes over fuel subsidies for fishing vessels, maritime subrogation, compensation for damage to offshore/underwater installations caused by vessels, and damages for negative effects on navigational safety. The Court has also tried and closed a case of dispute over damages for water pollution from land-based sources, the claimant being a procuratorial authority on behalf of the State, which is the first case of its kind in China. These new cases have largely enriched the specialized functions of the maritime court. As marine economy develops, quality and efficient judicial services through maritime trials are increasingly in demand. Cases we entertained have extended from traditional cases involving vessel, cargo and port to cases involving water, island and the sea, and from traditional shipping dispute cases centring on cargo, to new cases related to the marine economy.

 

—A high proportion of dispute cases involved foreign, Hong Kong, Macao and Taiwan elements. As cases of maritime disputes largely involve foreign elements, and as Guangdong is adjacent to Hong Kong, Macao and Taiwan, in 2010 the Court entertained 388 dispute cases of first instance involving foreign, Hong Kong, Macao and Taiwan elements. These cases accounted for 43.67% of all cases of first instance and involved more than 60 countries and regions. Covering almost all shipping powers around the world and major trade partners of China, they had a far-reaching influence worldwide. During the trials of such cases, other than Chinese law, foreign laws and international conventions, treaties or practice may also apply. This poses a great challenge for the professionalism and ability of judges.

 

— The proportion of cases in connection with marine resource exploitation was relatively small. The main types of cases we entertained were of traditional disputes arising out of contracts for carriage of goods by sea, disputes over forwarding, disputes arising out of ship contracts, and disputes over marine insurance. These cases took up 42% of the total number of cases. This was closely related to the developed marine economy and brisk shipping market in the Pearl River Delta Region. On the contrary, throughout the year, there were only 10 cases in connection with exploitation of marine resources. As Guangdong carries on its strategy of marine economy, it can be predicted that dispute cases in relation to marine resource exploitation will emerge and increase, such as disputes over island development, coastal reclamation, offshore oil, seafloor exploration, hydrographic charting, buoys, clean-up markings, and seabed sweeping.

 

— Cases were of distinct regional features. The development of shipping and marine economy in Guangdong represents distinct regional features. Here are some statistics from our four detached tribunals. The Shenzhen Tribunal, located in a core city in the Pearl River Delta, mainly handled disputes arising from forwarding contracts and contracts for carriage of goods by sea; forwarding contract disputes handled accounted for 65% of such disputes handled by the Court as a whole. The Jiangmen Tribunal, located in the hinterland of the Pearl River Delta, largely dealt with disputes arising from contracts for waterway transport of goods and disputes over compensation for bridge damage caused by ship contact; the Shantou Tribunal in the East handled considerable disputes over compensation for port damage caused by ship contact; Zhanjiang Tribunal entertained a large proportion of cases for disputes arising out of seafarer labour contracts. Furthermore, as Shantou and Zhanjiang Tribunals each has jurisdiction over numerous fishing ports, the fishing disputes they handled accounted for 83% of all similar cases entertained by the Court as a whole. These were mainly disputes arising from aquiculture and fishery partnership contracts, and disputes over damages for infringement in relation to fishing. Over the past few years, the four detached tribunals have played an active role in serving the public. They have efficiently resolved the difficulties with maritime proceedings for ordinary people in coastal areas. Cases they entertained accounted for 59.4% of the total number of cases entertained by the Court.

 

III Active Response to the Risks to Shipping Industry Brought by the Global Financial Crisis

— Problems under the impact of the financial crisis and solutions we propose

 

(I) Legal matters in handling cargo pile-up in ports

 

In a case where cargo delivery was no taken in port, the frozen beltfish exported by an enterprise arrived at Shekou Port, Shenzhen, and was detained in the port as no one came to take delivery; consequently, the storage life of the beltfish ran out and a large sum of storage charges were incurred. The customs authorities stated that they had no right to deal with this matter as the Customs Law of the People’s Republic of China makes no provisions for handling export cargoes. The Court consulted with the customs authorities, inspection authorities and other departments concerned, and eventually ruled that the enterprise should dispose of the detained beltfish so as to avoid further loss of storage charges.

 

Under the impact of the financial crisis, delivery of cargoes is frequently not taken and containers unclaimed remain in ports in Guangdong Province. These cargoes and containers pile up in goods yards and create a series of legal matters, mainly including: first, when delivery of cargo is not taken in the port of destination, the carrier often incurs loss of freight and prepaid storage charges. As a contract for carriage of goods by sea involves a consignor, carrier and consignee, the carrier is also faced with the legal question as to whether to claim against the consignor or the consignee. Second, while the carrier may apply to a court for finding unclaimed goods unowned and auction off such goods, the law makes no provisions on whether the carrier is entitled to be compensated directly from the auction proceeds. Third, there are legal barriers to the disposal of export cargoes detained in ports.

