Foreword

 

With the international shipping industry in the midst of a financial crisis, the maritime market in 2013 has been sluggish.

 

As a trough in the shipping market is prone to maritime disputes, Guangzhou Maritime Court, since early 2013 has made every effort to gain objectives put forward by General Secretary Xi Jinping that, “the people should be able to enjoy justice and fairness in every legal case”. This Court has adopted a proactive approach to the administration of justice. At the stage of case filing, we offer clearer litigation instructions and pre-litigation mediation to guide litigants to agreements on dispute resolution; this helps to resolve disputes, cut court costs, and reduce effort of the litigants. At the stage of trial, we summarize trial patterns, regulating trials of disputes arising from forwarding contracts and contracts for carriage of goods by sea, disputes over container demurrages, constitution of limitation funds for maritime claims, objection to enforcement, and other cases. We take measures to ensure open justice, regularly broadcast court trials live, and publish some judgments on our website in both Chinese and English, which help to gain judicial credibility. At the stage of enforcement, we strive for consistency between legal and social impacts, help litigants realize lawful claims, and protect the benefits of vulnerable groups. We pioneer the constitution of a fund for stability maintenance, and initiate new ways of thinking on compensation for labor claims.

 

Over the year, we have offered judicial suggestions about risks for financial institutions in ship building, operations and transfers, protection of seafarers’ rights and about acts interrupting the market, such as selling the same ship to two buyers. Based on case-by-case analysis, we put forward countermeasures against problems with export trade, jurisdiction over maritime cases, carriage of goods by sea, and other matters. This report is thus drawn up as a reference for competent authorities in decision-making and for companies in their operations, and to promote the sound development of the marine economy.

 

Table of Contents

 

I General Information on Maritime Trials

Large number of cases.

Substantial growth in subject matter of new cases.

Large increase in number of cases involving containers.

Shorter average processing period of new cases of first instance.

Smaller number of enforcement cases.

Smaller numbers of ships put up for and sold by auction.

 

II Exercise of Right of Action

—Problems with and guidance on filing a case

Problems with incomplete documents and information required for filing a case.

Problems with pre-litigation mediation.

Problems of agents forging signatures of litigants.

Problems with bringing a related case.

 

III Exercise of Jurisdiction

—Problems with and guidance on exclusive jurisdiction of maritime courts

Problems with jurisdiction clause on the reverse of bills of lading.

Problems with jurisdiction after pre-litigation maritime attachment.

Problems with the relation between insurance subrogation and the jurisdiction

clause in contracts for carriage of goods by sea.

Problems with scope of cases accepted by maritime courts.

 

IV Regulating the Fishing Boat Market

—Problems with and guidance on the purchase and sale of fishing boats

Problems with sale of fishing boats under no written contract.

Problems with sale of fishing boats without registration of transfer.

Problems with the sale of one fishing boat to two buyers.

 

V Regulating the Export Market

—Problems with and guidance on export trade

Problems with tax refund failure after export declaration made on purchased

documents.

Problems with payment for exported goods.

 

VI Regulating the Freight Market

—Problems with and guidance on carriage of goods by sea

Claim rights enjoyed by the shipper against the carrier after the B/L has been negotiated.

Problems with period of carrier’s responsibility for containerized goods.

Problems with the legal responsibilities after devanning.

 

I. General Information on Maritime Trials

 

Throughout 2013, we accepted 2,409 cases (including 311 cases carried over from the previous year); 2,089 cases were newly entertained, down 16.91% YOY; 2,102 cases were closed, down 18.59% YOY; the closing ratio was 87.26%, down 1.99% YOY; 307 cases were unclosed, down 1.2% YOY. Subject matter of filed cases valued RMB 6,689 million, up 153.18% YOY; subject matter of closed cases valued RMB 6,636 million, up 12.17% YOY.

 

Among the new cases, 1,159 were cases of first instance, 246 were enforcement cases, and 693 were cases subject to maritime special procedures. Among the cases of first instance, 1,154 were ordinary maritime cases, and 5 were maritime administrative cases; 374 cases involved foreign, Hong Kong, Macao, or Taiwan parties, accounting for 32.4% of the maritime cases of first instance.

 

Fig 1: Comparison of numbers of cases entertained over the past three years

Unit: case

Among the maritime cases of first instance, 257 were of disputes arising out of carriage of goods by sea, accounting for 22.27% of all maritime cases of first instance; 156 were of disputes arising out of container leases, accounting for 13.52%; 143 were of disputes arising out of seafarers labor contracts, accounting for 12.39%; 103 were of disputes over illegal retention of goods, accounting for 8.93%; 103 were of disputes over port operations, accounting for 8.93%; 95 were of disputes arising out of freight forwarding contracts, accounting for 8.23%; 76 were of disputes arising out of ship contracts (for sale, financing, repairs, shipbuilding, chartering, agency, mortgage, management, and operating loan etc.), accounting for 6.59%; 39 were of disputes arising out of time or voyage charters, accounting for 3.38%; 34 were of disputes over the supply of stores and spares, accounting for 2.95%; 28 were of disputes over damages for ship collision, accounting for 2.43%; 18 were of disputes over channel and port dredging contracts, accounting for 1.56%; 14 were of disputes over ship ownership or co-ownership, accounting for 1.21%; 10 were of disputes arising out of marine insurance contracts, accounting for 0.87%; 10 were of disputes arising out of multimodal transport contracts, accounting for 0.87%; 8 were of disputes arising out of salvage contracts, accounting for 0.69%; 7 were applications for constituting a limitation fund for maritime claims, accounting for 0.61%; 35 were other maritime disputes, accounting for 3.03%.

