Plaintiff: Shanxi Machinery Import & Export Co. Address: No.29 Changlezhonglu, Xi’an Legal representative: Qi Shiliang, general manager Authorized representative: Sun Weizeng, cadre of Shanxi Machinery Import & Export Co. Authorized attorney: Zhu Dezhi, attorney-at-law of Ruining Law Firm Defendant: Oasis (Tianjin) International Trade Ltd. Co. Address: Room 302, No. 51 Nanxin Building, Huanhuzhonglu, Hexi District, Tianjin Legal representative: Houbaohua, general manager Defendant: Toyo Warehouse Co., Ltd Address: Koku Yilibulei 1-2-3, Nagoya, Aryiqigan County, Japan Legal representative: Eichi, Chairman of the board Authorized attorney: Zhu Xiaokong, attorney-at-law of Wanhai Law Firm Authorized attorney: Zhao Shuyi, attorney-at-law of Xincheng Law Firm, Shanghai The plaintiff, Shanxi Machinery Import & Export Co. (hereinafter referred to as Shanxi Machinery), sued the defendant, Oasis (Tianjin) International Trade Ltd Co. (hereinafter referred to as Oasis) and TOYO WAREHOUSE CO. LTD. (hereinafter referred to as TWH), for exchanging cargo on marine transportation contract. Tianjin Maritime Court put the cases on record on Dec. 2, 1999. The court constituted collegiate panel and held public hearings. Authorized attorneys of the plaintiff Sun Weizheng and Zhu Dezhi, legal representative of the defendant Oasis Hou Baohua, Zhu Xiaokong and Zhao Shuyi, of defendant, appeared in court and participated in the suit. After the second and before the third hearing, the defendant, TWH, requested the plaintiff’s attorney Zhu Dezhi to withdraw from the case. According to law, the plaintiff’s authorized attorney, Zhu Dezhi, only applied withdrawal by himself, could the court require him to withdraw. Decided by collegiate panel, the court notified the plaintiff’s authorized attorney Zhu Dezhi to withdraw from the case and did not participate in the latter action of the case. But all his procedural activities before the withdrawal still challenge remained valid. Now the case has been finished. The plaintiff claimed: In Jan. 16, 1999, the plaintiff freighted metal silicon in containers (6X20’) from Tianjin Xingang to Pusan port, South Korea. Vessel ‘Victory Star V904E’ took in charge of the cargo. The defendant as the carrier singed and issued the clear bill of lading No. KYCR006. The bill recorded clearly the numbers, seal numbers and the name of metal silicon in of each container. In Feb. 1999, because issuing bank in Korea refused payment, all bills were returned back. After this, the plaintiff informed the defendant to bring the cargo back to Tianjin. Vessel ‘Victory Star V0920W’ took in charge of the cargo. B/L number was: DH99-0518. On June, during unpacking and visual examination, it was found out that containers’ number, parts of the cargos’ outer packing had been changed. With the inspection of commodity inspection and testing bureau in Tianjin and Shanxi, fifty tons of cargo had become clinker and unvalued, which caused great damage to the plaintiff. The freight had been under the defendant’s responsibility during defendant received the cargo at the loading port till the cargo was handed to consignee at the Pusan port. The plaintiff lost a lot in goods and freight due to the defendant’s failing to fulfill his duty. The plaintiff claimed for compensation of 538,315 Yuan and its interest 28,896.75 Yuan, total 567,211.74 Yuan. The plaintiff submitted 23 documents to court to prove his claims, facts and arguments, including B/L, commodities inspection report, certificate of the original products, purchase contract, invoices, freight returning notice, bill returning certificate and so on. (See details list) The defendant, Oasis, argued: According to the B/L of KYCR006, KH99-0518 and records of sea waybill, which plaintiff based to make his point, the contract carrier from Tianjin to Pusan was TWH, and the actual carrier was Namsung Shipping Co., Ltd. In the contract from Pusan to Tianjin, the contract carrier is DAEH LOGISTICS Co. Ltd., and the actual carrier was Hanjin Shipping Co., Ltd. Oasis worked as agent of TWH in China for getting orders and issuing lading bills. In this case, Oasis as an agent issued the lading bill at the port of loading without any misconduct. The contract carrier and the actual carrier did all of the specific work at the unloading port, Pusan. Oasis neither participated nor knew the work. According to related regulations in the Civil Law of the People’s Republic of China, Oasis, as an agent, takes no responsibilities for the loss. Records of B/L KYCR006 and DH99-0518 as well as marine bill of lading show that the shipping mode of containers is CY-CY. It means the shipper himself loaded the goods at the loading port and the carrier delivered the whole containers at the unloading port. With this shipping mode, the shipper has no reason to claim that the cargos were changed during the navigation. Moreover, the outer packing of cargo did not have any clear indication marks according to the records of B/L. The cargos were changed based on visual inspection at the unloading port claimed by the shipper is against the basic knowledge. According to the messages between plaintiff and the Korea Nonferrous Trade Limited Company (hereinafter referred as KNT), the buyer, KNT, refused to accept the cargo, and the reason is that the quality of delivering cargos does not meet the requirements in the contract. The plaintiff did not tell the truth; instead, he sued the carrier in the name of changing cargo in order to avoid his loss. The action of plaintiff is against the laws. The defendant, Oasis, submitted to court an agency agreement made between Oasis and TWH, 3 faxes of the concerned cargo between Oasis and the Shanghai representative office of THW. The defendant, TWH, argued: TWH neither signed any legal documents with Oasis, nor authorized Oasis to issue any lading bills. TWH was neither actual carrier nor contract carrier, so that TWH has no legal relationship with the plaintiff. The cargo was carried from Tianjin Xingang to Pusan, Korea, and was sent into the owner’s bond controlled by Korean customs. The warehousing containers and seals were perfect. According to the customs law of Korea, the Korean customs and the tax institutions both have rights to open the containers for inspection. The owner of the cargo also has rights applying the customs to open the containers for checking. The Korea Inspection Ltd. Co. authorized by Korean government examined the cargo and confirmed the cargo was unqualified. The inspection report and other evidences showed that the cargo arrived Korea and returned Tianjin was the same cargo of the plaintiff. TWH did not change the cargo. The evidences submitted by the plaintiff cannot prove the cargo was qualified before loading. In fact, it is purchase contract instead of contract of carriage. TWH has no misconduct, and should not take the civil responsibility. The defendant, TWH submitted court 79 evidences to support his claim including warehousing entry and departure, and inspection reports of Korea Inspection Ltd. Co. (see details in evidence list provided by TWH). After three hearings, the court made key investigation on the controversy between plaintiff and defendant: 1. Whether there is a contract of ocean carriage between plaintiff and defendant; 2. How to determine the liability term of the carrier; 3. Whether the carrier was free of duty; 4. Whether the cargo had been changed; 5. Whether the defendant should take responsibility of compensation. Plaintiff and defendant gave enough evidences, cross-examinations, debates and closing statements on the key point mentioned above during the hearings. The court also showed related evidences getting by court, which had been cross-examined by the two parts. Based on the evidences mentioned above, the court gave the following analysis and judgment: Materials collected by court in the industrial and commercial registration Shanghai Representative Office of TWH have been accepted because their truthfulness, legality and effectiveness. These evidences proved that Shanghai Representative Office of TWH as a branch of foreign company to be set in China does not have the status of a legal person. Based on the “Company Law of the People’s Republic of China” article 203 section 2,the defendant TWH should take civil responsibility for the business activities of Shanghai Representative Office. The court accepted 12 original inspection materials supported by Shanxi Exit & Entry Inspection and Quarantine Bureau (IQB), and accepted investigation written transcripts made by court to Gao Shaoping, and Gao Peicheng from IQB because their truthfulness, legality and effectiveness. These evidences showed that the inspection certificate No. 1403/991012 issued by Shanxi Exit & Entry Inspection and Quarantine Bureau is true. Evidences of No.1, 4, 5, 6, 9, 29 provided by the defendant, TWH, during the second session did not have any relevancy to the case, and the court refused to accept them. Evidences No.2, 3, 7, 10, 30, 31 provided by the defendant, TWH, in the second session are Korean law which were enforced after Jun. 1999, while this case happened before that time. The defendant TWH neither had certificate to prove that the law has retroactive force, nor submitted any other laws with the same regulations before the law enforcement. Therefore, the evidences mentioned above cannot be accepted. The civil judgment of Tianjin higher people's court (2000) Gao-Jing-Zhong-Zi-No.55 provided by plaintiff has no connection with this case. The court did not accept the evidence mentioned above. Other evidences provided by plaintiff and defendant were cross-examined by the parties, and both parties had no dissent to their truthfulness and legality. The court accepted these evidences after integrative analysis. Based on aforesaid confirmed evidences, the court finds the following facts: On Jan. 12, 1999, the plaintiff and KNT signed silicon purchase contract (Contract No.: KTC-ME99011/S1), exporting 120 (+-5%) tons of silicon. The contract has clear engagement on the specification, size, packing etc. The loading port should be Tianjin Xingang and unloading port should be Pusan, Korea; the dead line of shipping date was Jan. 26, 1999. Terms of payment were letter of credit in prompt cash. After made the contract, the plaintiff bought the silicon required in the contract from Yasheng Silicon Factory, Laiyuan County, Hebei Province with unit price of RMB 7,350 Yuan per ton. They were packed into 115 ton-bags. Shanxi Branch of China Committee on the Promotion of Trade issued certificate of original products (certificate No. 981801347) on Jan. 18,1999. On Jan. 22,1999, Shanxi Import and Export Inspection Bureau issued inspection certificate No. 1403/991012, and confirming the quality of the cargo meets the requirements in the contract. Later, the plaintiff carried the 115 ton-bags to Tianjin new port by land. The cargos were put into 6 containers by China Foreign Transport Company, Tianjin Branch, sealed by Tianjin Foreign Carrier Tally Company. The plaintiff delivered the 6 aforesaid containers to the defendant, Oasis. On Jan. 26, 1999, Oasis signed a clear bill of lading No.KYcr006, titled TWH Warehouse, as the agent of TWH, to the plaintiff .The B/L showed: the shipper was plaintiff; the consignee should be assignee of the instruction from the National Agriculture Bank; shipping port was Tianjin Xingang; port of destination was Pusan, Korea; carrier was vessel “Victory Star V904E”; cargos were 115 bags of metal silicon (gross weight: 115345 kg), in six 20’containers.The numbers of the containers and seals were clearly marked; hand-over form was CY-CY with cash against delivery. The cargos were shipped on time. The 6 containers of cargos were carried by carrier to the port of destination, Pusan, Korea on Jan. 8,1999 and were put into the New Korea Commercial Transport Warehouse, which is a bonded warehouse and had import and export cargo keeping contract with buyer, KNT. On Feb. 1, 1999, Lijinhao, the representative of Korea Shipping Loading & Unloading Co. and Jiang Yongzhun, authorized representative of New Korea Commercial Transport Warehouse, issued warehousing confirmation to prove the conformity of 6 containers and seals with B/L. New Korea Commercial Transport Warehouse opened the six containers and counted the cargos: 115 bags with 115,345kg. (It was conformable to B/L and proved that the warehousing cargos were the originals which plaintiff handed for transportation.) The warehousing confirmation had no records of unqualified packing or inferior quality etc. When the six containers were opened, the openers did not apply for inspection .The defendant, TWH, did not submit the evidence of whose decision of opening the containers (the consignee or the supervisors of the bonded Warehouse). But the defendant, TWH, provided a letter to plaintiff from the buyer KNT the ninth day after the opening that is Feb. 9,1999. It said: “The quality of cargo is inferior, an inspection should be done if agree.” On Feb. 10,1999 KNT wrote defendant again, and declared that the quality of the cargo was inferior, which was industry waste in fact, and asked for return. On Mar. 22,1999, the buyer, KNT entrusted Korea Inspection Co. to test the cargos kept on the open land of the New Korea Commercial Transport Warehouse. The inspection report No. BC-CI-9903043 says: Based on all kinds of formal reports, the cargo was unloaded on Feb 1,1999, and then sent to the bonded warehouse. After getting out of the cargos from the containers, with the importers on the spot, we checked one bag of each type, and found some wasted metals and sizes against the contract. So this inspection is followed. The inspection result: “net weight is 74,424,kg, far from the specifications on the contract, which disagree to the aim of the contract”. And made the following conclusion: “This unqualified cargo was due to the carelessness of the exporter.” On Mar. 26, 1999, the plaintiff replied to KNT agreeing with cargos returned and would like to take the returning charges. The Returning action needed the help of the buyer, KNT. After several rounds of consultations, KNT agreed to assist handling the returning process and the charges would be confirmed by the plaintiff. After many consultations between the plaintiff and Oasis, the agency of the defendant, the plaintiff agreed to pay for the freight charge ($ 20654.80, equivalent to RMB 170,815 Yuan), and two parties made an agreement in terms of returning issue. The returning cargos were put into 6 new containers with new seal numbers, sent out from the New Korea Commercial Transportation Warehouse on May 11, 1999, arrived at Tianjin Xingang on May17. Two defendants didn’t sign new B/L during returning. But from the lading process in the non-negotiable B/L No. DH99-0518 sealed by Shanghai agent of TWH, the cargos had been controlled under TWH all the time. Finally, the 6 containers were delivered to the plaintiff by cable notice. After the containers retained to Tianjin new port, the plaintiff applied for commercial inspection. On Jun. 16, 1999, the inspection certificate issued by Tianjin Inspection Bureau reports: the seal marks were complete before opening, which was conformable to the record on the non-negotiable B/L No.DH99-0581. (Under the No.DH99-O518, one container with the seal number 615288 instead of 615388 recorded on the shipping bill. The court defined it as a writing error with analysis). Inspection report No. 9920484 of Tianjin Commercial Inspection Bureau states: “All the six containers were opened on spot; two bags were casually taken from each container (12 bags in all). The visual inspection showed: cargos were packed in plastic ton-bags, no seals on the bags. Four among the twelve have a good appearance; two are in general; six are poor.” After inspection, the cargos were new sealed. Tianjin Notary Office and Tianjin Container Transport Co. issued certificates. Later on, the plaintiff applied Branch of Shanxi Inspection Co. for another check. From July 1 to 3, 1999,the Branch of Shanxi Inspection Co. reopened the containers and took another inspection and issued inspection certificate No. 99WT024X which showed the numbers of the containers and the seals at opening were the same with the new ones mentioned before. The No. 99WT024X report says: “After checking all 115 bags of cargos, 65 bags have a qualified appearance with no impurity and 90% of which has sizes 10-100mm; clinker and impurity were found in 50 bags, among which 95% has sizes of 0-200mm.” All the facts proved that the sealing, opening and resealing are in a consecutive process during the cargos’ returning. The inspection made by Shanxi Inspection Branch on July 1-3, 1999 shows that the cargos are the same ones returning from New Korea Commercial Transportation Warehouse. It was found out that: After getting the original B/L from the defendant, the plaintiff delivered concerned bills to the issuing bank, Industrial and Commercial Bank Xian Dongxinjie Branch, and it is the bank sent the bills to issuing bank in Korea. On Feb. 9, 1999, the issuing bank in Korea informed Dongxinjie Branch the refusal of payment because there were no original invoice and the unconformity on loading bills. After consultation between Dongxinjie Branch and plaintiff , the plaintiff agreed to require issuing bank to return the whole bills on March 16, 1999. It was also found out that: On Sept. 1, 1998, Oasis signed a contract with Shanghai Agent of TWH, TWH authorized Oasis as its agent in Tianjin Xingang. By the time when the case was put on record, vice representative of Shanghai Agent of TWH, Liu Wei, confirmed the facts mentioned above in a letter to court on Nov. 22,1999. On Nov. 2, 1999, the plaintiff went to court for compensation of cargo and other charges total RMB 538,315 Yuan. In the first hearing, the plaintiff added RMB 28,896.75 Yuan as interests’ loss. The court ordered the plaintiff to pay the legal cost of the adding claim, but plaintiff failed to pay it till now. The court took the plaintiff to quit the claim of interests’ loss. Based on the facts confirmed above, and the controversial points focused on the two parties, the court made the following judgments: The court deemed: in accordance with the agent agreement between Oasis and Shanghai Agent Office of TWH; the letter of vice representative of Shanghai Agent Office of TWH, Liu Wei, on Nov. 22,1999 and faxes of two defendants dealing with the concerned cargos, it confirms that the two defendants, Oasis and TWH have an agent relationship, and Oasis is the bill signing agent of TWH in Tianjin Xingang. The plaintiff delivered cargos in 6 containers to the two defendants and got B/L titled with TWH issued by Oasis, the agent of TWH. According to aforesaid facts and B/L as evidence of ocean going contract, it can be confirmed that plaintiff is shipper; defendant, TWH, is carrier; there is a contract of ocean carriage between