 

With respect to legal matters arising when delivery of cargo is not taken in the port of destination, relevant laws in effect only provide for general principles and offer no case-by-case approach. We suggest enacting relevant laws, rules or judicial interpretations to offer the following solutions: first, clear provisions on how the carrier may claim the freight, storage charges or container demurrage when the delivery of cargo is not taken in the destination port; second, judicial interpretation providing that the carrier may obtain compensation for loss directly from the proceeds of the auction of unowned cargo; third, amendments to the Customs Law to the effect that unclaimed export cargoes may be disposed of by the customs authority with reference to import cargoes. Furthermore, the courts should cooperate and communicate more with the customs authorities and frontier inspection authorities, so as to better connect different means of disposal, i.e. the discharge, retention and application by the carrier for finding the property unowned, with the auction by the court, and with the sales by the Customs; to avoid long-term pile-up of goods and make best use of logistics resources of the ports.

 

(II) Impact of the financial crisis on shipbuilding

 

In a case where a petition was submitted for recognition and enforcement of a foreign arbitral award, a Greek company and a Chinese shipyard had entered into a ship conversion contract which agreed that all disputes arising therefrom should be referred to arbitration in London. The parties thereto later had a dispute over contract performance, and after arbitration subject to the arbitration clause, the arbitral tribunal awarded that the Chinese shipyard should be liable for damages; accordingly, the Greek company petitioned the Court for recognition and enforcement of such arbitral award made in London. Based on the cause of such dispute, the competent judge of the Court interpreted applicable laws to, and considered the issue with both parties. Eventually the parties reached conciliation and the petition was withdrawn.

 

Shipbuilding enterprises in the Pearl River Delta Region have been under tremendous impact of the global financial crisis. First, orders for new ships have fallen sharply, with prices showing a downward trend. Shipowners frequently cancel shipbuilding contracts or request a reduction in price; second, in the downward market caused by the financial crisis, variables exist in shipowners’ operating conditions and capacity for due performance. These variables will increase the risks of shipbuilding enterprises in executing contracts; third, the rising prices of steel and other raw materials puts more of a burden on shipbuilding enterprises and exerts new pressure on the industry. Under the combined effects of these factors, the shipbuilding industry turns to a buyer’s market, and shipbuilding enterprises are in an adverse situation with difficulties in financing, acquiring orders and delivery. Besides, some smaller shipbuilding yards are mainly engaged in ship repair with shipbuilding as a supplement. Under the impact of financial crisis, some of these shipyards were involved in ship repair disputes arsing when the shipowner failed to pay the repair charges on schedule. Consequently the shipyards initiated proceedings and applied for the sale of the ships by auction.

 

At present, large shipbuilding enterprises in Guangdong enter into shipbuilding contracts as contractor and in forms with reference to English law. Such contracts model on sales contracts, and are based on principles different from those understood by Chinese shipyards. A lot of miscomprehension is generated as a majority of Chinese shipyards know little about the UK Sale of Goods Act and provisions on shipbuilding contracts. For this reason, we advise shipbuilding enterprises to timely adjust the scale of production and operation according to changes in the market, and to select forms of contracts with more prudence. When handling disputes, the Court will offer more clarifications and mediate in the conflicting understanding of a contract, so that the parties may again reach consensus on and maintain the shipbuilding contract.

 

(III) Impact of the financial crisis on the shipping & logistics industry

 

In a case of dispute arsing from a contract for carriage of goods by sea, a shipping company had carried a cargo for an industrial company which later had deteriorated production and ceased to operate, with the freight and container demurrage unpaid. The shipping company brought an action to the Court after placing a lien on the cargo. In accordance with law, the Court adjudged that the industrial company should pay the freight and container demurrage to the shipping company, and the shipping company should have a priority right to the cargo auction proceeds.

 

With a decrease in exports, shipping and logistics enterprises have seen the shipping market change from “whoever owns a ship makes a profit” to “whoever owns a ship loses money”. Some port and shipping enterprises relying on export have been heavily impacted, and some with poor performance have to cut down staff or even close down. Manufacturers have financial difficulties and generally fall into arrears with freight. Consequently it takes a longer period to recover freight, with higher bad debts ratio of accounts receivable and higher operational risks. Operating costs have also increased, as more human and material resources have to be input in order to develop the market and cope with operational risks. As freight rates drop sharply, some merchants, who have entered into a long-term contract of affreightment or space booking, refuse to pay the freight and request to modify the contract. They want to renegotiate with the shipping company to reduce the freight rates, resulting in an increasing number of disputes.

 

For the above reasons, we advise shipping enterprises to keep track of changes in the market, timely adjust production and operation scales, and optimize the industrial structure. In trials of disputes over freight, the Court will apply the principle of changed circumstances on a case-by-case basis to reconcile the interests of all parties concerned; with respect to manufacturing enterprises under greater impact of the financial crisis, when handling applications for property attachment, the Court will fully consider such enterprises’ survival and development, their employees’ livelihood and the social stability; on this basis the Court will take flexible attachment measures, in an attempt to ensure the realization of lawful rights and interests of creditors while avoiding causing operational difficulties to the enterprises with improper attachment measures.