 

Among the maritime administrative cases of first instance, there was 1 application for determining the government’s decision to cancel a Certificate of Right to Use Sea Area illegal, 2 applications for deciding that the Ocean and Fisheries Bureau’s refusal to grant fishing vessel certificates was illegal, 1 application for annulling maritime accident investigation conclusions, and 1 application for annulling damage survey conclusions.

 

Among cases subject to maritime special procedures, 438 were applications for auctioning off cargoes, accounting for 63.2% of all cases subject to maritime special procedures; 136 were applications for arresting vessels, accounting for 19.62%; 47 were applications for property attachment before litigation, accounting for 6.78%; 32 were applications for registration and recovery of claims, accounting for 4.62%; 8 were applications for maritime attachment, accounting for 1.15%; 6 were applications for public summons, accounting for 0.87%; 6 were applications for declaring the death of citizens, accounting for 0.87%; 3 were applications for maritime injunctions, accounting for 0.43%; 4 were assistance to Taiwan courts with civil investigation and evidence collection, accounting for 0.58%; 3 were judicial reviews of arbitration, accounting for 0.43%; 2 were applications for evidence preservation, accounting for 0.29%; 8 were other cases subject to special procedures, accounting for 1.15%.

 

1,177 cases were closed at first instance, including 420 closed by judgments, accounting for 35.69% of all cases closed at first instance; 385 were closed by claimants’ withdrawal, accounting for 32.71%; 305 were closed in mediation, accounting for 25.91%; 67 were closed by dismissal of action, referral of jurisdiction and other means, accounting for 5.69%.

 

 

 

 

 

 

 

 

 

 

 

 

 

Fig 2: Means of closing cases of first instance

Unit: case

Through analysis, we find that the cases handled by this court in 2013 have the following characteristics:

 

-- Large number of cases. In 2013, under the impact of growth slowdown, considerable overcapacity and high costs, the shipping industry had hard times and both upstream and downstream enterprises in the chain had sharply declining business, weaker ability to resist risks, and frequent disputes. The number of maritime cases remained large. Throughout the year we entertained 2,409 cases, the second largest number since the establishment of this court, outranked only by the year 2012 in which we entertained 2,893 cases.

 

-- Substantial growth in subject matter of new cases. Subject matter of new cases valued RMB 6,600 million, up 153.18% YOY, reaching a new high since our establishment. We entertained many important cases, including 12 with subject matter valued more than RMB 100 million, among which a case of dispute arising out of ship mortgage contract had subject matter valued over RMB 500 million.

 

-- Large increase in number of cases involving containers. As many ship owners made a loss or had cash flow problems, the number of cases with applications for arrest of ships or cargoes remained large, and number of cases involving containers increased substantially compared to the previous year. In 2013, we entertained 156 cases of disputes arising out of marine container leases, 103 cases of disputes over damages for illegal retention of containerized cargoes, and 438 applications for auctioning off containerized cargoes, which altogether accounted for 60% of new maritime cases we entertained.

 

-- Shorter average processing period of new cases of first instance. In 2013, we applied small claims procedure and thus shortened the average processing period of first-instance cases. In particular, since the issuance of our “pre-registration” filing guidelines in August, 381 out of 475 filed cases of first instance had been closed, featuring an average processing period 36 days shorter than the previous year.

 

-- Smaller number of enforcement cases. We entertained 246 new enforcement cases, down 34.92% YOY. The number of enforcement cases is closely linked to the number of first-instance cases closed by judgments. If the number of actions withdrawn by mediation at first instance increases, the number of cases closed by judgments will decrease and the number of enforcement cases in turn decreases. In 2013, the ratio of first-instance cases withdrawn by mediation was 58.62%, up 4.31% YOY; this was a significant reason for the reduced number of enforcement cases. Furthermore, our post-judgment answering system promoted real settlement of closed cases; as more litigants voluntarily fulfilled judgments, enforcement by the court was not necessary in these cases.

 

-- Smaller numbers of ships put up for and sold by auction. In 2013, we arrested 89 ships, handled 9 applications for the auction of 13 ships, which were 81.69% less than the previous year, and auctioned off 4 ships for aggregately RMB 19.21 million. The completion rate of auctions was merely 31%. One of the reasons for such a rate was that the shipping market was slack and bids were few and low, and the other reason was that claimants of ship-related contracts were more cautious about choosing ways of compensation. Throughout the year, we had 20 cases brought by banks for disputes arising out of ship mortgage contracts and 10 applications for arrest of ships, but in none of these cases application was made for the auction of ships.

 

II. Exercise of Right of Action

-- Problems with and guidance on filing a case

 

(I)      Problems with incomplete documents and information required for filing a case

 

Two ships collided resulting in the sinking of one; the owner of the sunken ship brought an action to our court and claimed for damages. Nonetheless, as salvage, repairs and other costs had not been incurred and the MSA had not issued an investigation report on the accident, the claimant only submitted a statement of claim without attachment of evidence, claiming for an estimated amount.