plaintiff and TWH. According to “Maritime Law of the People’s Republic of China” article 46, the carrier’s duty term for the cargo in containers shipping is from getting the cargo at the loading port to deliver it at the unloading port. During that time, the carrier controls the cargos. In this case, the defendant, TWH, as the carrier, took the plaintiff’s cargos from Tianjin Xingang to the unloading port the New Korea Commercial Transportation Warehouse, Pusan. The carrier did not deliver the cargos to the legal consignee or got back the original B/L, therefore, the cargos did not deliver legally, and the carrier’s duty was not released. With the circumstance that the B/L was refused to pay by the issuing bank and returned to the plaintiff, the defendant TWH, as carrier, neither delivered the cargos to its legal holder of B/L at the unloading port, nor took back the original B/L. With the negotiation between plaintiff and defendant, TWH, the two defendants accepted the consignation of plaintiff to carry the cargos back Tianjin and charged for the shipping. The returning cargos had been under the controlled of TWH all the time. Moreover, because of cable notice, TWH did not sign a formal B/L to the plaintiff, so TWH was also a carrier of the returning cargos. As for the fact that TWH transferred the cargos to others for returning is another legal issue. According to the facts mentioned above and the regulations of the “ Maritime Law of the People’s Republic of China”, the court holds: the period from Jan. 26, 1999, (the defendant, TWH received the cargos from the plaintiff) to May 17 (returning cargos were handed back to the plaintiff) is the liability term of the defendant, TWH, to protect and keep the cargos. Here the court needs to point out: in this case, the seals had been completed with continuity in the returning process from the cargos’ reloading and departure at New Korea Commercial Transportation Warehouse, Pusan, Korea until they were handed back to the plaintiff. The evidences confirm that the cargos that were received by plaintiff were the right ones from the New Korea Commercial Transportation Warehouse, Pusan, Korea There was no possibility that the cargos were changed during the returning navigation. Therefore, the argument of who is the returning carrier holds no meaning to this case. “Maritime Law of the People’s Republic of China” stipulates: the carrier’s duty to control the cargos in containers not only includes the captain and seamen to control the cargos, but also includes the loading and unloading Co., managers of the warehouse or dock, his agent hired or entrusted to control the cargos. In this case, the six containers with silicon were opened without delivery under the responsibility term of the defendant, TWH. The plaintiff claimed the defendant TWH failed to fulfill his duty during his supervision, and the cargos were changed in his responsibility term. So the plaintiff claimed defendant TWH to compensate for the damage. Against plaintiff’s claim, the defendant, TWH, defended from the following points of view. The carrier was exempted from liability and evidences submitted by the plaintiff do not strong enough to confirm the perfect quality of the cargos, while the materials collected by TWH from Korea can prove the cargos’ quality were inferior, and the defendant submitted concerned evidences to the court. As to the defense on being exemption from liability, the court holds: the defendant TWH emphasizes the New Korea Commercial Transportation Warehouse is a bonded warehouse, and quoted the Korea “Tariff Law” repeatedly. But all the evidences about Korea “Tariff Law” submitted by the defendant, TWH, in the second hearing were not put into action until Jun. 1999. The defendant TWH neither led evidences to prove that the Law has retroactive force to the disputes over the past, nor other equal regulations before that. So the Law of Korea used by the defendant, TWH, cannot support his arguments. In short, the defendant, TWH, failed to give any legal rules of the carrier can be exempted from his supervision duty for the containers had been opened in the bonded warehouse. Thus, the court refuses to accept the defendant’s (TWH) argument based on exemption from liability point. As to the argument from the defendant, TWH, that the plaintiff could not prove the cargos in the six containers he delivered for shipping were the right things to be inspected. Evidences collected by TWH from Korea proved that the cargos’ quality was inferior. The court deems: The inspection certificate No.1403/991012 submitted by Shanxi Import & Export Inspection Bureau is the commodity inspection certificate of the producing area, and is not the one on the loading spot. So the certificate only proves the quality when the cargos were inspected. In fact, there is a long way by land from the original producing area to the loading spot, Tianjin Xingang. The plaintiff has neither inspection certificate at the loading time, nor enough evidences to prove the metal silicon being put into containers was the right ones that had been inspected inland. The evidences submitted by the plaintiff are lack of continuity to prove the cargos’ good quality in the containers. The present evidences submitted by the plaintiff are not enough to prove the silicon that being put into the six containers are the right ones being inspected inland. Going through the evidences submitted by the defendant, TWH, it could be seen from the warehousing bill that the containers numbers with the first opening, seal numbers, the amount of the cargos, went along with the record on the B/L. It proves that the cargos being opened were the original cargos delivered by the plaintiff. But there was no defective record when the containers were opened. None of the defendants, TWH, the consigner at the destination port or the employees applied for a quality inspection when the containers were opened. Nine days after the six containers were opened, though claimed the cargos were inferior, the buyer, KNT did not take an inspection in time. 50 days after the containers being opened that is Mar. 22,1999, he took the inspection. The inspection report No. BC-C1-9903043 issued by Korea Inspection Co. only confirmed the cargos’ quality on Mar. 22,1999, and it could not prove the cargos were the ones plaintiff consigned and opened on Feb. 1,1999. Therefore, the evidences submitted by the defendant TWH could not enough to prove the cargos being inspected on Mar. 22,1999 were the ones being checked on Feb. 1,1999. From the analysis, compared with the evidences submitted by the two parties, the court holds: neither has sound evidences to confirm the cargos’ quality in the containers nor has enough evidences or reasons to reject the counterpart’s evidences. It is impossible for court to make sure whether the cargos were changed under the supervision of the plaintiff or being changed within the liability term of the defendant. According to the spirits of the “Civil Procedure Law of the People’s Republic of China”, if it is impossible to ascertain the true situation, what the court can do is to comprehensively analyze the case, and decides the responsibility based on the burden of proof contribution. The plaintiff claims: the defendant, TWH, should take the liability of changing the cargos since he did not fulfill his supervision duty during his responsible term. Considering the whole facts, the court deems: the containers did be opened in the responsible term of the defendant-TWH. The plaintiff claimed that the cargos were exchanged after opening the containers. It is necessary for the plaintiff to prove that the quality of the cargos in six containers is good. With this precondition, it can be confirmed that the cargos were exchanged in the responsible term of the defendant. However, since the plaintiff failed to submit enough evidences to prove the quality of cargos in six containers is good, and it cannot attest that it is the defendant, TWH, who exchanged the cargos in his responsible term. Therefore, the plaintiff should take the legal consequence of failing to submit the evidences. In conclusion, according to the “Civil Procedure Law of the People’s Republic of China” article 64 section 1; the Supreme People’s Court “Provisions Concerning the Civil Economic Mode of Trial Reform” article 3 section 2; “Maritime Law of the People’s Republic of China” article 42 section 1 item 1 and article 46, the court makes the following judgment: Reject the plaintiff’s claim. The legal cost RMB 10393 Yuan is born by the plaintiff. If refuse to accept this judgment, Plaintiff and defendant Oasis may submit appeal petition and with 5 copies of it to Tianjin Maritime Court within 15 days after the date of service this judgment; Defendant TWH may submit appeal petition and with 5 copies of it to Tianjin Maritime Court within 30 days after the date of service this judgment. The appeal shall be accepted by the Higher People’s Court of Tianjin. Appellant should pay cost of appeal RMB 10,393 Yuan to the Higher People’s Court of Tianjin (Bank account: Agriculture Bank of China new technical park branch, A/C no. 394-9887000390) within 7 days after the appeal petition. If payment delays for the time limit, the appeal will be treated as withdraw automatically. Chief Judge: Cheng Xianzhang Judge: Shi Wenxi Assistant Judge: Xu Fubin June 25, 2001 Court Clerk: Zhang Aiqin

Plaintiff: Shanxi Machinery Import & Export Co. Address: No.29 Changlezhonglu, Xi’an Legal representative: Qi Shiliang, general manager Authorized representative: Sun Weizeng, cadre of Shanxi Machinery Import & Export Co. Authorized attorney: Zhu Dezhi, attorney-at-law of Ruining Law Firm Defendant: Oasis (Tianjin) International Trade Ltd. Co. Address: Room 302, No. 51 Nanxin Building, Huanhuzhonglu, Hexi District, Tianjin Legal representative: Houbaohua, general manager Defendant: Toyo Warehouse Co., Ltd Address: Koku Yilibulei 1-2-3, Nagoya, Aryiqigan County, Japan Legal representative: Eichi, Chairman of the board Authorized attorney: Zhu Xiaokong, attorney-at-law of Wanhai Law Firm Authorized attorney: Zhao Shuyi, attorney-at-law of Xincheng Law Firm, Shanghai The plaintiff, Shanxi Machinery Import & Export Co. (hereinafter referred to as Shanxi Machinery), sued the defendant, Oasis (Tianjin) International Trade Ltd Co. (hereinafter referred to as Oasis) and TOYO WAREHOUSE CO. LTD. (hereinafter referred to as TWH), for exchanging cargo on marine transportation contract. Tianjin Maritime Court put the cases on record on Dec. 2, 1999. The court constituted collegiate panel and held public hearings. Authorized attorneys of the plaintiff Sun Weizheng and Zhu Dezhi, legal representative of the defendant Oasis Hou Baohua, Zhu Xiaokong and Zhao Shuyi, of defendant, appeared in court and participated in the suit. After the second and before the third hearing, the defendant, TWH, requested the plaintiff’s attorney Zhu Dezhi to withdraw from the case. According to law, the plaintiff’s authorized attorney, Zhu Dezhi, only applied withdrawal by himself, could the court require him to withdraw. Decided by collegiate panel, the court notified the plaintiff’s authorized attorney Zhu Dezhi to withdraw from the case and did not participate in the latter action of the case. But all his procedural activities before the withdrawal still challenge remained valid. Now the case has been finished. The plaintiff claimed: In Jan. 16, 1999, the plaintiff freighted metal silicon in containers (6X20’) from Tianjin Xingang to Pusan port, South Korea. Vessel ‘Victory Star V904E’ took in charge of the cargo. The defendant as the carrier singed and issued the clear bill of lading No. KYCR006. The bill recorded clearly the numbers, seal numbers and the name of metal silicon in of each container. In Feb. 1999, because issuing bank in Korea refused payment, all bills were returned back. After this, the plaintiff informed the defendant to bring the cargo back to Tianjin. Vessel ‘Victory Star V0920W’ took in charge of the cargo. B/L number was: DH99-0518. On June, during unpacking and visual examination, it was found out that containers’ number, parts of the cargos’ outer packing had been changed. With the inspection of commodity inspection and testing bureau in Tianjin and Shanxi, fifty tons of cargo had become clinker and unvalued, which caused great damage to the plaintiff. The freight had been under the defendant’s responsibility during defendant received the cargo at the loading port till the cargo was handed to consignee at the Pusan port. The plaintiff lost a lot in goods and freight due to the defendant’s failing to fulfill his duty. The plaintiff claimed for compensation of 538,315 Yuan and its interest 28,896.75 Yuan, total 567,211.74 Yuan. The plaintiff submitted 23 documents to court to prove his claims, facts and arguments, including B/L, commodities inspection report, certificate of the original products, purchase contract, invoices, freight returning notice, bill returning certificate and so on. (See details list) The defendant, Oasis, argued: According to the B/L of KYCR006, KH99-0518 and records of sea waybill, which plaintiff based to make his point, the contract carrier from Tianjin to Pusan was TWH, and the actual carrier was Namsung Shipping Co., Ltd. In the contract from Pusan to Tianjin, the contract carrier is DAEH LOGISTICS Co. Ltd., and the actual carrier was Hanjin Shipping Co., Ltd. Oasis worked as agent of TWH in China for getting orders and issuing lading bills. In this case, Oasis as an agent issued the lading bill at the port of loading without any misconduct. The contract carrier and the actual carrier did all of the specific work at the unloading port, Pusan. Oasis neither participated nor knew the work. According to related regulations in the Civil Law of the People’s Republic of China, Oasis, as an agent, takes no responsibilities for the loss. Records of B/L KYCR006 and DH99-0518 as well as marine bill of lading show that the shipping mode of containers is CY-CY. It means the shipper himself loaded the goods at the loading port and the carrier delivered the whole containers at the unloading port. With this shipping mode, the shipper has no reason to claim that the cargos were changed during the navigation. Moreover, the outer packing of cargo did not have any clear indication marks according to the records of B/L. The cargos were changed based on visual inspection at the unloading port claimed by the shipper is against the basic knowledge. According to the messages between plaintiff and the Korea Nonferrous Trade Limited Company (hereinafter referred as KNT), the buyer, KNT, refused to accept the cargo, and the reason is that the quality of delivering cargos does not meet the requirements in the contract. The plaintiff did not tell the truth; instead, he sued the carrier in the name of changing cargo in order to avoid his loss. The action of plaintiff is against the laws. The defendant, Oasis, submitted to court an agency agreement made between Oasis and TWH, 3 faxes of the concerned cargo between Oasis and the Shanghai representative office of THW. The defendant, TWH, argued: TWH neither signed any legal documents with Oasis, nor authorized Oasis to issue any lading bills. TWH was neither actual carrier nor contract carrier, so that TWH has no legal relationship with the plaintiff. The cargo was carried from Tianjin Xingang to Pusan, Korea, and was sent into the owner’s bond controlled by Korean customs. The warehousing containers and seals were perfect. According to the customs law of Korea, the Korean customs and the tax institutions both have rights to open the containers for inspection. The owner of the cargo also has rights applying the customs to open the containers for checking. The Korea Inspection Ltd. Co. authorized by Korean government examined the cargo and confirmed the cargo was unqualified. The inspection report and other evidences showed that the cargo arrived Korea and returned Tianjin was the same cargo of the plaintiff. TWH did not change the cargo. The evidences submitted by the plaintiff cannot prove the cargo was qualified before loading. In fact, it is purchase contract instead of contract of carriage. TWH has no misconduct, and should not take the civil responsibility. The defendant, TWH submitted court 79 evidences to support his claim including warehousing entry and departure, and inspection reports of Korea Inspection Ltd. Co. (see details in evidence list provided by TWH). After three hearings, the court made key investigation on the controversy between plaintiff and defendant: 1. Whether there is a contract of ocean carriage between plaintiff and defendant; 2. How to determine the liability term of the carrier; 3. Whether the carrier was free of duty; 4. Whether the cargo had been changed; 5. Whether the defendant should take responsibility of compensation. Plaintiff and defendant gave enough evidences, cross-examinations, debates and closing statements on the key point mentioned above during the hearings. The court also showed related evidences getting by court, which had been cross-examined by the two parts. Based on the evidences mentioned above, the court gave the following analysis and judgment: Materials collected by court in the industrial and commercial registration Shanghai Representative Office of TWH have been accepted because their truthfulness, legality and effectiveness. These evidences proved that Shanghai Representative Office of TWH as a branch of foreign company to be set in China does not have the status of a legal person. Based on the “Company Law of the People’s Republic of China” article 203 section 2,the defendant TWH should take civil responsibility for the business activities of Shanghai Representative Office. The court accepted 12 original inspection materials supported by Shanxi Exit & Entry Inspection and Quarantine Bureau (IQB), and accepted investigation written transcripts made by court to Gao Shaoping, and Gao Peicheng from IQB because their truthfulness, legality and effectiveness. These evidences showed that the inspection certificate No. 1403/991012 issued by Shanxi Exit & Entry Inspection and Quarantine Bureau is true. Evidences of No.1, 4, 5, 6, 9, 29 provided by the defendant, TWH, during the second session did not have any relevancy to the case, and the court refused to accept them. Evidences No.2, 3, 7, 10, 30, 31 provided by the defendant, TWH, in the second session are Korean law which were enforced after Jun. 1999, while this case happened before that time. The defendant TWH neither had certificate to prove that the law has retroactive force, nor submitted any other laws with the same regulations before the law enforcement. Therefore, the evidences mentioned above cannot be accepted. The civil judgment of Tianjin higher people's court (2000) Gao-Jing-Zhong-Zi-No.55 provided by plaintiff has no connection with this case. The court did not accept the evidence