 

(IV) Impact of the financial crisis on the ship finance lease market

 

In a case of dispute arising from a contract for a ship finance lease, the plaintiff, a finance company, and the defendant, an ocean engineering company, had entered into a finance lease contract for the leaseback of three ships, the rent of each exceeding 100 million Yuan. The defendant suffered sharp deterioration in its financial situation and ceased to operate, and fell into arrears of crew wages and rent to the plaintiff. For this reason, the plaintiff put claims to the Court for the return of ships and payment of rent. In view of the huge value of the subject matter, the Court maintained the normal operation of the ships to minimize the losses of both parties, and presided over the mediation between the parties based on ascertained facts. Eventually the parties reached agreement and the case was closed in mediation.

 

Ship finance leasing is an emerging financial business in China. It is a civil arrangement where the lessor lets a ship to the lessee in accordance with a lease; the lessee possesses and operates the ship and pays rents to the lessor during the lease term. Generally, in a ship finance lease, a bank or another financial institute provides the funds for ship construction or purchasing to acquire ownership of the ship, and then lets the ship to a shipping company to get profits from the rent. As an emerging financial business, ship finance leasing integrates funds and assets. It provides shipping companies with a good solution to shortage of funds for ship construction or purchasing, and is therefore well received in the shipping market. However, as a ship finance leasing involves a huge amount of funds and complicated relations, and concerns finance, trade, insurance and material supply, the market risks it may bring are prominent during the financial crisis. The main risks are: 1, performance risks, mainly the risk that the lessor is unable to recover his investment when the lessee fails to timely pay the rent and interest thereon due to changes in the shipping market, poor performance, or bad capital turnover; 2, exchange rate risk: if the ship for lease has been imported, international payment and settlement is involved. As exchange rates are volatile during the financial crisis, a large price difference may occur if the lessor and the lessee use different currencies for income and debt. As a medium- and long-term investment project, a ship finance lease involves a particularly prominent risk of exchange rates; furthermore, a ship finance lease may also involve operational risks and force majeure risks, and is therefore prone to disputes.

 

To cope with these problems, we advise the transport authorities to further regulate the industry and strictly implement the Notice of Regulating the Domestic Ship Finance Lease Business; to control market access, ensure the credit and performance capacity of the lessor and the lessee, and further regulate such leasing. Both the lessor and the lessee are advised to fully measure the market risks and its respective risk-bearing capacity. In case of foreign exchange settlement, the cost difference caused by fluctuations in the exchange rate should also be considered. These measures will help to facilitate the economic benefits of financing while avoiding its disadvantages.

 

IV Regulating the Order of the Shipping Market

— Problems in goods carriage and port management and solutions we propose

 

(I) Problems with package deal forwarding

 

In a case of dispute arising out of a forwarding contract, the plaintiff, a garment company, had entrusted a shipment of jeans to the U.S. to the defendant, a logistics company. The defendant sub-entrusted another logistics company with the task of goods collection from the plaintiff’s factory via a trailer. During the transport by the trailer, an employee of the second logistics company stole part of the goods. After the goods had arrived in the U.S., the plaintiff found out the shortage and accordingly claimed for damages against the defendant, who refused to compensate by alleging that it was the forwarding agent of the plaintiff.

 

With the high-speed development of the shipping market, there have been changes in the business scope and service modes of forwarders. These changes facilitate cargo transport, but in turn create new legal matters. The Court has lately entertained a number of cases similar to the foregoing, all of which involve package deal forwarding. In this mode of forwarding, when entrustment is unclear and a shortage of goods occurs, there comes the issue as to whether the forwarder has to assume liability. Problems with these cases are: 1, the consignor contacts the forwarder orally without a written power of attorney; 2, the forwarder “sub-entrusts” all or part of the arrangements to a third party without gaining express consent of the consignor; 3, a shortage of goods occurs in transit from the factory to the loading port by a trailer company sub-entrusted by the forwarder, or, in the case of multimodal transport, a shortage of goods is found at the destination port; 4, where the consignor does not pay the “freight”, the forwarder requests the consignor to make the payment by withholding the bill of lading, detaining the goods or taking other measures. Under such circumstances the forwarder claims that the two parties are in a relation under a contract for carriage of goods; however, in the event of a shortage of goods in transit or cargo release at the destination port without the presentation of original bill of lading, the forwarder claims that the parties are in a relation under an agency contract.

 

To conduct fair trials of disputes arising out of forwarding contracts and equally protect the lawful rights and interests of forwarders and consignors, the Court has drawn up guidance and judgment criteria, which to a certain degree regulate the forwarding market. To resolve the abovementioned problems, we propose the following solutions: 1, the consignor and the forwarder should clearly define each other’s rights and obligations in writing, which will serve to protect their lawful rights and interests; 2, if the forwarder sub-entrusts all or part of the transport arrangements to a third party, the express consent of the consignor should be obtained in advance; 3, the forwarder should select a trailer company in good standing and with good reputation, e.g. one equipped with a GPS monitoring system to prevent stealing. Where multimodal transport is concerned, the forwarder should see to the smooth handover of goods through all links; 4, the forwarder should fulfil its obligations and report to the consignor with the progress of the entrustment.