 

There were two problems with this litigation: first, the claim was not factual. The claimant claimed against the other ship’s owner for an estimated amount without a breakdown, such as salvages and repair costs. The litigation was not in compliance with Article 119 of the Civil Procedure Law, which provides that an action shall be supported by specific claims, facts and grounds, and thus was not accepted by the court. Second, the claimant did not submit evidence and thus would not be able to receive compensation even if the case was accepted. There is a common misconception that the sooner you bring an action to the court, the sooner a judgment can be made. In fact, evidence is the basis for trial and therefore only early and full production of evidence helps to close a case. If claimants merely submit a statement of claim and delay in collecting evidence, the evidence may disappear over time and may in turn result in the dismissal of the claims due to insufficiency of evidence.

 

To solve these problems, our case filing chamber has issued pre-registration filing guidelines to guide litigants to gather and complete required documents and information before formally filing a case. We put forward the following suggestions: 1, litigants should prepare required documents and gather evidence before bringing an action strictly pursuant to the Civil Procedure Law. 2, litigants should produce evidence supporting their claims and make supplements as instructed by the filing judge and as per the Notice of Supplementing Documents issued by our case filing chamber; as for evidence to which the litigants have no access, litigants may apply to the chamber for investigation and gathering for evidence. The court and litigants will work together to prepare for filing cases, which help facilitate trials, save legal costs, solve disputes, and better protect litigants’ lawful rights and interest.

 

(II)   Problems with pre-litigation mediation

 

A fuel company brought an action to our court against a ship management company for arrears of fuel payment of RMB 600,000. Our clerk found a letter of guarantee among the submitted documents, in which the ship management company undertook to pay off the arrears by the end of 2013. We then learned that the two parties had been negotiating about the matter, but the claimant brought the action to be on the safe side, as it had financial troubles and was afraid that the defendant might not make the payment as agreed.

 

The claimant filed the case in compliance with the requirements and we could have accepted the case. However, the defendant had guaranteed in writing to pay off the arrears in the near future and the parties had had good communication; direct commencement of the action would not only hinder the resolution of the dispute but also waste judicial resources. To promote dispute resolution, the clerk did not accept the case right away; instead, a judge contacted the defendant for mediation with the claimant’s consent. Three days later, the claimant received the payment and withdrew the action.

 

As part of our case filing system, we provide pre-litigation mediation for quicker and easier resolution of disputes. We thus put forward the following suggestions: 1, when bringing an action, litigants may inform the case-filing judge of their intention of reconciliation and provide information to facilitate the reconciliation. 2, as it is not certain whether a reconciliation will be achieved, litigants should prepare documents under the guidance of the case-filing judge for filing a case when preparing for the reconciliation. 3, if an agreement is reached by pre-litigation mediation, the claimant may apply for withdrawing the action or we can issue a civil mediation agreement. The agreement may be issued by the judge and signed for by the litigants on the spot, which saves court costs.

 

(III)              Problems of agents forging signatures of litigants

 

A lawyer submitted to our case filing chamber a statement of claim and a power of attorney, which stated that the claimant, Mr Chen, authorized the lawyer to bring a case on his behalf against a shipping company for disputes over damages for a ship collision. The next day, Mr Chen turned up and declared that the lawyer had submitted the documents without his consent and that his signature on both documents was forged. Afterwards the lawyer admitted having forged the signature, and our clerk admonished the lawyer and had him withdraw the documents.

 

The lawyer brought the action without the consent of Mr Chen and forged the signature, which not only harmed Mr Chen’s right of action and the defendant’s lawful rights and interest, but also severely disturbed judicial trial. The court reprimands any lawyer so disturbing civil actions, and we also advise anyone bringing a case to take effective measures to protect their right of action and preclude such violation.

 

We put forward the following suggestions: 1, to bring an action, a natural person should personally come to our case filing chamber and, by a filing judge’s witness, sign a statement of claim and power of attorney (where an agent ad litem is needed) and leave a thumbprint, which prevents the misuse of right of action by anyone else. 2, a claimant not able to come to us in person should have his signature and thumbprint on the statement of claim and POA notarized by a public notary office located at his residence, and then the documents may be submitted to us by an agent ad litem to bring an action on behalf of the claimant. If the claimant is outside China, the signed and thumbprinted statement of claim and POA should be legalized and notarized as required.

 

(IV) Problems with bringing a related case

 

Mr Fan had repaired a ship for a shipping company under no written contract, and the shipping company was in arrears of repair costs of RMB 40,000. Mr Fan was from Fujian, the shipping company domiciled at Jiangsu, and the ship was repaired in a port in Jiangsu. Mr Fan now worked in Guangzhou and for convenience brought an action to us against the shipping company.

 

The case was a dispute arising out of a ship repair contract and thus came within the jurisdiction of maritime courts at the defendant’s residence, or place where the contract had been signed, or place where the contract had been performed. As none of these locations were under this court’s jurisdiction, Mr Chen could not bring the case to us. For reasons of economy, he pleaded with us to entertain the case and informed us that the ship had been arrested by this court. The filing clerk looked up related cases involving the shipping company, and found that the ship had indeed been arrested by us and would likely be put up for auction soon. The clerk then gave Mr Chen two options: to bring a case to a court with jurisdiction, or to wait till the ship is put up for auction and then, pursuant to Articles 111 and 116 of the Special Maritime Procedure Law, come to us to register his claims and bring an action to have the claims confirmed.