mentioned above. Other evidences provided by plaintiff and defendant were cross-examined by the parties, and both parties had no dissent to their truthfulness and legality. The court accepted these evidences after integrative analysis. Based on aforesaid confirmed evidences, the court finds the following facts: On Jan. 12, 1999, the plaintiff and KNT signed silicon purchase contract (Contract No.: KTC-ME99011/S1), exporting 120 (+-5%) tons of silicon. The contract has clear engagement on the specification, size, packing etc. The loading port should be Tianjin Xingang and unloading port should be Pusan, Korea; the dead line of shipping date was Jan. 26, 1999. Terms of payment were letter of credit in prompt cash. After made the contract, the plaintiff bought the silicon required in the contract from Yasheng Silicon Factory, Laiyuan County, Hebei Province with unit price of RMB 7,350 Yuan per ton. They were packed into 115 ton-bags. Shanxi Branch of China Committee on the Promotion of Trade issued certificate of original products (certificate No. 981801347) on Jan. 18,1999. On Jan. 22,1999, Shanxi Import and Export Inspection Bureau issued inspection certificate No. 1403/991012, and confirming the quality of the cargo meets the requirements in the contract. Later, the plaintiff carried the 115 ton-bags to Tianjin new port by land. The cargos were put into 6 containers by China Foreign Transport Company, Tianjin Branch, sealed by Tianjin Foreign Carrier Tally Company. The plaintiff delivered the 6 aforesaid containers to the defendant, Oasis. On Jan. 26, 1999, Oasis signed a clear bill of lading No.KYcr006, titled TWH Warehouse, as the agent of TWH, to the plaintiff .The B/L showed: the shipper was plaintiff; the consignee should be assignee of the instruction from the National Agriculture Bank; shipping port was Tianjin Xingang; port of destination was Pusan, Korea; carrier was vessel “Victory Star V904E”; cargos were 115 bags of metal silicon (gross weight: 115345 kg), in six 20’containers.The numbers of the containers and seals were clearly marked; hand-over form was CY-CY with cash against delivery. The cargos were shipped on time. The 6 containers of cargos were carried by carrier to the port of destination, Pusan, Korea on Jan. 8,1999 and were put into the New Korea Commercial Transport Warehouse, which is a bonded warehouse and had import and export cargo keeping contract with buyer, KNT. On Feb. 1, 1999, Lijinhao, the representative of Korea Shipping Loading & Unloading Co. and Jiang Yongzhun, authorized representative of New Korea Commercial Transport Warehouse, issued warehousing confirmation to prove the conformity of 6 containers and seals with B/L. New Korea Commercial Transport Warehouse opened the six containers and counted the cargos: 115 bags with 115,345kg. (It was conformable to B/L and proved that the warehousing cargos were the originals which plaintiff handed for transportation.) The warehousing confirmation had no records of unqualified packing or inferior quality etc. When the six containers were opened, the openers did not apply for inspection .The defendant, TWH, did not submit the evidence of whose decision of opening the containers (the consignee or the supervisors of the bonded Warehouse). But the defendant, TWH, provided a letter to plaintiff from the buyer KNT the ninth day after the opening that is Feb. 9,1999. It said: “The quality of cargo is inferior, an inspection should be done if agree.” On Feb. 10,1999 KNT wrote defendant again, and declared that the quality of the cargo was inferior, which was industry waste in fact, and asked for return. On Mar. 22,1999, the buyer, KNT entrusted Korea Inspection Co. to test the cargos kept on the open land of the New Korea Commercial Transport Warehouse. The inspection report No. BC-CI-9903043 says: Based on all kinds of formal reports, the cargo was unloaded on Feb 1,1999, and then sent to the bonded warehouse. After getting out of the cargos from the containers, with the importers on the spot, we checked one bag of each type, and found some wasted metals and sizes against the contract. So this inspection is followed. The inspection result: “net weight is 74,424,kg, far from the specifications on the contract, which disagree to the aim of the contract”. And made the following conclusion: “This unqualified cargo was due to the carelessness of the exporter.” On Mar. 26, 1999, the plaintiff replied to KNT agreeing with cargos returned and would like to take the returning charges. The Returning action needed the help of the buyer, KNT. After several rounds of consultations, KNT agreed to assist handling the returning process and the charges would be confirmed by the plaintiff. After many consultations between the plaintiff and Oasis, the agency of the defendant, the plaintiff agreed to pay for the freight charge ($ 20654.80, equivalent to RMB 170,815 Yuan), and two parties made an agreement in terms of returning issue. The returning cargos were put into 6 new containers with new seal numbers, sent out from the New Korea Commercial Transportation Warehouse on May 11, 1999, arrived at Tianjin Xingang on May17. Two defendants didn’t sign new B/L during returning. But from the lading process in the non-negotiable B/L No. DH99-0518 sealed by Shanghai agent of TWH, the cargos had been controlled under TWH all the time. Finally, the 6 containers were delivered to the plaintiff by cable notice. After the containers retained to Tianjin new port, the plaintiff applied for commercial inspection. On Jun. 16, 1999, the inspection certificate issued by Tianjin Inspection Bureau reports: the seal marks were complete before opening, which was conformable to the record on the non-negotiable B/L No.DH99-0581. (Under the No.DH99-O518, one container with the seal number 615288 instead of 615388 recorded on the shipping bill. The court defined it as a writing error with analysis). Inspection report No. 9920484 of Tianjin Commercial Inspection Bureau states: “All the six containers were opened on spot; two bags were casually taken from each container (12 bags in all). The visual inspection showed: cargos were packed in plastic ton-bags, no seals on the bags. Four among the twelve have a good appearance; two are in general; six are poor.” After inspection, the cargos were new sealed. Tianjin Notary Office and Tianjin Container Transport Co. issued certificates. Later on, the plaintiff applied Branch of Shanxi Inspection Co. for another check. From July 1 to 3, 1999,the Branch of Shanxi Inspection Co. reopened the containers and took another inspection and issued inspection certificate No. 99WT024X which showed the numbers of the containers and the seals at opening were the same with the new ones mentioned before. The No. 99WT024X report says: “After checking all 115 bags of cargos, 65 bags have a qualified appearance with no impurity and 90% of which has sizes 10-100mm; clinker and impurity were found in 50 bags, among which 95% has sizes of 0-200mm.” All the facts proved that the sealing, opening and resealing are in a consecutive process during the cargos’ returning. The inspection made by Shanxi Inspection Branch on July 1-3, 1999 shows that the cargos are the same ones returning from New Korea Commercial Transportation Warehouse. It was found out that: After getting the original B/L from the defendant, the plaintiff delivered concerned bills to the issuing bank, Industrial and Commercial Bank Xian Dongxinjie Branch, and it is the bank sent the bills to issuing bank in Korea. On Feb. 9, 1999, the issuing bank in Korea informed Dongxinjie Branch the refusal of payment because there were no original invoice and the unconformity on loading bills. After consultation between Dongxinjie Branch and plaintiff , the plaintiff agreed to require issuing bank to return the whole bills on March 16, 1999. It was also found out that: On Sept. 1, 1998, Oasis signed a contract with Shanghai Agent of TWH, TWH authorized Oasis as its agent in Tianjin Xingang. By the time when the case was put on record, vice representative of Shanghai Agent of TWH, Liu Wei, confirmed the facts mentioned above in a letter to court on Nov. 22,1999. On Nov. 2, 1999, the plaintiff went to court for compensation of cargo and other charges total RMB 538,315 Yuan. In the first hearing, the plaintiff added RMB 28,896.75 Yuan as interests’ loss. The court ordered the plaintiff to pay the legal cost of the adding claim, but plaintiff failed to pay it till now. The court took the plaintiff to quit the claim of interests’ loss. Based on the facts confirmed above, and the controversial points focused on the two parties, the court made the following judgments: The court deemed: in accordance with the agent agreement between Oasis and Shanghai Agent Office of TWH; the letter of vice representative of Shanghai Agent Office of TWH, Liu Wei, on Nov. 22,1999 and faxes of two defendants dealing with the concerned cargos, it confirms that the two defendants, Oasis and TWH have an agent relationship, and Oasis is the bill signing agent of TWH in Tianjin Xingang. The plaintiff delivered cargos in 6 containers to the two defendants and got B/L titled with TWH issued by Oasis, the agent of TWH. According to aforesaid facts and B/L as evidence of ocean going contract, it can be confirmed that plaintiff is shipper; defendant, TWH, is carrier; there is a contract of ocean carriage between plaintiff and TWH. According to “Maritime Law of the People’s Republic of China” article 46, the carrier’s duty term for the cargo in containers shipping is from getting the cargo at the loading port to deliver it at the unloading port. During that time, the carrier controls the cargos. In this case, the defendant, TWH, as the carrier, took the plaintiff’s cargos from Tianjin Xingang to the unloading port the New Korea Commercial Transportation Warehouse, Pusan. The carrier did not deliver the cargos to the legal consignee or got back the original B/L, therefore, the cargos did not deliver legally, and the carrier’s duty was not released. With the circumstance that the B/L was refused to pay by the issuing bank and returned to the plaintiff, the defendant TWH, as carrier, neither delivered the cargos to its legal holder of B/L at the unloading port, nor took back the original B/L. With the negotiation between plaintiff and defendant, TWH, the two defendants accepted the consignation of plaintiff to carry the cargos back Tianjin and charged for the shipping. The returning cargos had been under the controlled of TWH all the time. Moreover, because of cable notice, TWH did not sign a formal B/L to the plaintiff, so TWH was also a carrier of the returning cargos. As for the fact that TWH transferred the cargos to others for returning is another legal issue. According to the facts mentioned above and the regulations of the “ Maritime Law of the People’s Republic of China”, the court holds: the period from Jan. 26, 1999, (the defendant, TWH received the cargos from the plaintiff) to May 17 (returning cargos were handed back to the plaintiff) is the liability term of the defendant, TWH, to protect and keep the cargos. Here the court needs to point out: in this case, the seals had been completed with continuity in the returning process from the cargos’ reloading and departure at New Korea Commercial Transportation Warehouse, Pusan, Korea until they were handed back to the plaintiff. The evidences confirm that the cargos that were received by plaintiff were the right ones from the New Korea Commercial Transportation Warehouse, Pusan, Korea There was no possibility that the cargos were changed during the returning navigation. Therefore, the argument of who is the returning carrier holds no meaning to this case. “Maritime Law of the People’s Republic of China” stipulates: the carrier’s duty to control the cargos in containers not only includes the captain and seamen to control the cargos, but also includes the loading and unloading Co., managers of the warehouse or dock, his agent hired or entrusted to control the cargos. In this case, the six containers with silicon were opened without delivery under the responsibility term of the defendant, TWH. The plaintiff claimed the defendant TWH failed to fulfill his duty during his supervision, and the cargos were changed in his responsibility term. So the plaintiff claimed defendant TWH to compensate for the damage. Against plaintiff’s claim, the defendant, TWH, defended from the following points of view. The carrier was exempted from liability and evidences submitted by the plaintiff do not strong enough to confirm the perfect quality of the cargos, while the materials collected by TWH from Korea can prove the cargos’ quality were inferior, and the defendant submitted concerned evidences to the court. As to the defense on being exemption from liability, the court holds: the defendant TWH emphasizes the New Korea Commercial Transportation Warehouse is a bonded warehouse, and quoted the Korea “Tariff Law” repeatedly. But all the evidences about Korea “Tariff Law” submitted by the defendant, TWH, in the second hearing were not put into action until Jun. 1999. The defendant TWH neither led evidences to prove that the Law has retroactive force to the disputes over the past, nor other equal regulations before that. So the Law of Korea used by the defendant, TWH, cannot support his arguments. In short, the defendant, TWH, failed to give any legal rules of the carrier can be exempted from his supervision duty for the containers had been opened in the bonded warehouse. Thus, the court refuses to accept the defendant’s (TWH) argument based on exemption from liability point. As to the argument from the defendant, TWH, that the plaintiff could not prove the cargos in the six containers he delivered for shipping were the right things to be inspected. Evidences collected by TWH from Korea proved that the cargos’ quality was inferior. The court deems: The inspection certificate No.1403/991012 submitted by Shanxi Import & Export Inspection Bureau is the commodity inspection certificate of the producing area, and is not the one on the loading spot. So the certificate only proves the quality when the cargos were inspected. In fact, there is a long way by land from the original producing area to the loading spot, Tianjin Xingang. The plaintiff has neither inspection certificate at the loading time, nor enough evidences to prove the metal silicon being put into containers was the right ones that had been inspected inland. The evidences submitted by the plaintiff are lack of continuity to prove the cargos’ good quality in the containers. The present evidences submitted by the plaintiff are not enough to prove the silicon that being put into the six containers are the right ones being inspected inland. Going through the evidences submitted by the defendant, TWH, it could be seen from the warehousing bill that the containers numbers with the first opening, seal numbers, the amount of the cargos, went along with the record on the B/L. It proves that the cargos being opened were the original cargos delivered by the plaintiff. But there was no defective record when the containers were opened. None of the defendants, TWH, the consigner at the destination port or the employees applied for a quality inspection when the containers were opened. Nine days after the six containers were opened, though claimed the cargos were inferior, the buyer, KNT did not take an inspection in time. 50 days after the containers being opened that is Mar. 22,1999, he took the inspection. The inspection report No. BC-C1-9903043 issued by Korea Inspection Co. only confirmed the cargos’ quality on Mar. 22,1999, and it could not prove the cargos were the ones plaintiff consigned and opened on Feb. 1,1999. Therefore, the evidences submitted by the defendant TWH could not enough to prove the cargos being inspected on Mar. 22,1999 were the ones being checked on Feb. 1,1999. From the analysis, compared with the evidences submitted by the two parties, the court holds: neither has sound evidences to confirm the cargos’ quality in the containers nor has enough evidences or reasons to reject the counterpart’s evidences. It is impossible for court to make sure whether the cargos were changed under the supervision of the plaintiff or being changed within the liability term of the defendant. According to the spirits of the “Civil Procedure Law of the People’s Republic of China”, if it is impossible to ascertain the true situation, what the court can do is to comprehensively analyze the case, and decides the responsibility based on the burden of proof contribution. The plaintiff claims: the defendant, TWH, should take the liability of changing the cargos since he did not fulfill his supervision duty during his responsible term. Considering the whole facts, the court deems: the containers did be opened in the responsible term of the defendant-TWH. The plaintiff claimed that the cargos were exchanged after opening the containers. It is necessary for the plaintiff to prove that the quality of the cargos in six containers is good. With this precondition, it can be confirmed that the cargos were exchanged in the responsible term of the defendant. However, since the plaintiff failed to submit enough evidences to prove the quality of cargos in six containers is good, and it cannot attest that it is the defendant, TWH, who exchanged the cargos in his responsible term. Therefore, the plaintiff should take the legal consequence of failing to submit the evidences. In conclusion, according to the “Civil Procedure Law of the People’s Republic of China” article 64 section 1; the Supreme People’s Court “Provisions Concerning the Civil Economic Mode of Trial Reform” article 3 section 2; “Maritime Law of the People’s Republic of China” article 42 section 1 item 1 and article 46, the court makes the following judgment: Reject the plaintiff’s claim. The legal cost RMB 10393 Yuan is born by the plaintiff. If refuse to accept this judgment, Plaintiff and defendant Oasis may submit appeal petition and with 5 copies of it to Tianjin Maritime Court within 15 days after the date of service this judgment; Defendant TWH may submit appeal petition and with 5 copies of it to Tianjin Maritime Court within 30 days after the date of service this judgment. The appeal shall be accepted by the Higher People’s Court of Tianjin. Appellant should pay cost of appeal RMB 10,393 Yuan to the Higher People’s Court of Tianjin (Bank account: Agriculture Bank of China new technical park branch, A/C no. 394-9887000390) within 7 days after the appeal petition. If payment delays for the time limit, the appeal will be treated as withdraw automatically. Chief Judge: Cheng Xianzhang Judge: Shi Wenxi Assistant Judge: Xu Fubin June 25, 2001 Court Clerk: Zhang Aiqin