 

(II) Problems with cargo release without the presentation of original bill of lading

 

In a case of dispute over cargo release without the presentation of original bill of lading (BL), a Chinese seller had sold the goods to a foreign buyer at FOB price (cost price exclusive of freight and insurance), and the carriage of goods was taken charge of by the foreign buyer. After the seller had booked space from a Chinese forwarder as instructed by the buyer, the forwarder issued a BL to the seller. The carrier recorded on the BL was a foreign non-vessel operating common carrier (NVOCC) in a name similar to the forwarder. The BL was not registered with the Ministry of Transport; and the cargo thereunder was released at the destination port without the presentation of original BL. Accordingly the seller initiated proceedings and requested the Chinese forwarder and the foreign NVOCC to compensate for the loss of cargo jointly and severally. The forwarder refused to compensate by alleging that it was the agent of the foreign NVOCC.

 

Similar cases are not rare in recent years. According to the statistics from competent authorities, Chinese sellers have consequently suffered huge losses and the domestic shipping market is seriously disturbed. Problems in these cases are: 1, when a Chinese seller sells goods to a foreign buyer at FOB price and the buyer appoints a foreign carrier, the carrier is likely to deliver the goods to the buyer at the destination port without collecting the original BL, after which the buyer may not make the payment to the seller; as a result, the seller, though holding an original BL, has no control over the goods thereunder, while it is difficult to claim against the foreign NVOCC as it has no assets in China; 2, without obtaining the qualification for non-vessel carrier operation and paying a deposit, the foreign NVOCC operates non-vessel carrier business in China and issues a house bill of lading (HBL) not registered with the Ministry of Transport so as to avoid supervision; 3, some NVOCCs are actually dummy affiliates of Chinese forwarders set up to avoid legal liability and taxes. Their main characteristics are: each of these NVOCCs has similar name, same staff and same place of business with a Chinese forwarder, and uses special invoices issued by a third party. When negotiating with a Chinese consignor about carriage of goods, the forwarder obscures its agency relation with the foreign NVOCC. It merely indicates in the BL, which is issued to the seller after loading, that it issues the BL as agent of the foreign NVOCC. In the event of a dispute over cargo release without the presentation of original BL, the forwarder will refuse to assume liability by alleging that it is the agent.

 

In the trial of the foregoing case, the Court took into account these facts: the Chinese forwarder did not disclose its agency relationship with the foreign NVOCC and did not obtain the explicit authority of the NVOCC, and the NVOCC did not obtain the qualification for non-vessel carrier operation. Based on these facts and in accordance with law, the Court adjudged that the forwarder should be jointly and severally liable. The judgment protected the lawful rights and interests of the Chinese seller, and came as a blow to such behaviours that disturb the domestic shipping market. We also advise Chinese consignors to avoid selling goods at FOB prices, and to arrange for the transport on their own, and select a carrier with good reputation to carry the goods. Once a court has discovered any of the abovementioned violations or illegal activities, it should timely report to the shipping administration and tax authorities.

 

(III) Problems with ship operations while berthing in dock

 

In a case of dispute over compensation for dock damage caused by ship contact, the dock owned by the plaintiff had a berthing capacity of 1,000 tonnage, yet the plaintiff told the defendant to berth with reference to a ship with a cargo capacity of 5,000 tonnage. The subject ship had a gear box failure during berthing and consequently contacted the dock, causing serious damage to the latter.

 

The Court has analyzed many cases of disputes over compensation for dock damage caused by ship contact, and concluded the following causes of such accidents: 1, some docks have complicated waters and the masters are not familiar with the waters and currents in these docks; 2, failures in ships’ equipment and apparel (towline); 3, port operators do not provide adequate control over port operation safety. For example, due to a lack of port patrol officers or immature safety facilities, ships cannot receive prompt and effective instructions from the ports, resulting in contacts, or port operators allow ships beyond the ports’ berthing capacity to berth.

 

To avoid or reduce such contact accidents, we propose the following solutions:

1, shipping enterprises should exert greater control over the safety of ship berthing, urge navigators to get familiar with port waters and to berth with good seamanship, and when necessary hire a tugboat or pilot to assist in the berthing; furthermore, they should pay more attention to the maintenance of ship equipment, so as to ensure the ships’ seaworthiness. 2, port operators should exert greater control over port operation safety, implement a safety responsibility system, and provide lighting and other safety supporting facilities for ship berthing; they should try to raise awareness of port operation safety, and only allow ships within the ports’ capacity to berth.

 

V Regulating the Labour Market

— Problems with seafarer management and solutions we propose

 

(I) Problems with seafarer labour export and offshore dummy companies

 

In a case of dispute over labour remuneration and medical expenses initiated by seafarers against a shipping company, some seafarers were deployed to a foreign ship without signing a labour contract; when the seafarers left the ship, they initiated proceedings on labour remuneration and medical expenses. Through analysis of similar cases, the Court has found that some overseas shipping companies lack legal awareness and in many cases do not sign written contracts, while relevant Chinese companies or intermediaries have poor management and inadequate control, both resulting in the frequent occurrence of such disputes.