 

Our standardized case filing system incorporates guidelines provided by filing judges. When there are related cases, our judges will offer guidelines for efficient and convenient litigation after taking consideration of all aspects of the case. We put forward the following suggestions: 1, litigants may factually inform us of any related case in trial by this court, and may request the judges for an inquiry if not sure. 2, litigants may select a most convenient and suitable way of litigation based on the judges’ advice.

 

 

III. Exercise of Jurisdiction

-- Problems with and guidance on exclusive jurisdiction of maritime courts

 

(I)      Problems with jurisdiction clause on the reverse side of bills of lading

 

In a dispute arising out of a contract for carriage of goods by sea, the Hong Kong shipper brought an action to this court against the Mainland Chinese carrier for delivery of goods without the presentation of the B/L. The port of departure was Shenzhen, China, the port of destination was a Spanish port, and the B/L was issued in Shenzhen. The carrier objected to our jurisdiction on the grounds that the terms on the reverse side of the B/L had agreed on the applicable law and the jurisdiction of courts in Hong Kong SAR, and accordingly disputes under the contract should be referred to a court in Hong Kong.

 

In cases of disputes arising out of contracts for carriage of goods by sea, the B/Ls based on which the cases are brought usually have a clause on contentious or arbitration jurisdiction written in small fonts without any special mark (in recent years CMA CGM Shipping Co. Ltd. has put boldface type on the face of its B/Ls), agreeing on competent courts outside the country or arbitration in London or Hong Kong. In such cases, the carrier as defendant would usually raise an objection to jurisdiction to stall for time or for other reasons.

 

The above case involved a contentious jurisdiction clause on the reverse side of the B/L, for which the maritime legal professionals have had long debates. We don’t think there is a single solution to the issue of validity of a B/L clause on jurisdiction of foreign courts. Long arm jurisdiction can be exercised on a case-by-case basis subject to Article 34 (provisions on agreement jurisdiction) of the Civil Procedure Law, after taking into account equality, mutual benefit, parallel jurisdiction, convenience and other factors.

 

Carriers may take into account the following factors when drafting a B/L clause on foreign court jurisdiction: 1. the contentious jurisdiction clause may be printed on the face of the B/L in distinctive bold type, and the other party may be reminded of the clause and requested to sign in confirmation of the clause when proofreading the B/L draft, so as to ensure the validity of the clause. 2. the contentious jurisdiction clause does not eliminate or mitigate the carrier’s responsibilities or unilaterally increase the responsibilities of the shipper or the B/L holder. 3. except as provided in Article 8[1] of the Special Maritime Procedure Law, the agreed court of jurisdiction should be actually related to the dispute.

 

(II)   Problems with jurisdiction after pre-litigation maritime preservation

 

In a dispute over insurance subrogation to a voyage charter, the shipowner and the charterer (the insured) had entered into a voyage charter under which goods were carried from an Indonesian port to Lanshan Port, China. The ship sank during the subject voyage and the goods on board were lost. It was agreed in the charter party that any dispute arising therefrom should be referred to China Maritime Arbitration Commission for arbitration pursuant to the rules then in effect. The insurer had issued a policy for the goods and paid the insurance indemnity to the insured. The insurer then applied to this court for pre-litigation maritime preservation and requested to freeze the shipowner’s account in a Shenzhen bank; we approved the application. The insurer subrogated to the charterer’s rights and brought an action against the shipowner. The shipowner then filed an objection to jurisdiction on the grounds that we did not have the jurisdiction over the substantive hearing of the case, and requested for the referral of the case to a court which had jurisdiction.

 

We held that although the request for freezing the respondents’ bank account was an application for maritime preservation, the provisions on property preservation in the Civil Procedure Law were applicable. Pursuant to the Supreme People’s Court’s Reply to Queries about Understanding Clause 31(2) of the “Opinions on Some Issues Concerning the Application of the Civil Procedure Law of the People’s Republic of China”, substantive hearing shall be conducted by a court with jurisdiction; pre-litigation property preservation does not naturally lead to the jurisdiction over substantive hearing, and the court granting the preservation should, if it has no jurisdiction, refer the case to a competent court with jurisdiction. Accordingly we sustained the shipowner’s objection.

 

In practice, if a maritime court adopts measures for pre-litigation preservation of the maritime claims against ships, cargo, fuel and stores carried by ships etc. subject to applicable provisions in the Special Maritime Procedure Law, the court may obtain jurisdiction over the substantive hearing of the case as per Article 19 of the law; if the court adopts measures for pre-litigation preservation of the maritime claims against properties other than ships, cargo, fuel and stores carried by ships subject to the Civil Procedure Law, the court will not naturally obtain jurisdiction over the substantive hearing, and the litigants should bring the case to a maritime court with jurisdiction. Litigants are thus advised to, based on the attachment object, determine whether a maritime court has jurisdiction over the substantive hearing of the dispute after the pre-litigation maritime preservation, and then carefully select a suitable maritime court to file the preservation application so as to save legal costs.

 

(III)              Problems with the relation between insurance subrogation and the jurisdiction clause in contracts for carriage of goods by sea

 

In a dispute over insurance subrogation under a contract for carriage of goods by sea, the shipper (the insured) and the carrier had entered into a contract for carriage of goods to Guangzhou; the contract was signed in Xiamen, and it had been agreed that any dispute arising therefrom should be referred to a competent court located in the place of signing. The cargo was lost during the carriage. The insurer paid the insurance indemnity to the insured and thus subrogated to the insured’s right of action. The carrier objected to this court’s jurisdiction and alleged that the dispute should be referred to Xiamen Maritime Court as agreed in the contract. We held that the insurer was not a party to the jurisdiction clause in the contract and therefore not bound by the clause unless the insurer had expressly accepted the clause. For this reason we dismissed the objection.