Plaintiff: Sun Youli, male, Han nationality, born on September 9, 1950, countryman, living at Sunzhuang Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Gao Weihua, male, Han nationality, born on February 6, 1956, countryman, living at Yangjiao Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Xu Shutian, male, Han nationality, born on April 10, 1955, countryman, living at Qijiasi Village, Xinkaikou Town, Yueting County, Hebei Province. Plaintiff: Wang Guicheng, male, Han nationality, born on June 20, 1959, countryman, living at Qijiasi Village, Xinkaikou Town, Yueting County, Hebei Province. Plaintiff: Gao Jianfu, male, Han nationality, born on April 26, 1961, countryman, living at Yangjiao Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Lu Yuebo, male, Han nationality, born on June 24, 1946, countryman, living at Wangzhuangshang Village, Chengguan Town, Yueting County, Hebei Province. Plaintiff: Sun Youyi, male, Han nationality, born on August 5, 1949, countryman, living at Sunzhuang Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Han Yuming, male, Han nationality, born on August 18, 1957, countryman, living at Yangjiao Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Sun Yougang, male, Han nationality, born on June 17, 1960, countryman, living at Sunzhuang Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Gao Weichun, male, Han nationality, born on December 26, 1961, countryman, living at Yangjiao Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Gao Wei’an, male, Han nationality, born on December 20, 1968, countryman, living at Yangjiao Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Wang Guixiang, male, Han nationality, born on April 28, 1962, countryman, living at Qijiasi Village, Xinkaokou Town, Yueting County, Hebei Province. Plaintiff: Gao Jianliang, male, Han nationality, born on August 23, 1968, countryman, living at Yangjiao Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Xu Shucheng, male, Han nationality, born on June 5, 1962, countryman, living at Qijiasi Village, Xinkaikou Town, Yueting County, Hebei Province. Plaintiff: Gao Yinchun, male, Han nationality, born on August 7, 1950, countryman, living at Touyangjiao Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Gao Sheng, male, Han nationality, born on April 4, 1954, countryman, living at Yangjiao Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Wang Weihua, male, Han nationality, born on June 20, 1962, countryman, living at Qijiasi Village, Wangtan Town, Yueting County, Hebei Province. Plaintiff: Qi Liancheng, male, Han nationality, born on July 30, 1950, countryman, living at Qijiasi Village, Wangtan Town, Yueting County, Hebei Province. Authorized Deputy: Sun Youli, countryman, living at Sunzhang Village, Wangtan Town, Yueting County, Hebei Province. Authorized Attorney: Feng Xiuhua, attorney-in-law of Zhongzi Law Firm, Beijing. Authorized Deputy: Gao Weihua, countryman, living at Yangjiao Village, Wangtan Town, Yueting County, Hebei Province. Authorized Attorney: Sun Junbao, attorney-in-law of Zhongzi Law Firm, Beijing. Authorized Deputy: Xu Shutian, countryman, living at Qijiasi Village, Xinkaikou Town, Yueting County, Hebei Province. Authorized Attorney: Sun Junbao, attorney-in-law of Zhongzi Law Firm, Beijing. Authorized Deputy: Wang Guicheng, countryman, living at Qijiasi Village, Xinkaikou Town, Yueting County, Hebei Province. Authorized Attorney: Feng Xiuhua, attorney-in-law of Zhongzi Law Firm, Beijing. Authorized Deputy: Lu Yuebo, countryman, living at Wangzhuangshang Village, Chengguan Town, Yueting County, Hebei Province. Authorized Attorney: Xin Xiuming, attorney-in-law of Zhongzi Law Firm, Beijing. Common Authorized Attorney: Xia Jun, attorney-in-law of Zhongzi Law Firm, Beijing. Defendant: Qian’an First Paper Mill Address: Qian’an Town, Qian’an City, Hebei Province Defendant: Qian’an Painting & Calligraphy Paper Ltd. (original Qian’an Painting & Calligraphy Paper Factory) Address: Qian’an Town, Qian’an City, Hebei Province Legal Representative: Hua Zhanhua, factory director Authorized Attorney: Yan Changjiang, legal operator of Xinshiji Law Firm, Qian’an Defendant: Qian’an Ruyuan Paper Mill (original Qian’an Fourth Paper Mill Address: Qian’an Town, Qian’an City, Hebei Province Defendant: Qian’an Huafeng Paper Mill Address: Qian’an Town, Qian’an City, Hebei Province Legal Representative: Li Xiangting, factory director Authorized Attorney: Liu Jie, attorney-in-law of Minjian Law Firm, Qian’an Authorized Deputy: Hou Zhong, clerk of Qian’an Huafeng Paper Mill Defendant: Qian’an Qixin Paper Mill Address: Qian’an Town, Qian’an City, Hebei Province Defendant: Qian’an Youyi Chemical Plant Address: Qian’an Town, Qian’an City, Hebei Province Legal Representative: Guo Yurong, factory director Authorized Deputy: Li Changzhi, clerk of Qian’an Youyi Chemical Plant Defendant: Hebei Qian’an Chemistry Ltd. Address: Malanzhuang Town, Qian’an City, Hebei Province Legal Representative: Tian Shushan, general manager Authorized Attorney: Chen Rong, attorney-in-law of Minjian Law Firm, Qian’an Authorized Deputy: Dong Zhichang, clerk of Hebei Qian’an Chemistry Ltd. Defendant: Tangshan Jiluan Paper Ltd. Address: Xiangtang Town, Luan County, Hebei Province Legal Representative: Chen Shenglong, manager Authorized Attorney: Wang Cuilin, attorney-in-law of Tianyi Law Firm, Tangshan Authorized Deputy: Wang Qinyu, deputy manager Defendant: Hebei Huafeng Paper Co. Address: Fengle Street No. 12, Qian’an Town, Qian’an City, Hebei Province Legal Representative: Li Xiangting, manager This Court, after filing the cases of the controversy over the compensation of aquaculture loss that Sun Youli and other 17 peoples (plaintiff) v. Qian’an First Paper Mill (defendant, hereinafter referred to as First Paper), Qian’an Ruyuan Paper Mill (defendant, hereinafter referred to as Ruyuan Paper) Qian’an Huafeng Paper Mill (defendant, hereinafter referred to as Huafeng Paper), Qian’an Qixin Paper Mill (defendant, hereinafter referred to as Qixin Paper), Qian’an Youyi Chemical Plant (defendant, hereinafter referred to as Youyi Chemical Plant), Hebei Qian’an Chemistry Ltd. (defendant, hereinafter referred to as Chemistry Ltd.), Tangshan Jiluan Paper Ltd. (defendant, hereinafter referred to as Jiluan Ltd.), Qian’an Painting & Calligraphy Ltd. (defendant, hereinafter referred to as Painting & Calligraphy Ltd.), Hebei Huafeng Paper Co. (defendant, hereinafter referred to as Huafeng Paper Co.) on May 23, 2001, has duly organized a collegial panel and held a public trial on December 17, 2001. Sun Youli, Gao Weihua, Xu Shutian, Wang Guicheng, Lu Yuebo, the authorized deputies of the plaintiffs, Xia Jun, Feng Xiuhua, Sun Junbao, Xin Xiuming, the authorized attorneys of the plaintiffs, Liu Jie and Hou Zhong, the authorized deputies of the defendant Huafeng Paper Co., Yan Changjiang, the authorized deputy of the defendant Painting & Calligraphy Ltd., Wang Cuilin and Wang Qinyu, the authorized deputies of the defendant Jiluan Ltd., Cheng Jufa and Chen Bijuan, the appraisers of Fishery Environment Inspection Center, Department of Agricultureappeared (hereinafter referred to as Fishery Environment Inspection Center) appeared at the trial for the hearing of the case. The defendants First Paper, Ruyuan Paper, Qixin Paper, Youyi Chemical Plant, Chemistry Ltd., Huafeng Paper Co. were summoned, but did not appear at the trial. In the course of the trial, the defendant Qian’an Painting & Calligraphy Factory was written off and the newly established Qian’an Painting & Calligraphy Ltd. took its all credit and debt agreed by Industry and Commerce Department. This court notifies the Painting & Calligraphy Ltd. to attend the trial in the light of law. On March 21, 2002, this court held the second trial. Gao Weihua, Xu Shutian, Wang Guicheng, Lu Yuebo, the authorized deputies of the plaintiffs, Xia Jun, Feng Xiuhua, Sun Junbao, Xin Xiuming, the authorized attorneys of the plaintiffs, Wang Cuilin and Wang Qinyu, the authorized deputies of the defendant Jiluan Ltd., Chen Rong and Dong Zhichang, the authorized deputies of the defendant Chemistry Ltd., Cheng Jufa and Chen Bijuan, the appraisers of Fishery Environment Inspection Center, appeared at the trial. The defendants First Paper, Ruyuan Paper, Qixin Paper, Youyi Chemical Plant, Chemistry Ltd., Huafeng Paper Co. were summoned, but did not appear at the trial. The case has now come to a close. The plaintiffs allege: Since 1997, the plaintiffs opened and operated five seashell farms and one fish farm at the site where Luan River and Daqin River enter the sea along the Jinyingtan Outdoor Bathing Place to Erguoduan, Yueting County. The products were exported to Japan. In the first ten days of October, 2000, the industry sewage let out from First Paper, Painting & Calligraphy Ltd., Qixin Paper, Chemistry Ltd., Jiluan Paper Ltd., etc. into the sea area of Lu River and Daqin River, which resulted in the death of a great number of seashells and fishes and the numerous loss to the plaintiffs. Being inspected by Water Quality Inspection Center, the water quality of sewage let out by above defendants conforms to neither the state standard for sewage nor the water quality standard for fishery. It was concluded by experts that the pollutants let out by above defendants was the only reason to cause the death of seashells and fishes, and the loss arising from the serious environmental pollution was checked. The plaintiffs brought the litigation to the court and claimed to decide the defendants to stop letting out pollutants, eliminate the risk to aquaculture and compensate the loss of ￥30,000,000 in accordance with Law of the People’s Republic of China on Maritime Environmental Protection and Law of the People’s Republic of China on the Prevention and Control of Water Pollution. The plaintiffs changed the sum of compensation into the sum of ￥20,000,000 on the first trial. The defendant First Paper did not answer the litigation. The defendant Painting & Calligraphy Ltd. alleged on the court that it should not bear any liability for the plaintiffs’ loss because it had stopped producing since July of 2000 and did not let out sewage at all. At the same time, it doubted the plaintiff’s legal qualification for breeding aquatics. The defendant Ruyuan Paper did not answer the litigation. The defendant Huafeng Paper alleged on the court that it should not bear any liability for the plaintiffs’ loss because the sewage it let out did not consist of the molecules of heavy metal and conformed to the state standard for sewage. The defendant Qixin Paper did not answer the litigation. The defendant Youyi Chemical Plant alleged in written form that its leading products were not let out in general, especially after reconstructing the equipment of sewage. Its products had been confirmed to conform to relevant state standards by three authoritative organs. The defendant Chemistry Ltd. alleged on the court that it had established special department on environmental protection and equipped with advanced inspection equipments. The sewage it let out had conformed to state standard that was confirmed by the inspection in October of 2000 and was issued the certificate on letting out sewage. It should not bear any liability for the plaintiffs’ loss. The defendant Jiluan Ltd. alleged on the court that its sewage conformed to state standard that was confirmed by the inspection. It should not bear any liability for the plaintiffs’ loss. The defendant Huafeng Paper Ltd. did not answer the litigation. In the course of trial, the plaintiffs and the defendants mainly focus on the following issues: 1. Whether the plaintiffs are qualified to breed aquatics; 2. Whether the loss claimed by the plaintiffs are true and reasonable; 3. Whether the fact exists that the defendants let out pollutants into Luan River; 4. Whether the relation between the defendants’ sewage and the plaintiffs’ loss is causality. Both the plaintiffs and those defendants who appeared on the trials submitted their own evidences and cross-examined the evidences submitted by the other party. To those defendants who did not appear on the trials, this court regarded that they gave up their rights to submit and cross-examine the evidences on the court. 1. Whether the plaintiffs are qualified to breed aquatics. The plaintiffs submit following evidences in the course of first trial: (1)The agreement on opening the aquatics farms in shares signed by the 18 plaintiffs on November 21, 1997; ( 2)Gao Weihua’s four licenses on the use of state sea area filed as Guo-Hai-Zheng-Zi No. 990200250, No. 990200246, No. 990200243 and No. 990200251; (3)Sun Youli’s licenses on the use of state sea area filed as Guo-Hai-Zheng-Zi No. 990200242 and the contract for undertaking the beach signed by Sun Youli and Beach Exploitation Administration Office of Yueting County; (4)Lu Yuebo’s licenses on the use of state land filed as Guo-Yong-Tan-Zi No. 51 and the contract for undertaking the beach signed by Lu Yuebo and Beach Exploitation Administration Office of Yueting County; (5)The agreement signed by Lu Yuebo and Ocean Bureau of Yueting County on August 26, 1999; (6)The agreement on undertaking the sea-route for aquaculture signed by Gao Weihua and Irrigation Engineering Administration Office of Yueting County on March 15, 2000, and attestation issued by Irrigation Engineering Administration Office of Yueting Office. The plaintiffs submit following evidences in the course of second trial: (7)The documents on the functions and department setting of Ocean Bureau issued by Yueting County Government; (8)The attestation on the validity of Yueqi Seashell Farm issued by Ocean Bureau of Yueting County; (9)The attestation on the validity of aquaculture issued by Ocean Bureau of Yueting County; (10)The attestation of validity for Gao Weihua breeding in the sea-route issued by Aquatic Products Bureau of Yueting County; (11)The explanation submitted by Aquatic Products Bureau of Yueting County that Yueting County has never issued the license on aquaculture and the explanation about the functions of Ocean Bureau of Yueting County on issuing licenses. Those evidences mentioned above prove that the licenses on aquaculture and relevant contracts for five seashell farms and one fish farm that are operated by the plaintiffs are admitted by governments and they are legally qualified to aquaculture. The defendant Painting & Calligraphy Ltd. alleges that the plaintiffs are unqualified because they have no special licenses for aquaculture. The licenses on the use of state sea area submitted by the plaintiffs are not checked in 2000 and shall be void. Gao Weihua does not have the license for aquaculture though he has a contract. Lu Yuebo has no right to sign on the contract with Beach Exploitation Administration Office of Yueting County because one party of the contract is Yueqi Seashell Farm instead of Lu Yuebo. The defendant Huafeng Paper alleges that the plaintiffs violate the provisions of law to breed aquatics without obtaining the administrative permission. The plaintiffs shall have the licenses for aquaculture. The defendant Jiluan Ltd. alleges that the evidences are void due to the lack of validity. The area for breeding aquatics shall be determined by government by issuing valid certificates. The defendant Chemistry Ltd. alleges that the attestation issued by Irrigation Engineering Office is void because it is not entitled the function. All defendants appearing the trial do not demur other evidences. The court affirms all evidences that are not demurred. The court also affirms the validity of the licenses on the use of state sea area and state land because all these evidences are issued and admitted by local governments and the plaintiffs pay relevant charges on time. 2. Whether the loss claimed by the plaintiffs exists. The plaintiffs submit following evidences: (1) The 17 attestations that prove Shi Zhijin, Pan Guohua, Wang Jinji, Wang Yonggang and other 6 peoples sold the plaintiffs the fries from 1998 to April of 2000; (2) A statistics on the loss of fries; (3) The attestation issued by Fishery Administration Office of Aquatic Products of Yueting County on the charge to catch seashells; (4) The price attestation issued by Fishery Administration Office of Aquatic Products of Yueting County; (5) The report on investigating the pollution in the breeding areas involved and the statistics on the loss issued by Fishery Administration Bureau of Hebei Province and Aquatic Products Burea of Yueting County; Those evidences mentioned above prove the plaintiffs’ loss arising from the pollution and detailed sum. The defendants do not submit any evidence to rebut above evidences. The defendant Jiluan Ltd. alleges that the authenticity of the attestation for purchasing fries shall not be affirmed because there are neither agreements for purchasing fries nor relevant receipts. The defendant Chemistry Ltd. alleges that the evidences submitted by the plaintiffs cannot prove the fact of purchasing fries and lacks authenticity. Fishery Administration Office of Aquatic Products Bureau of Yueting County is unqualified to issue the price attestation which shall be issued by other relevant departments. The plaintiffs allege that the fact shall be considered synthetically whether to purchase fries. The attestations for purchasing fries are authentic and the number of fries has been affirmed in the investigation report issued by relevant departments. Since both parties of the transactions for purchasing fries are individuals who have no receipts, the defendants shall submit evidences to rebut if they demur. The attestation issued by Fishery Administration Office is authentic because Fishery Administration Office has relevant function. This court holds that the 17 attestations for purchasing fries issued by the plaintiffs tally with the substantive requirements of form of valid evidence and what they prove relates to this case. Since the defendants appearing on the trials fail to submit evidences to rebut, considering the 5th evidence, above attestations are authentic. Furthermore, this court affirms the evidence issued by Fishery Administration Office of Yueting County for the price of aquatic products because Fishery Administration Office is entitled to administer fishery. In order to confirm the plaintiffs’ loss reasonably, this court entrusts Fishery Environment Inspection Center to evaluate the loss. Both plaintiffs and defendants affirm the report on the court. The plaintiffs allege that, though the formula for evaluating the loss adopted in the report is the same with the fishery administration department, the rate of survival in the formula is only 25%, which is lower than 33% prescribed by Department of Agriculture. Moreover, the data issued by the fishery administration department that the charge for catching clams is ￥0.1-0.5 per half a kilogram shall be affirmed. No other demurs are claimed to the course and the objectivity of evaluation. The defendant Chemistry Ltd. alleges that, though the method to evaluate the loss is reasonable, there is no original data when counting the number of fries listed in the formula. The defendant Jiluan Ltd. do not demur above report. The appraisers hold that the rate of survival has decreased after the clams grow as big as 25 granules per kilogram when the pollution happens. It is reasonable to fix the rate of survival as 25% according to the practical experience. The charge for catching clams is also authentic by adopting the original data checked by Fishery Administration Bureau of Hebei Province. This court holds that Fishery Environment Inspection Center, being the first-level organ of investigation and appraisal appointed by Department of Agriculture, is qualified to evaluate in term of Regulations on Procedure for Investigating Polluted Fishery Water. The appraisers are professional and the procedure of investigation is legal. It is reasonable when adopting original data and the formula for evaluating the loss. In term of above regulation, the result of evaluation is objective and fair, and this court affirms the report. 