 

We also find that some shipping companies have set up an offshore company, the operations of which are run by a Chinese company as agent so as to avoid legal liability. In one case, a management company claimed against a Chinese shipping company for a shipping agency fee. However, the contract concerned had been entered into between the management company and a Hong Kong company, rather than the said shipping company. The Hong Kong company did not appear in court, and the shipping company insisted that it merely acted as agent of the Hong Kong company. It was ascertained that although the aforesaid contract bore a seal of the Hong Kong company, all operations including payment to the management company were handled by the Chinese shipping company. The Court holds that the Hong Kong company was actually a shell company that the shipping company set up in Hong Kong. Accordingly, if the shipping company was ruled to be agent of the Hong Kong company and therefore not liable, it would be difficult to enforce any judgment in favour of the management company against the Hong Kong company. The establishment of such offshore dummy companies enables shipping companies to illegally avoid legal liability, and consequently disturbs the shipping market.

 

We suggest that labour authorities should exert greater supervision over the labour protection of seafarers, and the foreign affairs authorities should have better control over the seafarer labour export market, and should timely caution against and report on offshore companies with bad credit or poor management; seafarer management agencies or intermediaries should have greater legal awareness and do their best to protect the lawful rights and interests of seafarers deployed overseas. Administration for industry and commerce should widely disseminate and apply the Company Law, and look into the actual relationship between offshore and domestic companies. Furthermore, they should prevent the practice of setting a nominal company to avoid liability, and hold any violating domestic companies legally liable.

 

(II) Problems in ship operation safety and seafarer visa management

 

In trials of certain ship disputes, the Court finds that some inland ship managers have absolutely no awareness of safety. They not only fail to fulfil their basic obligations under their operation contracts, i.e. to ensure seaworthiness of ships and eligibility of seafarers, but also fail to rigorously manage ships and seafarers’ visas in accordance with regulations on safety management. A few ship managers even apply to the Maritime Safety Administration for voyage visas for ships in the name of seafarers who do not serve on such ships. Such practice gives rise to hidden troubles in operation and management safety. In accordance with the Regulations on Traffic Safety in Inland Waters, one condition for the seaworthiness of a ship is that the ship shall be crewed by seafarers meeting the regulations stipulated by the transport authorities under the State Council. Each seafarer shall be competent and eligible for his post. This is a fundamental requirement for safe navigation and management, as well as a significant guarantee of traffic safety at sea and in navigable inland waters.

 

We advise ship owners and mangers to raise awareness of production safety and of law, eradicate illegal or untrue applications, and eliminate hidden troubles in all links of shipping operations. The Maritime Safety Administration should conduct a strict examination of ship safety and seafarers’ eligibility and exert greater supervision over ship inward and outward visas.

 

(III) Problems with fair protection of rights and interests of labourers and employers

 

The Court finds that it is quite common that written contracts are not signed for labour relations involving seafarers. In particular, in small or private shipping companies, a large proportion of seafarers are deployed or self-employed seafarers in temporary employment. In the event of a dispute between such seafarers and their employers, it will be difficult to produce evidence for the agreed wages, working conditions and period, and other facts. In accordance with the Labour Contract Law, as long as a seafarer is able to prove that labour relation de facto has been formed and wages have been agreed upon, the employer shall make payment doubling such wages to the seafarer. This provision is intended to urge employers to timely sign labour contracts with labourers, so that the rights and interests of labourers can be protected. The Court also entertained some cases of disputes over overtime payments to seafarers. These disputes arose when shipping companies failed to timely settle overtime payments while there were no applicable regulations in place. Viewed from the enforcement of relevant judgments, the aforesaid double wages and overtime compensation paid to seafarers are usually higher than the wage arrears. For this reason, a shipping company that fails to sign written labour contracts with seafarers will have to pay a higher price. Shipping companies and employers should attach great importance to this issue and manage labour contracts in compliance with applicable regulations.

 

In trials of these cases, the Court finds that a few seafarers intentionally did not sign a labour contract, and started to purposely collect evidence of their service on the ship from the date they got on board, e.g. taking and keeping photos of the daily log. After some time they resigned with an excuse, and then claimed for double wages on the ground that no written labour contract was signed. The labour authorities, shipping companies and employers should be aware of this problem.

 

We advise the labour authorities to exert greater supervision over these labour contracts, and when necessary cooperate with the customs or port authorities to carry out activities within their jurisdiction, so as to examine and rule out arrears of wages and employment of seafarers without written labour contracts. Furthermore, when hiring a seafarer, each shipping company should make sure to sign a written labour contract with the seafarer, so as to fairly protect the rights and interest of both parties. These measures will help to regulate the seafarer labour market and create a more harmonious labour market.

 

(IV) Problems with properly understanding and applying policies benefiting the common people

 

Due to increasing fuel prices, China has offered diesel subsidies to power-driven fishing vessels since 2006 to help the fishing population cope with rising costs. Although the subsidies are given to the owner of each fishing vessel, the government has not made provisions for the allocation and use of such subsidies. Disputes and conflicts thus arise in practice, mainly including the following circumstances: in a partnership, a partner holds that the other party wants to pocket all or most of the diesel subsidies; a party holds that the other party is not cooperative, resulting in the failed application for diesel subsidies; after collecting the diesel subsidies, a party withholds the allotment to the other party without authorization. In 2010, courts in Guangdong Province closed some cases in which the crew of fishing vessels claimed for allotment of diesel subsidies. As the government intends the subsidies to reduce the oil costs of production and operations, the Court holds that in cases where the owner and the crew of a fishing vessel share the production costs, the owner has no right to dispose of the diesel subsidies at its discretion. Accordingly, it was adjudged that the crew were entitled to an allotment of the subsidies. This decision facilitates the implementation of governmental policies benefiting the common people.