 

We advised carriers (shipowners) to carefully select the ways to resolve disputes. As insurers will subrogate to the insured’s claims after paying the indemnity, shipowners should negotiate with and seek the insurers’ express consent if they want to refer the disputes to a court agreed in the carriage contract.

 

(IV) Problems with scope of cases accepted by maritime courts

 

In a dispute arising from a ship sale contract, the defendant raised an objection to jurisdiction alleging that the case did not fall within the jurisdiction of maritime courts as the parties only had a dispute over the transfer of the ship’s ownership. In a dispute over the co-ownership of a ship, the defendant objected to the maritime court’s jurisdiction on the grounds that the parties only had a dispute over the payment.

 

Pursuant to the Provisions of the Supreme People’s Court on Scope of Cases Accepted by Maritime Courts, “cases of disputes arising out of contracts for ship building, sales, repairs, construction and breaking” set forth in Article 14, and “cases of disputes between co-owners of ships engaged in marine transport and fishing over operations, profits, allocation and property division” set forth in Article 37, were within the scope; accordingly disputes arising out of ship sale contracts and disputes over co-ownership of ships are within the exclusive jurisdiction of maritime courts.

 

We advise litigants and agents ad litem to pay due attention to the scope of cases within the exclusive jurisdiction of maritime courts, and not to knowingly refer such cases to a local court, which would not only cause unwarranted delay in the litigation, disturb the administration of justice, hinder the efficiency of proceedings, but also cause troubles to the other party and waste limited judicial resources.

 

IV. Regulating the Fishing Boat Market

-- Problems with and guidance on the purchase and sale of fishing boats

 

(I)      Problems with sale of fishing boats under no written contract

 

We have tried a number of disputes over the sale of fishing boats in which the buyer and the seller had not signed a written contract for sale. They usually settled the transaction (payment and delivery) witnessed by their village committee. As no written contract was signed and no written proof of the settlement was kept, it would be difficult for the buyer to put to the proof to protect his lawful rights and interest when years later there arose a dispute over the ownership of the boat.

 

By analyzing the cases, we conclude that sellers and buyers do not sign contracts for the sale of fishing boats mainly for the reasons below: fishermen’s legal illiteracy, the closed peasant economy, as well as low costs and simple formalities of direct transaction without a contract.

 

We suggest that fishing boat administration study the purchase and sale of fishing boats within their jurisdiction, make fishing boat sale contract samples accessible to the public, and provide guidelines and regulations on the transactions. These efforts will help preclude disputes arising from no written contract.

 

(II)   Problems with sale of fishing boats without registration of transfer

 

In many disputes over the ownership of fishing boats sold, the buyer did not have the ownership transfer registered promptly after the actual delivery, and when they did request for the registration, the seller out of his own interest declined such request. In judicial practice, such sale of fishing boats without registration of certificate alteration not only hinders competent authorities’ supervision but also poses risks to both buyers and sellers. For one thing, a fishing boat sales contract is not fully performed if the transfer is not registered, and the buyer may request to continue the contract; and for another, if the buyer wants to transfer the boat, he would need the former owner’s assistance and cooperation to register the ownership transfer to the new buyer, which causes unnecessary troubles and may give rise to disputes. Furthermore, as the boat is still registered under the name of the seller, there are risks of the seller reselling or mortgaging the boat, and of the boat being arrested or put up for auction due to the seller’s debts.

 

The transfer of ownership is not registered mainly for two reasons. First, some buyers and sellers do not know the legal effect of ownership registration and believe that actual possession and use of the boats are sufficient. Second, to carry out offshore fishing, a fishing boat buyer has to obtain a fishing boat inspection certificate, a fishing boat, net and tackle index ratification, a fishing licence, a fishing main engine power certificate, a fishing boat ownership certificate, and a nationality certificate. These certificates are under the authority of the administrations of ocean and fisheries, the supervision authorities of fishery ports, and the registry of fishing vessels. Complicated and costly formalities are required for alterations to such certificates. Some buyers exploit the ineffective supervision of local fisheries authorities and, without being inspected or interfered with by these authorities, engage in fishing using boats without ownership transfer registration and a fishing license. When the fisheries authorities do conduct an inspection, these buyers would request the former owner’s help by creating a false impression that the boat has not been transferred.

 

We put forward the following suggestions: 1, the registration of fishing boats should seek better publicity of the Measures of the People's Republic of China for the Registration of Fishing Vessels amended by the Ministry of Agriculture on 22 October 2012 and, in particular, Article 14 thereof “the acquisition, transfer and loss of ownership of a fishing boat shall be registered as provided herein; unregistered ownership is not effective against bona fides third parties”, so as to urge registration of ownership transfer after the sale of fishing boats; 2, buyers who have not registered the ownership transfer promptly after the sale of fishing boats should go through the registration formalities at their earliest convenience subject to the Measures, so as to protect their lawful rights and interest.