3. Whether the fact exists that the defendants let out pollutants into Luan River. The plaintiffs submit following evidences: (1) The video evidence made by relevant organs who are entrusted by the plaintiffs in June of 2001; (2) The sketch map about the pollution in the water areas at Luan River and Xiaohezi River issued by investigation office; (3) Eight photos about the pollutants; (4) The qualification certificate of Water Quality Investigation Center and the report on the water quality; (5) The report on investigation issued by Fishery Administration Bureau of Hebei Province and Aquatic Products Bureau of Yueting County on February 7, 2001; (6) The report on investigation of another damage arising from polluting aquatics issued by Fishery Environment Inspection Center in April of 2001. Above evidences prove the existence of the fact that each defendant let out sewage that do not conform to state standard into Luan River continuously even after causing the loss. The defendant Painting & Calligraphy Ltd. submits the original certificate issued by Qian’an Economy & Trade Committee on October 10, 2001, in order to prove that the enterprise stopped producing from July of 2000 to January of 2001 due to the reform and cannot let out sewage. The defendant Huafeng Paper submits 12 documents issued by Qian’an Environment Protection Bureau and the certificate issued by Qian’an Environment Inspection Office in order to prove that there are no heavy metals exists in the sewage that it let out. The defendant Youyi Chemical Plant submits the certificate issued by Qian’an Environment Inspection Office, the certificate issued by the Office of Public Health of Hebei Province on its products, the report issued by the Office of Epidemic Prevention of Hebei Province on its products and the report issued by the Center of Illness Prevention of Tianjing City on its products in the course of second trial in order to prove that its product conforms to the state standard and is not harmful to the plaintiffs’ aquatic products. The defendant Jiluan Ltd. submits the reports about the investigation result issued by the Office of Environment Inspection of Luan County in August of 2000, on September 13, 2000, on October 19, 2000, on November 23, 2000, and on December 15, 2000, in order to prove its sewage conforms to state standard. The defendant Chemistry Ltd. submits the license for letting sewage issued by Environment Protection Bureau of Hebei Province and the report of investigation issued on October 10, 2000, in order to prove its sewage conforms to state standard. This court, in the light of the plaintiffs’ requisition, obtains following evidences from Environment Protection Bureau of Tangshan City and Qian’an Notarization Bureau: (1) The standard for the paper mills to let out sewage; (2) The inspection data about the pollutants let out by paper mills and the surface water in Qian’an City in 2000; (3) The inspection data about the pollutants recorded by Environment Protection Bureau from June of 2000 to June 2001; (4) The record that Qian’an Environment Protection Bureau punishes First Paper and other five defendants from June of 2000 to June of 2001; ( 5) The contract for transferring the property right of Qian’an Huafeng Paper Mill. Following written notes recorded in the course of trials are announced on the court: (1) The written note for Sun Zhiqiang, deputy director of Water Quality Inspection Center, on February 28, 2002; (2) The written note for Cai Youhua, director of Qian’an Economy & Trade Committee, on January 10, 2002; (3) The written note for Qi Yuxiang, deputy director of Yueting Aquatic Products Bureau and member of Investigation Panel, on Januaru 8, 2002; (4) The written note for Song Wenxiang, deputy director of Yueting Environment Protection Bureau, on January 8, 2002; (5) The written note for Zhang Guofu, deputy head of Yueting County, on January 8, 2002; (6) The written note for Li Fumin, factory director of the defendant Ruyuan Paper, on January 10, 2002; (7) The written note for Cai Youhua, director of Qian’an Economy & Trade Committee, on January 10, 2002; (8) The written note for Zhuang Xuegong, general engineer of the defendant Huafeng Paper, on January 9, 2002; (9) The written note for Wei Wenna, general director of Tangshan Environment Protection Bureau, on January 11, 2002; (10) The written note for Cai Youhua, director of Qian’an Economy & Trade Committee, on January 10, 2002; (11) The written note for Li Meng, deputy director of Environment Branch, Fishery Administration Bureau of Hebei Province, on January 10, 2002. After cross-examination, both plaintiffs and defendants do not demur at the evidences and written notes. The plaintiffs hold that it can be proved that the certificate issued by Qian’an Economy & Trade Committee is false that proves the defendant Painting & Calligraphy Ltd. do not let out sewage when reforming in the light of the notice for stopping production issued by Qian’an government and the written notes. The evidences submitted by the defendant Huafeng Paper prove it lets out pollutants during the period involved in this case. The evidences submitted by Chemical Plant are not sufficient to prove that it do not let out pollutants. Since Water Quality Inspection Center issues the report to prove its sewage exceeds state standard, it must submit evidences to prove no pollutants exist in its sewage. The principal part on the evidence submitted by the defendant Jiluan Ltd. is not Jiluan Ltd. and the result of the evidence indicates the pollutants in its sewage exceed state standard, which tallies with the inspection data obtained by this court. The license submitted by the defendant Chemistry Ltd. shall not be affirmed because it has expired and is not original. The time of the inspection report submitted by the defendant Chemistry Ltd. is October 10, 2000, which shall not prove the sewage it let out before the pollution has conformed to state standard. In the course of second trial, the defendant Chemistry Ltd. submits the certificate issued by Qian’an Environment Inspection Office, the certificate issued by Tangshan Environment Protection Bureau and the certificate issued by Qian’an Sea-route Administration Office in order to prove following facts: the report issued by Hebei Pollution Inspection Office is concluded according to the result of Qian’an Environment Inspection Office samples on September 25, 2000; Tangshan Environment Protection Bureau confirms its sewage to conform to state standard; Almost no water exists in the sea-route upwards Zhangguanying, Luan River, and it is impossible for the defendant to let out pollutants into the location involved in this case. The plaintiffs do not demur at the authenticity of above evidences. However, they hold that the certificate issued by Qian’an Environment Inspection Office cannot prove the pollutants let out by the defendant Chemistry Ltd. always conforms to state standard, and the certificate issued by Qian’an Sea-route Administration Office cannot prove the pollutants let out by the defendant Chemistry Ltd. does not float toward lower reaches of the river. This court holds that the fact shall be affirmed that the defendants First Paper, Painting & Calligraphy Ltd., Huafeng Paper, Huafeng Paper Ltd., Ruyuan Paper and Jiluan Ltd. let out sewage which does not conform to state standard during the period involved in this case in term of the evidences and written notes involved in this case. Therefore, this court affirms the validity of above evidences and written notes that both plaintiffs and defendants do not demur. The court also holds that the video data and photos submitted by the plaintiffs are objective and reliable. The report issued by Water Quality Inspection Center that is objective and legal shall be affirmed as the direct evidence for the water quality of sewage let out by the defendants when sampling. The reports issued by Fishery Administration Bureau of Hebei Province and Aquatic Products Bureau of Yueting County shall be affirmed as the evidence for the pollution. The report issued by Fishery Inspection Office in April of 2001 relates to this case and proves that six defendants still let out pollutants. The documents issued by Qian’an Environment Protection Bureau cannot indicate the pollutants let out by Huafeng Paper conforms to state standard. However, the inspection record issued by Tangshan Environment Protection Bureau indicates that Huafeng Paper let out pollutants for several times. Therefore, this court does not affirm 12 documents issued by Qian’an Environment Protection Bureau. This court affirms the certificate issued by Qian’an Environment Inspection Office because it can prove the pollutants let out by Huafeng Paper. The report issued by Water Quality Inspection Center proves that the sewage let out the defendant Chemical Plant exceeds state standard. Therefore, this court does not affirm the evidences issued by Qian’an Environment Inspection Office. Other evidences submitted by the defendant Chemical Plant have nothing to do with this case and shall not be adopted. Although the certificate submitted by the defendant Painting & Calligraphy Ltd. is issued by Qian’an Economy & Trade Committee, the report issued by Tangshan Environment Protection Bureau and the written notes for Cai Youhua, director of Qina’an Economy & Trade Committee prove that the defendant do not stop productions at all. Therefore, this court do no affirm the evidences submitted by the defendant because of the lack of authenticity. The evidences submitted by the defendant Jiluan Ltd. fail to prove its sewage conforms to state standard. Nevertheless, the inspection data issued by Tangshan Environment Protection Bureau indicate the sewage let out by Jiluan Ltd. exceeds state standard for several times. In conclusion, the court does not affirm the evidences submitted by the defendant. Since it is written on the license submitted by the defendant Chemistry Ltd. that “This license shall be checked every year, and would be cancelled without the record of annual check” and there is only the record of annual checked in 1996, the evidence shall not be affirmed as valid evidence. The evidences issued respectively by Qian’an Environment Inspection Office, Hebei Pollutants Inspection Center and Tangshan Environment Protection Bureau are authentic and shall be affirmed. The certificate issued by Qian’an Sea-route Administration Office cannot prove that the sewage let out by the defendant does not run into the location involved in this case and shall not be affirmed. 4. Whether the relation between the defendants’ sewage and the plaintiffs’ loss is causality. The plaintiffs prove their loss are caused by the pollutants let out by all defendants in the light of all evidences submitted in the course of second trial and the written notes obtained by this court. The pollutants let out by the defendants re the direct reason that results in the plaintiffs’ loss. Nine defendants do not submit evidences to rebut above claim. The defendant Jiluan Ltd. alleges that the sewage let out by the defendant conforms to state standard in term of Article 29 and Article 90 of Law on Ocean Environment Protection. To let out sewage does not certainly result in the pollution. The defendant Chemistry Ltd. alleges that the report issued by Hebei Pollutants Inspection Center proves the sewage let out by the defendant conforms to state standard. The license also can prove that it is licensed for the defendant to let out sewage. This court holds that the defendants shall bear the burden of proof in the case on the loss of pollution. The plaintiffs have submitted primary evidences for the causality between the sewage and the loss. The defendants shall submit evidences to prove that no causality exists between the sewage and the loss in accordance with the prescribed exception clauses. The evidences submitted by the defendants Jiluan Ltd. and Chemistry Ltd. fail to deny above causality. Other evidences that have nothing to do with the exception clauses shall be affirmed. This court entrusts Fishery Environment Inspection Center to evaluate for the pollution involved in this case in order to confirm the reason accurately. The appraisers, Chen Bijuan and Chen Jufa, appear on the trials and read out the report for evaluation in public. Both plaintiffs and defendants cross-examine the report. The plaintiffs hold the report shall be affirmed because its bases for evaluation are reliable, its procedures are legal and its conclusion is fair. The plaintiffs do not demur at the report. The defendant Painting & Calligraphy Ltd. holds that the appraisers shall have the conclusion by taking the sample when the pollution happens. Thus, it is not authentic for the appraisers to take the sample in May of 2001. It claims not to affirm the conclusion in the report that the defendant let out pollutants that cause the plaintiffs’ loss. The defendant Huafeng Paper holds that the report is void because its procedure does not tally with the provisions of law. The defendant Jiluan Ltd. holds that the report cannot be the evidence for deciding the case because the report lacks validity and its conclusion is incorrect. The defendant Chemistry Ltd. holds that the details in the report do not tally with the facts. The inspection report issued by Hebei Environment Inspection Center has proved that the sewage let out by the defendant conforms to state standard. The appraisers hold that some pollutants, such as CODcr and so on, will influence the survival of aquatics. In term of the data inspected by Water Quality Inspection Center, above pollutants exceed state standards greatly. It is sure that the reason arising the loss is the serious pollution instead of technical lapsus. The basic principle to confirm the pollution source is the consistency between the pollutants resulting in the loss and the pollutants existing in the sewage. It has been affirmed that the sewage let out the defendants can run into the water areas through different sea-routes. The procedures are legal and it is reasonable to conclude that the sewage let out by the defendant Painting & Calligraphy Ltd. causes the pollution because no evidences prove that the defendant has not let out sewage or its sewage does not run into Luan River. This court holds that Fishery Environment Inspection Office is qualified to investigate the fishery pollution and its staffs are professional. The bases for investigation are reliable and the methods of investigation and relevant procedures are objective. Considering the evidences submitted by plaintiffs and defendants, together with the evidences obtained by this court, the conclusion of the report shall be affirmed, excluding the part that the sewage let out by the defendant Chemistry Ltd. does not conform to state standard and has nothing to with the plaintiffs’ loss. In sum, following facts are affirmed: On November 12, 1997, the eighteen plaintiffs Sun Youli, Gao Weihua, Xu Shutian, Wang Guicheng, Gao Jianfu, Lu Yuebo, Sun Youyi, Han Yuming, Sun Yougang, Gao Weichun, Gao Wei’an, Wang Guixiang, Gao Jianliang, Xu Shucheng, Gao Yinchun, Gao Sheng, Wang Weihua and Qi Liancheng signed an agreement for operating six aquatic farms by shares. It is stipulated that the location and area are confirmed in the light of the certificates on the use of beach and land issued by government and relevant contracts. The plaintiff Gao Weihua has four certificates on the use of state sea area filed as Guo-Hi-Zheng No.990200250, No.990200246, No.990200243 and No.990200251. The plaintiff Sun Youli has the certificates on the use of state sea area filed as Guo-Hi-Zheng No.990200242. The plaintiff Lu Yuebo has the certificates on the use of state land filed as Guo-Yong-Tan-Zi No.51. Those plaintiffs who have above certificates signed contracts or agreements with relevant departments. The qualification of above six aquatic farms has been affirmed by Ocean Bureau and Aquatic Products Bureau of Yueting County. The plaintiffs have paid the charges for using relevant beach or land. The area of the seashell farms is 1,882 acres and the area of the fish farm is 300 acres, which have been affirmed by Aquatic Products Bureau of Yueting County and Fishery Administration Bureau of Hebei Province. In October of 2000, serious pollution happened in the seashell farms and fish farms. A great number of seashells and fishes died, which resulted in enormous loss to the plaintiffs. The polluted area was 6,882 acres. Aquatic Products Bureau of Yueting County, Ocean Bureau of Yueting County, Environment Protection Bureau of Yueting Bureau, Fishery Administration Bureau of Hebei Province and Tangshan Environment Protection Bureau had inspected the polluted farms. Water Quality Inspection Center sampled at 14 sites, including the water area for breeding aquatics and the sites of some defendants, and issued a report on which the inspected items including CODcr, PH (mg/1), dissolved oxygen, volatilizable hydroxybenzene, suspending materials and heavy metals. The results are listed as following: the mouth for letting out sewage at Shenzhuang, CODcr1433.30 and PH7.56; Chemical Plant, CODcr138.62, PH1.45 and volatilizable hydroxybenzene 0.005；Ruyuan Paper, CODcr394.34, PH8.67 and volatilizable hydroxybenzene 0.005；Chemistry Ltd., CODcr198.78, PH7.58 and volatilizable hydroxybenzene 0.006；Jiluan Ltd., CODcr1,708.00, PH7.44 and volatilizable hydroxybenzene 2.790；First Paper CODcr1,787, PH6.75 and volatilizable hydroxybenzene 3.57；Red House Sluice, suspending materials 316.3 and CODcr1,627.65；Erpaigan Sluice, suspending materials 538, CODcr6.45 and PH7.43；Erpaigan Aquatic Farm, CODcr1,176.93 and PH6.93；Huafeng Paper and Huafeng Ltd., CODcr2,024, PH6.76 and volatilizable hydroxybenzene 1.81. The suspending materials in all aquatic farms exceed state standard. From January 4 to February 7, 2001, an investigation panel was established, including five experts on aquatic products and staffs of