 

We advise the local government or fishing authorities to promote relevant laws and regulations, and to ensure owners and crews of fishing vessels or fishermen properly understand and implement such laws and regulations. By making effective agreements on the allotment and use of diesel subsidies during production and operation, disputes will be reduced and the fishing industry will develop in a sound and orderly way.

 

VI Regulating the Shipping Insurance Business

— Problems with the shipping insurance industry and solutions we propose

 

(I) Problems in executing contracts for insurance

 

In trying cases of disputes arising out of contracts for cargo transport insurance, the Court finds that it was agreed on some insurance contracts that in the event of cargo loss, the insured should first lodge a written claim or even bring an action against the carrier or another third party; if the insured waived its claim against the third party, the insurer does not assume any liability for compensation. The Court holds that in accordance with the Insurance Law, the insured has the right to request the insurer to settle the claims in advance. The law does not support any agreement on the insured’s obligation to first claim or even proceed against the carrier or any liable third party. The time limit is one year for a consignor to claim against the carrier under a contract for carriage of goods by sea, while the time limit is two years for the consignor to claim against the insurer under an insurance contract. If the consignor is negligent in claiming or unable to claim against the carrier as agreed, and one year later claims against the insurer, the insurer will be at risk of exceeding the time limit to claim against the carrier after it has obtained the subrogation after settling the insured’s claim. For this reason, such agreement is not conducive to the protection of the lawful rights and interests of the insurer, or to the sound development of the shipping insurance market.

 

In addition, it is agreed in some insurance contracts that if the insured requests the insurer to settle the claim first, the insured shall sign and hand over to the insurer a subrogation form and a statement of claim against the carrier or a third party, together with other relevant documents and materials, and shall assist the insurer with the recovery from the liable party. The Court holds that this restriction is impracticable. The claim settlement by the insurer is a precondition for the issuance of a subrogation form; accordingly, it would be unreasonable to require the insured to issue a subrogation form before the insurer has made the payment. As the above agreement is a standard term provided by the insurer, when no other evidence is available, the Court has to interpret such agreement to the disadvantage of the insurer.

 

We advise insurers to properly manage insurance contracts, study applicable laws and regulations and discuss feasibility before drafting standard terms, and take into account the lawful rights and interests of both the insured and the insurer.

 

(II) Problems with the credibility of insurance surveyors

 

In trying cases of disputes arising out of ship insurance contracts, the Court finds that with respect to the evaluation of a ship involved in a covered accident and the calculation of the ship repair or salvage expenses, the surveyor reports issued by a few insurance surveyors firms aroused a lot of controversy. In some cases, two consecutive surveyor reports even came to contradicting conclusions on the same issue; consequently the Court had to ascertain relevant facts with the help of other evidence. This hinders trials and dispute resolution. It is known that in some places, a surveyors firm can carry on business after simply registering with the local administration for industry and commerce; founders or employees of some surveyors firms are former employees of insurance companies, and may be prone to bias drive by illegal benefits; some surveyors have limited ability and competence that they fail to offer authoritative opinions on specialized issues. These phenomena have impaired the credibility of insurance surveyors firms to different degrees.

 

We advise insurance regulatory authorities to attach more importance to these problems and cooperate with insurance companies in improving the supervision and control over insurance surveyors firms, surveyors and the reports they issue.

 

(III) Problems with inspection before acceptance of special cargo insurance

 

In a case of dispute arsing out of a marine insurance contract, an insured imported a cargo of second-hand electromechanical equipment and took out all risks insurance on the transport of such cargo with an insurer. However, no inspection was conducted of the equipment conditions before loading, and damage was found when the cargo arrived at the destination port. The insured and the insurer disputed bitterly on the value of cargo loss. The cargo damage survey report, issued by a surveyors firm after the accident, was not able to illustrate the actual conditions of the equipment before loading; accordingly there was no basis for the equipment repairs costs it estimated with reference to the actual prices in the repair market. Through the efforts of the Court, the case was eventually closed in mediation. Nevertheless, where such special cargo is not inspected or secured before loading, it would be more difficult for courts to ascertain the relevant facts once an accident occurs, and the dispute resolution among the consignor, insurer and carrier would be hindered. We advise insurers, before signing a transport insurance contract in connection with special cargoes, to conduct a pre-inspection before loading, so as to minimize the risk of settlement.

 

In view of the promise made by the Chinese government upon entry into the WTO, i.e. to open up the domestic insurance market, we advise domestic insurance companies to practically improve their services and enhance their credibility, so as to gain better integrated competitiveness in the global shipping insurance market.