 

(III)              Problems with the sale of one fishing boat to two buyers

 

We handled a dispute over the ownership of a fishing boat which was sold to two buyers. The claimant signed a sales contract with defendant A in 2007, defendant A then delivered the fishing boat along with her certificates to the claimant, but the ownership transfer was not registered. In 2010, defendant A sold the boat to defendant B who, knowing that the boat had been delivered to the claimant, requested defendant A to register the transfer. Considering the serious inconsistency between the delivery and registration of the boat and the fuel subsidies at hundreds of thousands of RMB per year, the claimant brought an action to this court on 12 July 2012 and requested the defendants to cooperate in the registration of ownership transfer. We supported the claimant’s claims.

 

Disputes over the sale of one boat to two buyers are common. In most of these cases, after the boat is delivered but the buyer has not registered the ownership transfer, the seller resells the boat to a third party and goes through all formalities for the registration. Such acts disturb normal registration and management of fishing boats, and hinder the boat owners from fishing and production. In judicial practice, we usually require all parties to appear in court for examination; we assess evidence in strict accordance with the rules of evidence in civil procedure, and render judgments pursuant to law and based on facts.

 

There are several reasons for the above disputes. Sellers do not register the ownership transfer promptly after the sale of fishing boats, and the registration authorities do not verify actual delivery of boats when registering ownership transfer to third parties. Furthermore, some interest-driven persons make false registration for unjust benefit from fuel subsidies which they believe belong to registered owners of fishing boats.

 

We suggest that fishing boat registration authorities carry out better supervision and management of fishing boat registration and strictly verify each applicant’s proof of acquisition of ownership. In addition to the sales contract and delivery certificate submitted as provided in Clause 15(2) of the Measures of the People’s Republic of China for Registration of Fishing Vessels, they should to the best of their ability verify the actual delivery and possession of each boat, and make a registration announcement pursuant to Article 38 of the Measures to satisfy the requirement for property announcement; owners and buyers should not file false lawsuit or commit any other act that disturbs civil procedure, and any violator will be legally liable as provided in Article 112 of the Civil Procedure Law. To be specific, the court will dismiss any false claim and impose a fine and/or detention, and even hold the violator criminally liable if the violation constitutes a crime.

 

 

V. Regulating the Export Market

-- Problems with and guidance on export trade

 

(I)      Problems with tax refund failure after export declaration made on purchased documents

 

Company A was a private and limited liability company with a foreign trade license. It commissioned Company B to transport a cargo by sea from China to a foreign port and make an export declaration. Company B charged the freight including RMB 500 named Purchased Documents Price, which Company A paid without objection. Company B made an export declaration in the name of another company, issued a bill of lading with Company A as the shipper, and completed the carriage. Afterwards, Company A inquired about the tax refund on the goods, but Company B answered that they could not file a tax refund as the declaration had been made in the name of another company. Subsequently Company A brought an action to this court against Company B for losses of tax refund in the amount of RMB 110,000. Although Company B’s charges breakdown included an item specified as “Purchased Documents Price RMB 500”, the breakdown did not detail the nature or purpose of such price. Therefore, the court held that the two parties had not expressly agreed on the way of export declaration. Company A had a foreign trade license, but there was no evidence shows that it had been registered in the administration of foreign exchange at the time of the declaration or that it had obtained an export earnings verification sheet and handed over it to Company B. Company A did not perform due diligence or notification obligation, and should therefore assume 40% liability for the failure to acquire a tax refund. Company B accepted Company’s commission but made the declaration in the name of a third party, which was beyond its authority, and should therefore assume 60% liability for the loss of tax refund sustained by Company A. To be specific, Company B should pay RMB 66,000 to Company A for the loss of tax refund.

 

In foreign trade practice, “declarations made on purchased documents” refer to situations in which a company, which has no import/export licence or has a licence but doesn’t want to declare in its own name, purchases an export contract, a verification sheet and other required documents from a licensed company and make a declaration in this company’s name after paying the company certain fees. Under China’s foreign exchange control, the exporter, foreign exchange receiver and verification applicant should be the same entity. Declarations made on purchased documents are against relevant laws, and therefore companies exporting in this way are not qualified for tax refunds. As it is quick and convenient compared to regular export through foreign trade agents and in this way exporters can receive foreign exchange with their own accounts at lower costs, many companies without an import/export licence prefer this way to export goods. On the other hand, they would risk the failure to obtain tax refunds and may suffer losses greater than gains.

 

To avoid these problems, we put forward the following suggestions: companies without an import/export licence should export goods via qualified agents so as to secure their tax refunds; agents should perform due diligence for the sake of their principals, specify a way of declaration, explain to the principals the meaning and risks of declaring on purchased documents, and preserve evidence in case of future disputes.

 

(II)   Problems with payment for exported goods

 

In a dispute under a contract for carriage of goods by sea, the claimants brought the action against the defendant for delivering the goods without the presentation of the bill of lading at the destination. The defendant alleged that the claimants had fully received the payment from the consignee, and provided evidence of remittance made by the consignee to the account A of claimant. By request of the defendant, the court of first instance obtained the transaction records of claimant’s account A during that period, but found no credit of the payment alleged by the defendant. Accordingly, the court of first instance determined that the claimants had not received the payment and the defendant’s allegation was unfounded, and thus adjudged the defendant to compensate the claimants for the loss of goods and the interest thereon. The defendant then lodged an appeal. The court of second instance obtained the transaction records of claimant’s account B by request of the defendant, and found a credit on the day and in the amount alleged by the defendant and that claimant’s account B showed a debit matching a credit on claimant’s account A. The court of second instance held that the evidence submitted by the defendant during the first instance proved the consignee had remitted the payment to claimant’s account A, and the new evidence obtained by the court of second instance proved that claimant’s account B received the payment and then transferred it to claimant’s account A with some other amounts; it could thus be determined that the remittance was truly the payment alleged by the defendant. Such evidence was sufficient to prove that the claimants had received the payment from the consignee and had not suffered any actual loss. Accordingly, their claims were factually and legally groundless and thus should not be supported. The court of second instance revised the judgment and dismissed the claimants’ claims based on the new evidence.