fishery departments of Yueting County. It was concluded in the inspection report that the pollution source comes from those paper mills and chemical plants lying Qian’an City. In the light of the report issued by Water Quality Inspection Center, the sewage let out by the defendants exceeded state standard and run into Luan River directly, which caused the death of seashells and fishes in great number, and the leading pollutants were organic pollutants. Compared with state standards for the sewage, the water quality of sea and the water quality of fishery, the pollutants existing in the eight aquatic farms and at the sites where the defendants lie exceeded state standards greatly. However, the conditions and method for breeding aquatics in each aquatic farm tallied with the rules of aquaculture. Therefore, it can be concluded that the death of seashells and fishes was caused by the pollutants let out by the defendants which exceeded state standard greatly. During the period involved in this case, the defendants Huafeng Paper, First Paper, Painting & Calligraphy Ltd., Qixin Paper, Ruyuan Paper and Jiluan Paper were manufacturing and letting out sewage. In the light of the data inspected by Tangshan Environment Protection Bureau, from June of 2000 to June of 2001, the pollutants in the sewage let out by above defendants exceeded state standards. Tangshan Environment Protection Bureau punished Huafeng Paper for three times, respectively on August 31, September 13, and December 27, 2000; punished Painting & Calligraphy Ltd. for two times, respectively on August 31 and September 13, 2000; punished Ruyuan Paper for two times, respectively on March 10 and March 24, 2000; punished Qixin Paper for two times, respectively on October 15 and October 23, 2000; punished First Paper for four times, respectively on October 15, October 23, November 13 and December 17, 2000. It was written in the report on the pollution in Luan River that “The water in Luan River almost consists of industry sewage and living sewage because its own character and the current standard for enterprises letting out sewage, which results in serious conflict between the water quality of Luan River and the need for water in the range of lower reaches of Luan River. According to the original plan, the water quality in lower reaches shall be conform the five-sort standard for surface water in which CODcr is 40mg/1, the standard for irrigating fields is 300mg/1 to dry lands and 200mg/1 to wet lands. However, the water quality cannot conform to above standards after enterprises let out sewage into Luan River, which does not meet the requirement for breeding aquaculture.” In addition, it is written in the report on the pollution in Luan River filed as Tang-Huan-Fa-2001-153 issued by Tangshan Environment Protection Bureau on November 2, 2001, that “It is the five paper mills in Qian’an City and one paper mill in Luan County who let out 90 percent of pollutants in Luan River, which makes it impossible to conform to state standards” and “CODcr consists of 90 percent of the total sewage and is the leading source of pollution”. It is stated about the situation of six paper mills in above report that “Huafeng Paper has eliminated the manufacture line at the end of June; First Paper is approved to manufacture at the end of September; the sewage let out by Painting & Calligraphy Ltd. still conforms to state standards though the project for processing the sewage in October of 2000; Ruyuan Paper is reconstructing relevant equipments; Jiluan Ltd. did not conform to state standards for two times when being inspected in May of 2001 and has been commanded to stop production again now.” It is also pointed out in above report that Painting & Calligraphy Ltd. deceived. Following facts are also affirmed: The pollutants in the sewage let out by the defendant Chemical Plant include PH1.45, CODcr138.62 and volatilizable hydroxybenzene0.005. Being sampled by Qian’an Environment Inspection Office on September 25, 2000, and inspected by Hebei Environment Inspection Center, the sewage let out by Chemistry Ltd. includes CODcr1,115.6 tons per year and is proved to conform to state standard by Tangshan Environment Protection Bureau. The defendant Huafeng Paper Ltd. let out sewage before the pollution. In the course of trials, the name of Qian’an Fourth Paper Mill had been altered into Qian’an Ruyuan Paper Mill approved by Qian’an Industry and Commerce Bureau on November 23, 2001. The legal representative Huang Zhanhua and other 27 peoples purchased all assets of Qian’an Painting & Calligraphy Factory that was written off on November 29, 2001. On December 7, 2001, Qian’an Industry & Commerce Bureau approved the establishment of Painting & Calligraphy Ltd. who bears all original credits and debts. This court entrusts Fishery Environment Inspection Center who is qualified to investigate the pollution to investigate the pollution involved in this case. In the light of the report on pollution at the mouth where Luan River and Daqing River run into the sea issued by panel organized by Hebei Fishery Administration Bureau and Aquatic Products Bureau of Yueting County and the report and relevant data issued by Water Quality Inspection Center in May of 2001, the appraisers investigate the reason for the death of seashells and fishes. They affirm the conclusion made by above panel and the fact that it is the sewage let out by the defendants that causes the pollution. In accordance with the regulations on sewage filed as GB8978-1996, the sewage let out in the water area for breeding aquatics shall conform to the first-level standards, among which CODcr is 100mg/1, volatilizable hydroxybenzene is 0.5mg/l, PH is 6~9, and suspending materials is 70mg/1. Compared with above standards, the value of CODcr exceeds 14.3 times at the site of Shengzhuang; Chemical Plant, the value of PH does not conform to above standard, and the value of CODcr exceeds 1.4 times; Ruyuan Paper, the value of CODcr exceeds 3.5 times; Huafeng Paper and Huafeng Ltd., the value of CODcr exceeds 19 times and the value of volatilizable hydroxybenzene exceeds 2.5 times; First Paper, the value of CODcr exceeds 17 times and the value of volatilizable hydroxybenzene exceeds 6 times; Chemistry Ltd., the value of CODcr exceeds 2.0 times; Jiluan Ltd., the value of CODcr exceeds 16 times and the value of volatilizable hydroxybenzene exceeds 5 times; Red House Sluice, the value of CODcr exceeds 16.3 times and the suspending materials exceeds 4.5 times; Erpaigan Sluice, the value of CODcr exceeds 16 times and the suspending materials exceeds 4.2 times; Erpaigan Seashell Farm, the value of CODcr exceeds 11.8 times. In accordance with above regulation, the suspending materials in the water areas for breeding aquatics shall not exceed 10mg/l and the suspending materials in the coastal water areas shall be below 20mg/l. Compared with above values, the suspending materials in the seashell farms at the mouth where Xiaohezi River and Daqing River run into sea exceed 2.5 to 8.7 times. In addition, the result shows that the values of heavy metals (such as Cu, Zn, Pb, Cd, Hg, Cr, etc.) in the samples are normal, which indicates that the water areas for breeding aquatics are not polluted by heavy metals. The final conclusion of the report is: The conditions and methods for breeding aquatics in the seashell farms and fish farms involved in this case tally with the rules of aquaculture. Moreover, the seashells living in the farms nearby grow normally during the period the pollution happens. It can be concluded that it is the sewage let out by the defendants causes the pollution, which results in the death of seashells and fishes in great number in the aquatic farms of the plaintiffs, because the pollutants in relevant water areas exceed the prescribed first-level standards. In sum, the sewage let out by the paper mills and chemical plants along the Luan River, which does not conform to state standards, is the direct reason for the death of seashells and fishes in the water areas at the mouth where Daqing River, Xinchao River, Xiaohezi River and Chang River run into sea. In term of the regulations prescribed in Regulations on Procedures for Investigating the Pollution in the Water Areas for Fishery issued by Department of Agriculture, the appraisers evaluate the plaintiffs’ loss arising from the pollution according to the method for counting the loss statistically prescribed in Regulations on Method of Counting the Loss Arising From Pollution. The conclusions are: the number of damaged clams is 1,059,023 kilograms and relevant sum of loss is ￥13,458,800; the number of damaged fishes is 20,010 kilograms and relevant sum of loss is ￥20,090,000. The sum of loss in total is ￥13,659,700. According to Article 11 of Law of the People’s Republic of China on Fishery, it is necessary for individuals to have the license issued by local county governments in order to breed aquatics in the water areas or beaches owned by the whole people, and the water areas or beaches owned by the collectives or owned by the whole people and used by agriculturally economic organs could be undertaken by individuals or the collectives for breeding aquatics. In this case, the reason that the plaintiffs do not have the prescribed licenses is because the government of Yueting County has not issued relevant licenses till now. However, the plaintiffs have the licenses on the use of state sea areas and the licenses on the use of state lands issued and affirmed by relevant departments. Moreover, the contracts also are valid to prove the fact that the plaintiffs are qualified for breed aquatics. The defendants’ claims lack sufficient evidences and shall not be supported. The plaintiffs report the fact as soon as the pollution happens, and the panel organized by Aquatic Products Bureau of Yueting County and Hebei Fishery Administration Bureau investigates and evaluates the plaintiffs’ loss. It is affirmed that the loss exists according to the investigation reports and relevant evidences. Fishery Environment Inspection Office, being qualified to investigate the fishery pollution and its staffs are professional. The bases for investigation are reliable and the methods of investigation and relevant procedures are objective. Therefore, its report shall be affirmed as the basis to count the plaintiffs’ loss. In term of the report issued by Water Quality Inspection Center and the original data issued by Tangshan Environment Protection Bureau, together the evidences obtained by this court, the fact can be affirmed that all defendants has let out industry sewage into Luan River before the pollution happens and there are a number of pollutants in the sewage. Among the defendants, First Paper, Huafeng Paper, Huafeng Paper Ltd., Painting & Calligraphy Ltd, Ruyuan Paper, Qixin Paper, Chemical Plant and Jiluan Ltd. let out the sewage that exceeds state standard. Only the sewage let out by Chemistry Ltd. conforms to state standard according to the attestation issued by Qian’an Environment Inspection Office, Hebei Pollution Inspection Office and Tangshan Environment Protection Bureau. Being a controversy over the compensation for aquaculture loss, the plaintiffs has submitted sufficient evidences to prove the fact that the defendants let out pollutants, the plaintiffs’ loss arising from the pollution and the causality between the defendants’ sewage and the plaintiffs’ loss. Nine defendants shall bear the burden of proof for the exception clauses and the fact that above causality does not exist. In term of Law of the People’s Republic of China on Environmental Protection and Law of the People’s Republic of China on Maritime Environmental Protection, the defendants shall be exempted to bear the liability only if the environmental pollution or damage is caused by natural disaster or the fault of the third party or the victim itself. In this case, all evidences submitted by the defendants fail to prove the situations mentioned above. Furthermore, no evidenced submitted by the defendants prove that the sewage they let out runs into the water areas involved in this case or prove that the pollutants in the sewage would not result in the death of aquatic products. Although the sewage let out by the defendant Chemistry Ltd. conforms to state standard, it does not indicate that the sewage would not cause the pollution. The sewage standards prescribed by state are only the bases to decide whether relevant charges shall be collected rather than deciding whether to bear the liability for civil compensations. The fact that the sewage let out by Chemistry Ltd. conforms to state standards merely indicates that it shall not be punished in term of Administrative Law. It is prescribed in Article 41 of Law of the People’s Republic of China on Environmental Protection: The party who pollutes the environment is obligate to eliminate the pollution and compensate the parties who surfer the loss. The evidences submitted by the defendant Chemistry Ltd. cannot prove that the sewage it let out would not run into the water areas for breeding aquatics, that is, the evidences cannot prove that no causality exists between its sewage and the plaintiffs’ loss. Thus, Chemistry Ltd. shall bear the civil liability for compensating the plaintiffs’ loss. The defendant’s claim that it shall not bear any liability cannot be supported. Since the pollutants in the sewage let out by nine defendants which can cause the death of aquatic products are possible to run into the water areas for breeding aquatics, together with the report issued by Fishery Environment Inspection Office, it can be concluded that the pollutants in the sewage let out by the defendants are the direct reason for the death of aquatic products, and direct and certain causality exists between the defendants’ sewage and the plaintiffs’ loss. In sum, the 18 plaintiffs are qualified to breeding aquatics and it is true that they surfer loss arising from the pollution. Nine defendants let out pollutants before the pollution happens. The causality exists between the plaintiffs’ loss and the defendants’ sewage. The defendants infringe the legal rights and interests of the plaintiffs, which violates the laws. Nine defendants shall bear the joint and several liability for the plaintiffs’ loss. Considering the sum of loss claimed by the plaintiffs, this court confirms the sum as ￥13,659,700 and the sum exceeding the former shall not be supported. This Court hereby decides as follow pursuant to Article 130 of Civil Procedure Law of the People’s Republic of China, Clause 2 and Clause 3 of Article 117, Article 124, Article 130 of General Principles of Civil Law of the People’s Republic of China, Clause 1 of Article 41 of Law of the People’s Republic of China on Environmental Protection, and Clause 1 of Article 90 of Law of the People’s Republic of China on Maritime Environmental Protection: 1. The defendants First Paper, Painting & Calligraphy Ltd., Ruyuan Paper, Huafeng Paper, Qixin Paper, Chemical Plant, Chemistry Ltd., Jiluan Ltd. and Huafeng Paper Ltd. shall bear the joint and several liability for compensating the plaintiffs in the sum of ￥13,458,800 for the loss of clams and the sum of ￥200,900 for the loss of fish, in total ￥13,659,700. 2. To command the defendants First Paper, Painting & Calligraphy Ltd., Ruyuan Paper, Huafeng Paper, Qixin Paper, Chemical Plant, Chemistry Ltd., Jiluan Ltd. and Huafeng Paper Ltd. to stop infringement at once, not to let out sewage into sea, and to eliminate the risk of polluting the plaintiffs’ water areas continuously. 3. The plaintiffs’ other claims shall not be supported. Nine defendants shall pay above damages to the plaintiffs within 10 days after the judgement becoming effective. Otherwise, the defendants shall be fined in accordance with Article 232 of Civil Procedure Law of the People’s Republic of China. The cost of this case is ￥160,010 and the charge for evaluation is ￥10,000, in total￥170,010. The plaintiffs shall bear the sum of ￥81,701.5 for the cost. The defendants First Paper, Painting & Calligraphy Ltd., Ruyuan Paper, Huafeng Paper, Qixin Paper, Chemical Plant, Chemistry Ltd., Jiluan Ltd. and Huafeng Paper Ltd. shall bear the sum of ￥88,308.5 jointly, including a part of cost and the charge for evaluation. If any party refuses to accept this judgement, it may submit its appeal petition to this court within 15 days after service of this judgement, together with 20 duplicated copies, and the appeal shall be filed with the Higher People’s Court of Tianjin. The appeal fee of ￥160,010 shall be submitted in advance within 7 days since submitting the appeal petition (the account: New Technology Industry District Branch, China Agriculture Bank, the number of account is 394-9887000390), otherwise it would be regarded as withdrawing the appeal automatically. Presiding Judge: Jian Yanjin Deputy Judge: Chen Shunping Deputy Judge: Xu Fubing Date: April 12, 2002 Court Clerk : Li Zhen