 

VII Protecting Eco-environment of Waters

— Problems in dealing with pollution of water resources and solutions we propose

 

(I) Problems with actions taken by ship owners to minimize risk of pollution caused by accidents

 

In a dispute case, two foreign vessels, i.e. M/V “Hyundai Advance” and M/V “MSC Ilona” collided at the Pearl River estuary, resulting in serious pollution from oil spill. As the two foreign vessels had respectively taken out insurance with the Swedish Club and the Steamship Mutual Underwriting Association Limited before the accident, the shipowners eventually reconciled with the plaintiff, the Administration of Ocean and Fisheries of Guangdong Province, with the assistance of the P & I clubs. This case inspires all shipowners. In most similar cases the Court has tried and achieved reconciliation, the owner of a ship causing such an accident has taken out insurance on the ship, and therefore is able to reach reconciliation with the strong support of the insurer. We advise shipowners to ensure that proper ship insurance is in place, so as to reduce and diversify risks of polluting the waters and avoid going bankrupt when an accident happens.

 

Shipowners should make every effort to reduce pollution once an accident takes place. When pollution happens, some liable shipowners adopt a negative and evasive attitude, which is highly undesirable. For instance, when M/V “Minghui 8” collided with another ship and sank after incurring damage to her cargo oil tank, the MSA sent a letter to request the shipowner to remove the oil so as to eliminate the threat of pollution; however, the shipowner ignored such request, and was eventually ordered by the Court to indemnify the MSA for the expenses of the compulsory actions to remove the oil. In the event of spill of oil or fuel on board a ship, the liable shipowner should take positive actions to minimize pollution, i.e. by timely blocking the spill and immediately calling a marine rescue centre, so that the MSA will send people to deploy booms and oil absorbent mats to contain oil pollution. The shipowner should timely report to the MSA on the details of the accident, the overall ship condition, the location of spill and dimensions of drain outlets of the ship, approximate speed of spill, total volume and loading positions of oil on board, and degree of risk of oil spill etc. The shipowner should make every effort to minimize oil spill and reduce pollution of the marine environment and any other losses. Furthermore, pointless rescue actions should be prevented lest secondary pollution may occur. For example, when oil spill occurred when M/V “Ocean Success” was unloading oil at port, the ship interests poured oil dispersant into the sea and used a fire hydrant to spray over the floating oil within the booms. When people sent by the MSA arrived, a white oil film had been formed over the water surface, resulting in secondary pollution.

 

To solve these problems, we propose the following solutions: 1, to engage an assessment agency as early as possible to collect evidence. The shipowner of M/V “Ocean Success” did not engage a foreign expert until 10 days after the accident, and the other Chinese expert engaged had never appeared on the scene. Consequently, the evidence it provided was not admitted by the Court in that such evidence was not adequate to refute the evidence provided by the plaintiff. The liable shipowner should actively collect evidence at the scene upon occurrence of the accident, including taking photos and video of the accident scene, keeping water samples, engaging a qualified assessment agency for prompt investigation and evidence collection, and acquiring initial data. These will be necessary conditions for the resolution of any future dispute; 2, to set up a fund to limit the amount of compensation. After the occurrence of an accident causing pollution of water resources, the liable shipowner should fully exercise the special mechanism to protect shipowners’ rights and interests, and set up a fund of limitation of liability for maritime claims so as to keep the amount of compensation within the statutory limit.

 

(II) Problems with pollution assessment techniques

 

In a dispute case, the defendant challenged the claim that the marine pollution in dispute was caused by an oil spill on the part of the defendant, and held that an assessment should be conducted of the oil pollution in order to indentify the oil concentration of the waters before the pollution accident. However, restricted by time, geography and other factors, it was difficult to identify the exact oil concentration of the waters before the accident. This is one of the difficulties in the technical assessment of water pollution.

 

There are two technical barriers to claims in relation to water resources pollution: 1, there are no adequate technical means to exactly assess the scale of pollutant spread and the extent of damage to the marine life and environment. Due to the fluidity of the waters, and as pollutants will flow away as time goes by and marine creatures will swiftly escaped from a polluted scene, it becomes extremely difficult to determine the extent of damage caused by pollution. 2, there is no basis for the calculation of the amount of most losses. Oil pollution accidents mainly cause two types of damage to the national and public interests: the first type is damage to the national environmental resources, such as natural fishery resources, aquatic plants, mangrove, birds and landscape; the other type is damage to the environmental quality, such as deteriorated water quality, temporary or permanent loss of various uses and functions, disappearance of habitats for animals and plants. Nevertheless, the plaintiff can only claim for the loss of fishery resources, mainly because it is clearly stipulated in the Regulations on Calculation of Fishery Loss Caused by Pollution of Water Resources, issued by the Ministry of Agriculture, that the loss of natural fishery resources can be estimated at no less than 3 folds of the direct damage to aquatic products. As there is no basis for the calculation of other losses, the plaintiff cannot claim for such losses.