 

In recent years, under the impact of the international economic trends, there have been an increasing number of disputes over delivery of goods without the presentation of a bill of lading, and most of such cases are brought by shippers (exporters) against carriers. The most common defence produced by carriers is that the shippers have received the payment and thus not suffered actual losses. We are of the opinion that in these disputes the carrier should be liable for damages, but the actual losses suffered by the shipper or B/L holder should be a precondition for such liability; thus it should be examined whether the shipper or B/L holder has received all or part of the payment for goods. If there is evidence that the shipper or B/L holder has received all or part of the payment, the same amount should be deducted from the compensation.

 

Disputes over delivery of goods without the presentation of a bill of lading involve foreign trade and payments are usually made in foreign currencies. As China implements foreign exchange control, a full understanding of the country’s exchange control measures is necessary to ensure correct fact-finding. For instance, under China’s exchange control, a foreign exchange payment made by the consignee cannot be directly transferred to the exporter’s account; instead, the payment should be made to the exporter’s account-to-be-verified, and after verification may be debited by the exporter in the amount, at the time and to the account preferred by the exporter. It would not be difficult for exporters to confirm whether they have received a certain payment as long as they make some efforts to go through the transaction records. We suggest that before bringing an action for damages for delivery of goods without the presentation of a bill of lading, exporters should carefully examine relevant accounts to make sure whether they have received the payments, so as not to waste both parties’ time and money or to risk failing the suit.

 

VI. Regulating the Freight Market

-- Problems with and guidance on carriage of goods by sea

 

(I)                Claim rights enjoyed by the shipper against the carrier after the B/L has been negotiated

 

In a dispute arising out of a contract for carriage of goods by sea, after the ship arrived at the port of destination, a container unloaded from the ship fell off the upper layer during shifting operations in the port yard and the goods inside were damaged. The corresponding B/L had been endorsed by the consignee and given back to the carrier. After indemnifying the shipper for its losses, the insurer subrogated to the shipper’s claim against the carrier. The court held that although the goods had been taken by the consignee at the port of destination, the position of the shipper to a contract for carriage of goods would not be changed due to the fulfillment of the contract. The shipper was still a party to the contract for carriage of goods and should, in accordance with the principle of privity of contract, be entitled to claim against the carrier for the losses arising due to the improper performance of such contract by the carrier.

 

Although China is a big exporter, the domestic exporters are always in an inferior position when doing export trading. Once damage occurs to the goods during transportation, most foreign buyers may request the domestic exporters to replace or take back the damaged goods or to cut the price, and sometimes they may directly reject the goods. Due to the fierce competition in freight market, domestic exporters may, in order to keep their customers, satisfy the demands of the foreign buyers. After paying indemnifications, most of the domestic exporters would claim as a shipper against the carrier.

 

In accordance with Article 71 of China’s Maritime Law, a B/L is a document which serves as an evidence of the carriage contract, but not in itself a carriage contract. Negotiating a B/L does not mean assigning the rights and obligations under the carriage contract in whole. Therefore, as a party to the carriage contract, the shipper would not lose all of its contractual rights and obligations due to the negotiation of B/L. According to Clause 78(1) of the Maritime Law, after the B/L has been negotiated, the relationship between the carrier and the consignee and that between the carrier and the B/L holder with respect to their rights and obligations shall be defined by the B/L. Therefore, if the B/L has been negotiated, the legal relation under the B/L between the carrier and the B/L holder is coexisting with that under the carriage contract between the carrier and the shipper. Although some of the shipper’s rights and obligations under the carriage contract (such as the right to take delivery of goods and the obligation to pay the freight) have been assigned to the B/L holder, the B/L holder cannot completely take the place of the shipper as a party to the carriage contract. The shipper still has some rights and obligations under the carriage contract, including the right to claim against the carrier for any cargo loss caused by the carrier’s failure to perform the carriage contract properly.

 

Due to the existence of the above two legal relations, the rights of action enjoyed by the shipper and the B/L holder are two independent rights which coexist with each other. The shipper and the B/L holder separately claim against the carrier for the cargo loss occurred in the course of carriage of goods. However, actual cargo loss only occurred to one party, thus the party who could prove the existence of actual loss may get compensation from the carrier through proceedings. Only in this way the carrier could be protected from giving double indemnifications. In addition, we recommend that the carrier shall, in case of any disputes, collect evidence relating to the payment for goods and plead promptly. The B/L holder shall also preserve evidence relating to the cargo loss, payment for goods, endorsement and negotiation of the B/L so as to support future claims in case of disputes.

 

(II)             Problems with period of carrier’s responsibility for containerized goods

 

In a foreign-related dispute arising out of a contract for carriage of goods by sea, after the containerized goods arrived at the port of destination, the consignee exchanged the original B/L for the delivery order held by the carrier. Damage occurred before the goods were actually taken by the consignee. The consignee requested the carrier to compensate for the damage to the goods, but the carrier claimed that since it had taken back the original B/L from the consignee, the goods were not under its control and thus it was not liable for compensation. The court held that the damage to the goods occurred before they were taken by the consignee, which means during the period of the carrier’s responsibility. Failing to prove that it had legal or agreed causa excusationis, the carrier was liable for compensation.