Defendant-Appellant: Zhuhai Yufeng House Property Ltd. Address: Xinshi Uptown 2nd Floor, Yuehua Road, Gongbei, Zhuhai City, Guangdong Province. Legal Representative: Jian Yuqiang, general manager Authorized Deputy: Wu Lizhong, deputy general manager Authorized Attorney: Yang Zi, professor of Law College, Beijing Univesity Plaintiff-Appellee: Guangdong Branch, China Bank Address: Fengxi Road No. 197, Guangzhou City, Guangdong Province Responsible Person: Tian Xiaoren, president of Guangdong Branch Authorized Deputy: Wu Zexuan, clerk of Guangdong Branch Authorized Attorney: Yi Minshen, attorney-in-law of Jinpeng Law Firm, Guangzhou Defendant in original instance: Guanman Development Ltd. Address: Room 1705, Hongkong Business Center, West Gannuo Avenue 186-191, Hongkong Special Administrative Region. Legal Representative: Jian Yuqiang, president Zhuhai House Property Ltd. (appellant), refusing to accept as final the civil cases judgement of Higher People’s Court of Guangdong for a controversy over a loan contract, which is filed as 1997-Yue-Jing-Er-Chu-Zi-5, has made an appeal to this Court. Pursuant to relevant laws this Court has organized a collegial panel, including the presiding judge Li Jian, the judge Wang Yun and the deputy judge Chen Jizhong, and held a trial. Gao Xiaoli is the court clerk. The case has now come to a close. The following facts have been confirmed: On February 27, 1993, Guangdong Branch of China Bank (hereinafter referred to as Guangdong Branch) and Zhuhai Yufeng House Property Ltd. (hereinafter referred to as Yufeng Ltd.) reached a mortgage loan contract. It was stipulated that: Guangdong Branch provides a loan of $20,000,000 for one-year term at the interest rate of 4.5% (counted in term of floating interest rate and paid per half-year), and the interest arising from paying in delay is counted in term of the rate of compound interest; Yufeng Ltd. guarantee above loan by mortgaging the right to the use of 19,111-square-meter land lying the west side of Yingbin Avenue, Gongbei, Zhuhai City, together with the constructions built on the land; Yufeng Ltd. is forbidden to lease, convey, impawn, auction, remortgage or deal with the estate under mortgage with any other transactions, and the constructions built on the land shall be dealt with unconditionally at the same time when dealing with the estate under mortgage because the latter is land, and the profit of selling the merchantable houses shall be used to pay off the principal and relevant interest of loan prior after excluded the cost for building those houses; Guangdong Branch is entitled to collect the interest of loan at the rate of 20% to 50% or sell off the estate under mortgage if Yufeng Ltd. breaches the contract in order to pay off the principal and relevant interest. Then, two parties registered for the mortgage at Land and Resources Bureau of Zhuhai and Yufeng Ltd. handed the original certificate on the right to the use of state land to Guangdong Branch. On March 2, Guangdong Branch paid $20,000,000 to Yufeng Ltd. in accordance with the mortgage loan contract. Yufeng Ltd. requested to extend the term of loan two times when the term is to expire and both parties signed on the contract for extending the term of loan, on which the term of loan is extended to November 30, 1996. The extension of the loan was registered, too. On November 27, 1993, Yufeng Ltd. loaned a sum of $5,000,000 from Guangdong Branch and took the estate under mortgage recorded in the former loan contract as the estate under mortgage. Yufeng Ltd. and Guangdong Branch signed another mortgage loan contract, on which it was stipulated: the term of loan is two years and the annually fixed interest shall be counted at the rate of 6% from the date of signing the contract; the interest for paying in delay is counted in term of compound interest rate; it must be agreed by Guangdong Branch for Yufeng Ltd. to sell the estate under mortgage, i.e. the 3.73-square-meter land lying at West Mingzhu Road, Qianshan, Zhuhai City, before paying off the sum recorded on the loan contract; otherwise, more interest of 20% to 50% shall be collected for the breach. Then, Guangdong Branch deposited the loan of $5,000,000 into the appointed account of Yufeng Ltd. in the light of Notification on Drawing issued by Yufeng Ltd. On January 30, 1994, Yufeng Ltd. loaned a sum of $2,000,000 and still took the 19,111-square-meter land and the constructions built on the land as the estate under mortgage. In the mortgage loan contract reached by Yufeng Ltd. and Guangdong Branch, it was stipulated: the term of loan is three months and the fixed interest is counted at the rate of 10%; the interest shall be counted in term of compound interest in case the loan is paid in delay. According to the requisition of Yufeng Ltd., two parties signed the extension contract for above mortgage loan on June 20, 1996, in order to extend the term of loan to November 30, 1996. On September 12, 1994, Yufeng Ltd. applied a loan in foreign exchange from Guangdong Branch and still guarantee with the estate under mortgage that is same with the former contracts. In Loan Contract of Foreign Capital, two parties stipulated: Guangdong Branch loans $1,071,405.34 for three times to Yufeng Ltd. with the term of one year; the interest is counted at the rate of 6-month floating interest, beginning from 8.775%; Guangdong Branch is entitled to collect the fine interest at the rate of 20% to 50% for paying in delay. Then, Guangdong Branch paid the stipulated loan to Yufeng Ltd. on December 22, on December 28 and on January 5, 1994, respectively. Except for the sum of $460,000 paid off on September 1, 1993, the sum of $817,500 paid off on September 1, 1994, the sum of $151,111.11 paid off on October 30, 1995, which are $1,428,611.11 in total, the residual sum of loan has not been paid off till now. The fact is also affirmed: On September 1, 1993, Zhuhai Yi’an Development Company (the associated company to Yufeng Ltd., hereinafter referred to as Yi’an Company) issued a receipt to Foushan Jinda Exploitation Industry Company (the enterprise run by Guangdong Branch, hereinafter referred to as Jinda Company), on which the former confirmed to have received the capital of ￥10,000,000. On December 24, 1993, Yufeng Ltd. issued a guaranty to Guangdong Branch, on which it was said that Yufeng Ltd. loaned a sum of ￥19,000,000 from Guangdong Branch in order to pay the sum of money for the project “YUHUAYUAN” by mortgaging above project and the project of “YUHEQINGJIN” lying at Qianshan, Zhuhai City, the existing 1,500-square-meter building and the 1,600-square-meter house property of “YUYUAN JIUJIA”, and promised to pay off the loan within 3 months. Nevertheless, Yufeng Ltd. and Guangdong Branch did not sign a loan contract. Yufeng Ltd. received the sum of ￥19,000,000 the next day and issued a receipt to Jinda Company. On September 1,1994, Yufeng Ltd. issued two receipts to Jinda Company on which it is shown that Jinda Company paid a sum of ￥4,565,000 as the interest of above sums of money, though Jinda Company did not pay above interest actually. On July 11, 1994, Guangdong Branch notified Yufeng Ltd. that it agreed Yufeng Ltd. to sell “YUHUAYUAN” lying at the west side of Gongbei Avenue, Zhuhai City, and relevant sum shall be deposited into the appointed account “Wanzai Branch of China Bank”. On August 19, the parties involved in this case signed an agreement for house property sale. It was stipulated in the agreement: Yufeng Ltd. sells the 15,951.36-square-meter area of the project “YUHUAYUAN” to Guangdong Branch with the unit price of ￥4,800 per square meter, in total ￥76,566,528; the total sum that Guangdong Branch shall pay to Yufeng Ltd. offsets the sum of ￥33,656,000 that Guangdong Branch has loaned to Yufeng Ltd. (including the principal of ￥29,000,000 and relevant interest of ￥4,656,000), and Guangdong Branch shall pay the residual sum in installment plan to Yufeng Ltd. according to the construction plan of the project “YUHUAYUAN” and the total needed sum after Guangdong Branch checks; Yufeng Ltd. would has paid off all loans and relevant interest after above sum of ￥33,656,000 is paid off. On the same day, two parties also signed a supplement agreement. It was stipulated: Guangdong Branch entrusts Yufeng Ltd. to sell 136 sets of houses purchased in term of the agreement of sale and opens a special account for depositing all relevant sum of money, among which the sum exceeds the unit price of ￥7,000 per square meter is put aside to Yufeng Ltd. as the premium; Yufeng Ltd. shall purchase all sets of houses with the unit price of ￥7,000 per square meter from Guangdong Branch if it fails to sell out before July 30, 1995. Guangdong Branch also issued a guaranty to Jinda Company on the same day. It was written in above guaranty: “This branch would provide all sum of money for constructing “YUHUAYAN” in the light of the agreement for house property sale reached between this branch and Yufeng Ltd. Jinda Company is entrusted to put aside all sum of money be stages in order to supervise the management of the sum of money conveniently. This branch would notify Jinda Company to put aside the sum according to the schedule of project. The sum of ￥19,000,000 and the sum of ￥10,000,000 that this branch loaned to Yufeng Ltd., together with relevant interest of ￥4,565,000, are transferred as the loan recorded on this agreement.” Then, Guangdong Branch entrusted Jinda Company to pay the sum of ￥10,000,000 on August 22, the sum of ￥5,883,000,000 on September 12, the sum of ￥8,000,000 on October 10, the sum of ￥5,000,000 on December 7, the sum of ￥20,000,000 on December 29, and the sum of ￥1,830,000 on April 27, 1995, respectively. The total sum Guangdong Branch paid to Yufeng Ltd. was the sum of ￥45,418,300, and Yufeng Ltd. issued receipts to Jinda Company respectively. However, Yufeng Ltd. did not pay the sum of money to Guangdong Branch in term of the agreement for house property sale and the supplement agreement after gaining above sum. On January 10, 1996, Guangdong Branch issued a notification on urging to pay off the overdue principal and relevant interest to Yufeng Ltd., Yi’an Company, Beijing Jiancheng Electrical Lamp-house Ltd. (the associated company to Yufeng Ltd.) and it was affirmed on the list of loan, which was the annex of the notification, that the total sum of money loaned to Yufeng Ltd. was ￥79,074,300. On December 10, 1996, Guangdong Branch issued another notification on urging to pay off the overdue principal and relevant interest to Yufeng Ltd. and asked Yufeng Ltd. to pay off the principal of $28,071,405.34 and relevant interest of ￥79,074,300 before December 20, 1996. Otherwise, relevant interest would be collected at the rate of four ten-thousandth per day for US dollar and at the rate of five ten-thousandth per day for RMB from January 1, 1997. On August 18, 1997, Guangdong Branch brought the litigation to the court of original instance and claimed to decide Yufeng Ltd. to pay off the principal of $28,071,405.34 and relevant interest of $7,570,250.71, the principal of ￥79,074,300 and relevant interest of ￥20,400,811.94 (above interest is counted till August 31, 1997) and to decide Guanman Company to take the debt of Yufeng Ltd. within the registered capital of $4,500,000 that it invested to Yufeng Ltd. The Higher People’s Court of Guangdong holds: Since Guangdong Branch is an organ dealing with banking finance and Yufeng Ltd. is a solely foreign-owned enterprise invested by Guanman Company which is registered in China, the mortgage loan contracts and relevant extension contracts are valid. The registered mortgage of property that Yufeng Ltd. provides to Guangdong Branch in order to obtain the loans is valid, too. Guangdong Branch has paid the loan of $28,071,405.34 respectively to Yufeng Ltd in term of the contracts. However, Yufeng Ltd. fails to pay off the principal and relevant interest after the term of loan expires, excluding the interest of $1,428,611.11. Yufeng Ltd. has breached the contracts and shall bear the liability for breach. Yufeng Ltd. shall pay off the principal of $28,071,405.34 and relevant unpaid interest, and pay the interest counted form January 1, 1997, till the day on which all sum is paid off at the rate of four ten-thousandth per day. Yufeng Ltd. applies the loans from Guangdong Branch in order to construct the project “YUHUAYUAN” and still guarantees with the estate under mortgage, which has been mortgaged for the loans in foreign exchange, and other relevant property. Guangdong Branch loans the sum of ￥10,000,000 on September 1 and the sum of ￥19,000,000 on December 24 respectively in 1993. Yufeng Ltd. also issues the guaranty for promising to pay off the loans. Therefore, the valid jural relation exists between Guangdong Branch and Yufeng Ltd. Then, two parties sign the agreement for house property sale and relevant supplement agreement, which are both valid because the content in above agreements show the true will of two parties and do not violate the provision of law. Two parties agree: Yufeng Ltd. sells the 15,951.36-square-meter area of “YUHUAYUAN” (136 sets in total) to Guangdong Branch. The sum of money that Guangdong Branch shall pay for the house property offsets the sum of ￥33,656,000 (including principal and relevant interest) of the loans, and the residual sum of ￥42,910,528 is paid in the form of new loan to Yufeng Ltd. Yufeng Ltd. deposits the sum of money earned by selling above house property into the account appointed by Guangdong Branch. The true will of two parties is to pay off the loans by purchasing the house property instead to replace the relation of loan with the agreement of purchasing house property. Since Yufeng Ltd. does not deposit the sum of money earned by selling the house property into the account appointed by Guangdong Branch, the agreement for house property sale is not performed and the debt of loan still exists. Thus, Yufeng Ltd. is obligate to pay off the principal and relevant interest for the mature loans to Guangdong Branch. Yufeng Ltd. has breached the contract because it does not pay off the sum of ￥79,074,300 on time and shall bear the liability for breach. The interest for the overdue payment shall be counted at the rate of five ten-thousandth per day. The claim that Yufeng Ltd. is obligate to pay off the principal and relevant interest of all loans shall be supported. Yufeng Ltd. alleges that Guangdong Branch has obtained the ownership of assets of Yufeng Ltd. in Hongkong and Beijing without consideration, whose value is equal to the principal and relevant interest of the loans, and Guangdong Branch has no right to ask Yufeng Ltd. to pay off the principal and relevant interest of all loans. Since Yufeng Ltd. fails to submit valid evidences, this court does not support the claims. Yufeng Ltd. claims that Guangdong Branch has no right to ask Yufeng Ltd. to pay off the loans because all loans have been transferred as the sum of money for purchasing house property, which does not conform to the fact and lacks legal basis. This court does not support the claim. Yufeng Ltd., being a legal person, has the independent civil capacity and is able to take the debts arising from its own transaction. Guangdong Branch fail to submit evidence for its claim that Guanman Company shall bear the joint and several liability for paying off the debt within the registered capital of $4,500,000. The claim shall be dismissed due to the lack of factual and legal basis. This court hereby decides as follow pursuant to Article 36, Article 84, Clause 2 of Article 89, Article 90, Article 108 of General Principles of Civil Law of the People’s Republic of China, Article 16 of Regulations on Loan Contract: 1. The mortgage loan contract, the extension contract for the term of loan, the loan contract for foreign exchange, the agreement for house property sale and its supplement agreement are all valid; 2. Yufeng Ltd. shall pay off the sum of $28,071,405.34 and relevant interest to Guangdong Branch, excluding the paid interest of $1,428,611.11. The residual interest is counted from the date of obtaining the loan to December 31, 1996, at the stipulated rate. And the interest from January 1, 1997, to the date of paying off is counted at the rate of four ten-thousandth per day; 3. Yufeng Ltd. shall pay off the sum of ￥79,074,300 and relevant interest to Guangdong Branch. The relevant interest is counted from the date of obtaining the loan to December 31, 1996, at the stipulated rate. And the interest from January 1, 1997, to the date of paying off is counted at the rate of five ten-thousandth per day; 4. The claim against Guanman Company shall be dismissed. Above obligation of payment shall be performed within 10 days from the next day on which the judgment is in effective. The interest of debt shall be collected double in case to pay in delay. Yufeng Ltd. shall bear the sum of ￥3,329,016.92 in total, including the cost of ￥1,674,518.46 for this case and the sum of ￥1,654,498.46 for attachment. Yufeng Ltd. refuses to accept the judgement and appeals to this court. It alleges: The judgement of original instance is incorrect when affirming the facts and applying the laws. It not only encroaches the appellant’s legal interests and endangers the safety of a great number of state assets but also cumbers the enforcement of several effective judgement made by Zhuhai Intermediate People’s Court to confirm the appellee’s claims. It is obviously unfair to affirm that the appellee has the certificate on property right of the estate under mortgage while to decide the appellant shall bear the charge for attachment. Yufeng Ltd. claims: 1. To withdraw the judgement of original instance and to dismiss the appellee’s claims; 2. To decide the appellee to bear all cost of this case; 3. To decide the appellee to return the unjust enrichment. In the course of the second instance, Yufeng Ltd. alleges: 1. The appellee obtains the property right of the land of Beijing project and other assets without consideration by taking the reason that the loan that the appellee provides to the appellant for the Beijing project (the shortened name for three Chinese and foreign equity joint ventures or Chinese and foreign cooperative joint ventures established and controlled by Jian Yuqiang’s Hongkong Jiancheng Estate Ltd.) exceeds the term of loan. It lacks legal basis for the appellee to obtain the assets of Beijing whose value exceeds the loans in great sum till now and to claim the appellant to pay off the loan. The appellee has no right to ask the creditor’s right and shall return the unjust enrichment; 2. No loan agreement exists between the two parties involved in this case. It is true that the appellant owes the sum of money earned by selling house property. However, above sum of money shall not be defined as the loan or the arrearage after transferring Beijign project. On the contrary, it shall be the sum that has not been settled. Moreover, the sum of ￥2,507,772 included in the sum of ￥79,074,300 lacks the contract or any other legal basis; 3. Great difference exists between two notifications. The appellee fakes the latter one in order to support its unreasonable claim. The court of original instance does not examine, which results in the inaccuracy when affirming the nature of the sum of money in RMB and the relation of credit and debt in this case; 4. It is incorrect in the judgement of original instance to affirm the existence of mortgage because the range of original mortgage has been changed when the appellee entrusts the appellant to sell. In the light of the fact that “YUHUAYUAN” has been sold out, the relation of loan and arrearage have been changed into the relation of credit and debt without consideration, and the relation of mortgage has ended. The appellant shall bear the charge of attachment. Guangdong Branch does not allege in written form. In the course of second instance, Guangdong Branch alleges: 1.The appellant fails to submit affirmed evidence to support its claim that its debt has been paid off. As far as the Beijing project, it is another jural relation independent of this case; 2. The nature of the loan in RMB is a loan which is affirmed by the form of house property sale; 3. The appellee has never cancelled its right to the estate under mortgage. Therefore, the appellee has the right to claim attachment. This court holds: The four loan contracts in US dollar signed by Yufeng Ltd. and Guangdong Branch are valid because they indicate the true will of two parties and do not violate any provisions of laws in China. Guangdong Branch has loaned the sum of $28,071,405.34 in term of the loan contracts. Yufeng Ltd. shall bear the liability for breach because it does not pay off the principal and relevant interest excluding the interest of $1,428,611.11. Yufeng Ltd. shall pay off above principal and relevant interest to Guangdong Branch and pay stipulated interest in term