 

To overcome the foregoing technical barriers, we suggest setting up an oil pollution compensation fund and cooperating with international experts. In accordance with the Regulations on the Prevention and Control of Marine Pollution from Ships enacted by China in 2010, owners of cargo oil shall contribute to the ship oil pollution compensation fund. The State is contemplating setting up a ship oil compensation fund and the management committee thereof. We suggest drawing lessons from the practice of the International Oil Pollution Compensation Funds (IOPC Funds), namely to actively participate in assessing and determining the damage as the party providing the compensation. After an accident, an expert team is formed consisting of experts from the IOPC Funds and the International Group of P&I Clubs to assess the cleanup costs and other claims made by the victims. Experts sent by the IOPC Funds are generally experts from the International Tanker Owners Pollution Federation (ITOPF). They not only encourage reasonable cleanup actions, but also rapidly assess claims caused by the pollution and facilitate the resolution of disputes over damages.

 

(III) Problems with pollution assessment mechanism

 

In a case of public interest litigation caused by water pollution, the defendant challenged the objectivity and fairness of an investigation report issued by a fishery environment monitoring centre and provided by the plaintiff, the fishery authorities. The defendant held that the data used in the investigation report, including oil concentration in the waters and monitoring records, were all provided by fishery inspectors affiliated with the plaintiff. This reveals the institutional defects of assessment organizations. Some assessment organizations are affiliated with the plaintiff, and some participate in the investigation as accident investigators and are accordingly obliged to provide technical support and services for plaintiffs such as marine administrations; consequently, the credibility of investigation reports they issue are widely challenged. Furthermore, assessment organizations have different qualifications. Some are only qualified for environmental monitoring, some are qualified for assessing damage to fishery resources and do not have  adequate ability and experience for assessing damage to environmental resources and the environment.

 

To cope with these problems, we suggest forming a specialized organization consisting of maritime experts, marine environment researchers and price evaluation experts to assess pollution of water resources and damage to environment, thereby supporting relief for environmental damage.

 

(IV) Problems with the plaintiff capacity of water management functional authorities

 

In a case of dispute over damages for marine pollution initiated by the Environmental Protection Bureau of Zhuhai, Guangdong against two shipowners, the two defendants raised objection to the capacity of the plaintiff, alleging that it was legally groundless for the plaintiff to initiate public interest litigation on behalf of the State. In most cases of public interest litigation, the capacity of the plaintiff is challenged, showing that this is a highly controversial issue. In China, other than the Marine Environmental Law, no other laws directly provide for public interest litigation. Accordingly, functional authorities are not legally authorized to initiate public interest litigation. Furthermore, the Civil Procedure Law provides that one condition for the plaintiff to bring an action is that the plaintiff must “have a direct interest in the case”, while one of the features of public interest litigation is that the plaintiff has no direct interest in the damage at issue. The aforesaid provision becomes a legal barrier hindering functional authorities from initiating public interest litigation. As a result, only a small number of public interest litigation is initiated, failing to effectively reduce the pollution of water resources. Over the 26 years since our establishment, we have entertained cases of public interest litigation over water pollution with subject matters amounting to approximately 70 million Yuan. According to preliminary statistics provided by the Administration of Ocean and Fisheries of Guangdong Province, Guangdong suffered economic losses of nearly 200 million Yuan as a result of pollution of the ocean and fisheries merely between 2001 and 2007. Plus the losses caused by pollution of water resources under the administration of the MSA, environmental protection bureau, port authorities, water authorities, Pearl River water resources authorities and other government agencies, the amount of claims known only takes up a very low proportion. According to the statistics on China’s Green National Accounting Study Report 2004, China sustained losses of around 511,800 million Yuan due to environmental pollution in 2004, yet few cases of public interest litigation were thus initiated.

 

We advise the People's Congress or local governments to enact laws and regulations to explicitly authorize relevant functional authorities to initiate public interest litigation over water pollution. Moreover, in cases of public interest litigation over water pollution, the courts can only adjudge the damages to be turned in the national treasury, while no monitoring mechanism is available to supervise whether the damages are used to restore the water environment. To cope with this problem, we suggest setting up a water resources pollution compensation fund, with contributions from the government, polluters, environmental organizations and the society. Damages adjudged by maritime courts in public interest litigation should also be included into the fund. The fund should be managed by an appointed body, and be exclusively used to restore and control the loss of national and public interests caused by pollution of water resources.

 

VIII Conclusions

 

The Report on Trials 2010 of Guangzhou Maritime Court is the epitome of the overall maritime trials conducted by the Court throughout 2010. By reviewing the maritime trials completed, the Court has analyzed changes and legal issues in shipping-based financing, forwarding, labour, and insurance markets, and proposed solutions and countermeasures. We hope our efforts will provide some empirical reference and guidance for shipping companies in preventing risks and disputes, thereby promoting the sound and orderly development of the shipping economy.

 

A clear objective to promote the marine economy is set out in the Proposal for Formulating the Twelfth Five-Year Plan for National Economic and Social Development, passed in the 5^th plenary session of the 17^th Central Committee of the CPC. 2011 is the first year of China’s 12^th Five-Year Plan. Protecting and promoting the sound development of the shipping economy is vital to the growth of trade and economy of Guangdong Province. The Court will insist on rendering judicial services for the people, improving maritime trials, and actively fulfilling our judicial functions. Through these efforts, we will make greater contributions to the growth of the marine and shipping economy of Guangdong.