 

Article 46 of the Maritime Law provides that “the responsibility of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge.” Under China’s foreign trade control, the carrier does not deliver the imported goods to the domestic consignee on the principle of “B/L on delivery of goods”, but through the port operator. The specific process goes as follows: the consignee first exchanges the B/L for delivery order from the carrier or its agents, accomplishing the constructive delivery of goods. Secondly, the carrier actually delivers the goods to the port operator. Finally, the consignee takes delivery of the goods from the port operator by presenting the delivery order sealed by the customs for approving the imported goods. At this point, the delivery of goods is completed. In the above case, although the carrier had taken back the original B/L, the period of carrier’s responsibility did not end “until the goods had been delivered at the port of destination”, which should be construed as “until the goods had been actually delivered”, i.e. when the consignee had actually taken delivery of the goods rather than just exchanging the B/L for the delivery order or completing constructive delivery. In addition, the goods were still under the carrier’s control, and the port operator was merely entrusted by the carrier to keep the goods. Before the consignee actually took delivery of the goods, the carrier should bear the risks of loss of or damage to the goods. Therefore, we recommend that carriers should prudently supervise containerized goods stored at the port yard. In respect of loss caused by port operators, carriers should promptly seek compensation from the port operator after indemnifying the consignees according to law. Additionally, the specific provisions in different ports shall be taken into account in ascertaining the carrier’s responsibility for delivery of goods. According to the laws of some countries, such as Mexico and some countries in South America, goods shipped to their ports shall be delivered to the local customs or port authorities. The consignee may take delivery of the goods by presenting the bill of lading to the local customs or port authorities. After delivering the goods to local customs or port authorities, the carrier has fulfilled its responsibility for delivery of goods and is not liable for any damage to the goods afterwards.

 

(III)          Problems with the legal responsibilities after devanning

 

In a case, the carrier, when shipping exported containerized goods for a shipper, issued a B/L specifying that the goods would be delivered FCL CY/CY. Upon the arrival of the goods at the port of destination, the carrier moved, relabeled and re-packed the goods according to the consignee’s instructions when the shipper still held the original B/L. The shipper claimed for losses of RMB 540,000 against the carrier on the grounds of delivery of goods without the production of B/L. The carrier defended that the goods were still under its control and had not been delivered to the consignee. Upon examining the evidence provided by both parties, the court ascertained that, although the containers had been disassembled, the goods were still in the carrier’s charge and had not been delivered to the consignee, thus the claim of delivery of goods without B/L filed by the shipper could not be sustained. However, the act that the carrier changed the packaging and labeling of the goods without authorization did infringe upon the shipper’s ownership to the goods and was in breach of the carrier’s responsibility. Therefore, the court exercised its discretion to adjudge that the carrier should indemnify the shipper for its loss in an amount of RMB 270,000.

 

For the carriage of containerized goods, if the shipper ships the goods in a way of full container load, it will come to an agreement with the carrier applying the term of “FCL on delivery”. It’s for the convenience of carriage and division of responsibility. At the current stage, domestic companies are mainly engaging in export trade. It’s inconvenient for the shipper to collect evidence at foreign ports relating to non-delivery, thus the shipper usually presents the devanning fact as the prima facie evidence for claims against the carrier in respect of the delivery of goods without B/L. The devanning at the port of destination by the carrier could be for the purpose of delivering goods without B/L, but there may be some other reasons. Below are some of the reasons: to dispose of the containerized goods subject to the mandatory requirements of the customs of the port of destination, or to take out the goods and put them in warehouses for the purpose of accelerating the turnover of containers or reducing the economic losses since no one takes delivery of the goods for a long time after the goods have arrived at the port of destination. In any case, the fact of devanning only serves as prima facie evidence that the carrier delivers the goods without B/L. If the carrier could prove that the goods are still under its control, it would not bear the blame for delivery of goods without B/L. Therefore, in cases where the carrier denies the fact of delivery of goods without B/L, we recommend that the shipper may personally or via its agent visit the port of destination to verify the situation of the goods, otherwise it may lose the case because of failure to adduce evidence.

 

In the above case, although the carrier’s act did not constitute delivery of goods without B/L, it was a serious breach of the contract that the carrier disassembled the container and re-packed the goods as instructed by the consignee when the shipper still held the B/L. this is not uncommon in cases we have handled in recent years. Under the impact of the global financial crisis, some foreign consignees may first present a letter of guarantee to take the delivery of goods without B/L, and then retire the B/L after selling or reselling the goods, thus shifting the risk of trading to the domestic companies. Some consignees even return unmarketable goods to the carrier when the B/L holder claims against the carrier for delivering the goods without B/L. Under this circumstance, even if the domestic companies could take back the goods, they may sustain losses arising out from revanning, repacking and re-transporting the goods. In addition, due to the market volatility, it may be impossible for the exporters to sell the goods at the original prices, which makes them unable to collect the payments. Therefore, we recommend that the domestic exporters should, upon booking shipping space, clearly instruct the carrier not to disassemble the containers for any reason unless as required by the local laws of the port of destination or by the instructions of the B/L holder, or else the carrier shall bear corresponding responsibilities.