of the loan contracts. Nevertheless, the decision made in the judgement of original instance according to the content of Notification on Urging the Overdue Principal and Relevant Interest that Yufeng Ltd. shall pay the interest counted by stages shall be corrected due to the lack of factual and legal basis. Although Yufeng Ltd. and Guangdong Branch do not sign the loan contract in RMB, both parties confirm the relation of loan including the principal of ￥29,000,000 and relevant interest of ￥33,656,000 by signing the agreement of house property sale and stipulate the form of paying off above loan by Guangdong Branch purchasing the house property and entrusting to sell the house property at the same time. The true goal for two parties to sign above agreement is to obtain the loan in the form of Yufeng Ltd. selling house property instead to perform the obligation of purchasing and selling house property. Therefore, Guangdong Branch loan the sum of ￥45,418,300 for six time according to the agreement and its supplement agreement. The two notifications on urging overdue principal and relevant interest issued by Guangdong Branch regard the capital transaction between Guangdong Branch and Yufeng Ltd. as loan, and Yufeng Ltd. does not demur at that time. Since Yufeng Ltd. fails to pay the sum of money earned by selling house property to Guangdong Branch in accordance with the agreement for house property sale and its supplement agreement, above agreements shall be cancelled and Yufeng Ltd. shall be obligate to return the total sum of ￥79,074,300, including the sum of ￥33,656,000 before the agreement and the sum of ￥45,418,300 after the agreement. The interest counted in the judgement of original instance shall be corrected because two parties does not stipulated on the form of paying relevant interest. The interest of the sum of ￥45,418,300 shall be counted from the actual date of obtain to the actual date of payment at the rate of loan interest announced by China Bank at the same period. Yufeng Ltd. provides the estate under mortgage when applying the loan in foreign exchange from Guangdong Branch and registers. The four loan contracts shall be valid because they all show the true will of two parties and conform to the provisions on mortgage prescribed in Guaranty Law. In the course of mortgage, Yufeng Ltd. is entrusted by Guangdong Branch to sell all estate under mortgage. It shall be considered that Guangdong Branch give up its hypothec when entrusting to sell the estate under mortgage, and the relation of mortgage shall be ended. Guangdong Branch shall return the certificate on the use of land to Yufeng Ltd. The charge of attachment shall be borne by Guangdong Branch. The claim of Yufeng Ltd. that the appellant shall bear all charge of attachment due to the end to the relation of mortgage shall be supported. Yufeng Ltd. alleges that the former debt has been cancelled when Guangdong Branch obtains the assets of Beijing project without consideration, that is, the sum obtained by Guangdong Branch is greatly exceeds the sum of debt according to the loan in foreign exchange and the agreement for house property sale. However, Yufeng Ltd. fails to submit the written agreement according to which Beijing project is transferred to Guangdong Branch. The so-called Beijing project is independent of this case, and Yufeng Ltd. shall claim its right in other cases. No evidence exists to show that the relation of credit and debt between Yufeng Ltd. and Guangdong Branch has ended. The appellant’s claim that the assets of Beijing project has offset the debt in this case shall not be supported because of the lack of factual basis. In sum, the judgement of original instance affirms the fact almost correctly. However, the interest that Yufeng Ltd. shall pay to Guangdong Branch is counted inaccurately and shall be corrected. This court hereby decides as follow pursuant to Item 1 and Item 3 of Clause 1 of Article 153 of Civil Procedure Law of the People’s Republic of China: 1. To change the 1st decision in the 1997-Yue-Fa-Jing-Er-Chu-Zi-5 civil judgement made by the Higher People’s Court of Guangodng into “The mortgage loan contract, the extension contract for the mortgage loan and the loan contract for foreign exchange are valid; The agreement for house property sale and its supplement agreement signed by Guangdong Branch and Yufeng Ltd. shall be cancelled”. 2. To change the 2nd decision in the 1997-Yue-Fa-Jing-Er-Chu-Zi-5 civil judgement made by the Higher People’s Court of Guangodng into “Yufeng Ltd. shall pay the sum of $28,071,405.34 and relevant interest (excluded the paid interest of $1,428,611.11, and counted from the date of obtaining the loan to the date of paying actually at the rate of the stipulated interest rate in the loan contract)”. 3. To change the 3rd decision in the 1997-Yue-Fa-Jing-Er-Chu-Zi-5 civil judgement made by the Higher People’s Court of Guangodng into “Yufeng Ltd. shall pay the sum of ￥79,074,300 and relevant interest (no interest shall be paid for the sum of ￥4,656,000, the interest of the sum of ￥29,000,000 is counted from September 1, 1994, to the date of paying actually at the rate of loan interest rate announced by China Bank at the same period, and the interest of the sum of ￥45,418,300 is counted from the date of obtaining the loan actually to the date of paying actually at the rate of loan interest rate announced by China Bank at the same period)”. 4. To confirm the 4th decision in the 1997-Yue-Fa-Jing-Er-Chu-Zi-5 civil judgement made by the Higher People’s Court of Guangodng. The cost of first instance is ￥1,674,518.46 and shall be borne by Yufeng Ltd.. The charge of attachment of ￥1,654,498.46 shall be borne by Guangdong Branch. The cost of seconde instance is ￥1,674,518.46 shall be borne by Yufeng Ltd.. This judgement is final. Presiding Judge: Li Jian Judge: Wang Yun Deputy Judge: Chen Jizhong Date: February 14, 2001 Court Clerk : Gao Xiaoli

Plaintiff: Shenzhen Xunlong Shipping Ltd. Address: Shekou 2nd Floor, Shenzhen, Guangdong Province. Legal Representative: Cui Tieyin, general president Authorized Deputy: Zhao Jingsong, legal adviser Authorized Attorney: Deng Xiaomao, attorney-at-law of Qizheng Law Firm, Guangdong Province Defendant: Fangchenggang Jinwan Trading Ltd. Address: Xingang Road, Jinsha County, Gangkou District, Fangchenggang City, Guangxi Chuang Regional Autonomy Legal Representative: Weng Zhaojin, general president Authorized Deputy: Yin Nianzhang, male, Han nationality, teacher of Zhanjiang Ocean University Defendant: Guangxi Ocean Shipping Company Address: Legal Representative: He Jianpin, general president Authorized Attorney: Yuan Xiaoyong, attorney-in-law of Lijiang Law Firm This Court, after filing the cases of the controversy over the damages of collision Shenzhen Xunlong Shipping Ltd. (plaintiff) v. Fangchenggang Jinwan Trading Ltd. (defendant, hereinafter referred to as Jinwan Ltd.) and Guangxi Ocean Shipping Company (defendant, hereinafter referred to as Shipping Company) on January 9, 2001, has duly organized a collegial panel and summoned the parties concerned to exchange the evidence on the court on May 28, and held two public trials on March 29 and November 12 respectively. Zhao Jingson, the authorized deputy of the plaintiff, Deng Xiaomao, the authorized attorney of the plaintiff, Weng Zhaojin, the legal representative of the defendant Jinwan Ltd., Yin Nianzhang, the authorized deputy of the defendant Jinwan Ltd., Yuan Xiaoyong, the authorized deputy of the defendant Shipping Company, appeared at the trials for the hearing of the case. The case has now come to a close. The plaintiff alleges: On September 7, 2000, the plaintiff’s “M/V Xunlong 2” set sail from Kong’ao Port at Hongkong at 21:00. After entering the north sea-route, a small-size cargo ship, i.e. “M/V Xiongchang 1” belonging to the defendant, was found to sail toward the starboard of “M/V Xulong 2”. “M/V Xunlong 2” took measures for dodging as soon as possible by whistling one time and decelerating at once, but two ships collided at 21:06. The reasons of the collision are that “M/V Xiongchang 1” neglected to keep a normal lookout, to sail at the safe speed, to cross the sea-route at the right time and to take effectual measures for dodging when existing the risk of collision. The defendant shall bear the liability for the maritime affair because its ship violated relevant regulations on the international rules on dodging collision on the sea. After the collision, “M/V Xunlong 2” reported to Hongkong Maritime Affair Bureau in time and applied CCS to examine on September 8. The total sum for repairing and the damage of sailing date to “M/V Xunlong 2” was HK$3,066,002.10. The plaintiff claims the court to decide the defendants to compensate above damages and bear the cost of this case. The defendant Jinwan Ltd. affirms the fact of collision. However, it alleges that the plaintiff shall bear the leading liability for the collision because the plaintiff sailed at high speed in the sea-route and neglected to keep a lookout, whereas the defendant shall bear secondary liability. Those charges for repairing that do not relate to the damages of collision shall be excluded, such as the charges for repairing the leading propeller and for replacing the window curtain and carpet. The plaintiff’s indirect damage shall not be included into the sum of compensation. The defendant shall only burden the damage of collision in the light of the reasonable rate to the liability for collision. The defendant Shipping Company alleges: It shall bear no liability for the controversy of collision because it is neither the owner of “M/V Xiongchang 1” nor the operator of above ship and those sailors on “M/V Xiongchang 1” are not assigned by the company. The following facts are affirmed: On September 7, 2000, the plaintiff’s “M/V Xunlong 2” with 35 passengers set sail from Kong’ao Port at Hongkong to Shekou at Shenzhen at 21:00. Liang Zewen, the captain, steered, Zhang Si’an, the chief mate, and Zheng Dong, the sailor, were in charge of the instrument for watching in dark and for radar inspection, and Fan Dongben, the engineer, was in charge of inspecting the machine. After entering into the north sea-route of Victoria Port, “M/V Xunlong 2” sailed along the sea-route from southeast to northwest in the direction of 320° and closed to the 4th buoy at the 30-knot speed. (“M/V Xunlong 2” obtained the certificate on speed exemption issued by Hongkong Sea-route Supervision Department by which it was permitted to sail in the sea-route at the 30-knot speed.) The defendant’s “M/V Xiongchang 1” was steered by Su Weicheng, the second mate. Gao Yingguang, the captain, was in charge of control the speed of engine and Weng Zhaojin, the sailor, was in charge of radar inspection. “M/V Xiongchang 1” set sail from Kuiyong Port at Hongkong by carrying cargo at 20:35 to the anchorage ground. The weather of Hongkong water area at that time was benign. The wind direction was northeastward and the wind power was at 4 level. The wave was smooth, and the visibility was 3-5 sea miles. At 21:07, at the point of 22°09′12"N/114°07′30"E, “M/V Xunlong 2” found that “M/V Xiongchang 1” was about 0.4 sea miles in front of its starboard. Although “M/V Xunlong 2” whistled one time and dodged by steering leftward, it was too late to be collided by “M/V Xiongchang 1” at the locations between its 18th and 23rd rib on starboard. It was about 20 seconds between finding “M/V Xiongchang 1” and colliding. According to its own statement, “M/V Xiongchang 1” sailed in the direction of 220° and at the speed of 4-5 knots, and there were only 10 minutes after finding the yellow signal lamp and red-green board lamp of “M/V Xunlong 2”. In the light of the record inspected by Hongkong Maritme Affair Office, neither ships decelerated or dodged obviously before the collision. After being collided, “M/V Xunlong 2” was permitted specially to sail at low speed in order to send the injured passenger back to Kong’ao Port for treatment, and then was towed to Hongkong Youlian Dockyard Ltd. (hereinafter referred to as Youlian Dockyard) for repairng at that night. On September 8, 2000, the plaintiff entrusted CCS, together with China Examination Ltd. (it remandated Hongkong Maritime Affair Notarizaiton Ltd. for examining on the spot) entrusted by Hua’an Property Insurance Agent, the insurer for “M/V Xunlong 2”, to examine the damage of collision, and issued examination report in written form respectively. Being affirmed by both parties in the court, the examination report filed as 2000BS2256 issued by China Examination Ltd. is adopted as the written evidence for the average of “M/V Xunlong 2”. It is said in above report: “M/V Xiongchang 1” collides the locations of 18th to 20th ribs on “M/V Xunlong 2” at the angle of 90° because the damaged locations are between 18th to 23rd ribs, and all damaged locations are beyond the water level. There are 8 items including more 30 damaged locations on “M/V Xunlong 2” in term of the report and the assumable charge for repairing is HK$1,350,000. Then, the plaintiff entrusted CCS to examine “M/V Xiongchang 1”, but Gao Yingguang, the captain of “M/V Xiongchang 1”, refused the examinators to get on. Moreover, Gao Yingguang and Weng Zhaojin had admitted they had never been trained to inspect radar instrument or only for two days when being acquired by Hongkong Maritime Affair Office and did not know the basic common sense about steering ship. Gao Yingguang also admitted in the inspection report on maritime affair that the oil paint on the left fore of ”M/V Xiongchang 1” was rub away slightly. From September 8 to October 15, 2000, “M/V Xunlong 2” was repaired at Youlian Dockyard. The plaintiff decided to stop repairing for transportation during the holidays of National Day, and the ship left Youlian Dockyard from September 30 to October 8. The plaintiff had to hire other passenger ships for replacing “M/V Xunlong 2” from other companies two times in order to maintain the transportation between Shekou to Hongkong in the course of repairing from September 8 to September 29 and from October 9 to October 15. The plaintiff submits all relevant documents to this court, such as the towage to Youlian Dockyard, charge for repairing, cost for hiring other ships in the course of repairing, charge for using port, cost for fuel and lube, charge for examining to CCS, charge for arranging accommodation for those passengers involved in the collision, charge of transportation and communication for dealing with the collision, charge for investigating maritime affair, charge for legal consultation, counsel fees, etc. The total sum is HK$3,066,002.10, including the towage of HK$45,745, and charge of HK$73,020 for repairing life rafts; charge of HK$1,500,880 for repairing the ship to Youlian Dockyard (including charge for repairing leading propeller, charge for replacing releasers and joining to life rafts, charge for replacing window curtains and carpets for cabins, part charge for repairing engine, charge for temporary transportation during holidays of National Day and relevant charges for mooring, in total HK$151,402.50); charge of HK$600,00 and HK$190,911 for hiring other ships to replace “M/V Xunlong 2” and relevant charges for fuel of HK$391,708, for lube of HK$9,894.80, for using port of HK$119,017 in the course of repairing; charge of HK$32,100 for entrusting CCS to examine; charge of HK$15,638.30 for arranging accommodation for those passengers involved in the collision; charge of HK$15,020 on transportation and communication for dealing with the collision, charge of HK$2,931 for investigating maritime affair, charge of HK$5,000 for legal consultation and charge of HK$64,137 for counsel fees. It is also affirmed that “M/V Xunlong 2” is a high-speed passenger ship with double floors, made of aluminum alloy in Norway in August of 1998. The length of ship is 38 meters, the width is 11.20 meters and the depth is 3.90 meters. The total tonnage is 531.tons and the net tonnage is 159 tons. The power is 3,152 kilowatts. The date of obtaining the title deed is August 14, 1998, and the owner recorded on the deed is the plaintiff. “M/V Xiongchang 1” is a ship for carrying dry goods and is registered in Fangchanggang City, Guangxi Chuang Regional Autonomy. It is made in Viet Nam with the length of 53.55 meters, the width of 7.63 meters and the depth of 3.20 meters. The total tonnage is 298 tons and the net tonnage is 176 tons. The power is 224 kilowatts. There are two sets of ship certificate. On one set including Registration Certificate on Ship Ownership of the People’s Republic of China (the date of obtaining the ownership June 12, 1996) and Certificate on Ship Nationality of the People’s Republic of China (the term of validity from June 12, 1996, to June 12, 2001), the defendant Jinwan Ltd. is the registered owner and the legal representative of the owner is Weng Zhaojin. On the other set including Certificate on Ship Nationality of the People’s Republic of China (the term of validity from November 21, 1997, to November 20, 2002) and several Ship Certificate for shipping to Hongkong and Macau (the term of validity from May of 1997 to May 30, 2000, from September 18, 1997 to September 17, 1997, from May 30, 2000, to September 30, 2002, etc.), the registered owner and operator is the defendant Shipping Company. Jinwan Ltd. is a private enterprise, which signed an agreement on ship management with Shipping Company on November 20, 1997. It is stipulated that: “M/V Xiongchang 1” belongs to Jinwan Ltd., while Shipping Company transacts relevant procedures on registration and operation for applying transportation in the name of Jinwan Ltd.; the scope for transportation includes along the coastal areas in China (including Hongkong and Macau), and from Chian to Viet Nam; the term of management is from 1997 to 1998; Shipping Company is paid ￥30,000 for management by the owner and operator of “M/V Xiongchang 1” every year. Then, “M/V Xiongchang 1” registers in the name of Shipping Company and obtains the license for transportation, but has never paid above charge to Shipping Company. After the term of management expired, Shipping Company neither applies to withdraw the license for transportation in its name and other relevant certificates nor declares to cancel its management relation with Jinwan Ltd. in public. Jinwan Ltd. is always engaged in ocean transportation in the name of Shipping Company. In fact, Shipping Company does not bear the responsibility for supervising “M/V Xiongchang 1”. Above facts have been affirmed by the parties and the collegial panel. The evidences involved in this case include those submitted by the plaintiff, such as two sets of ship certificates and certificates on ship nationality, logbook of “M/V Xunlong 2”, Report on Accidentally Maritime Affair filled out by both parties after the collision, the idea on confirming the collision issued by Hongkong Maritime Affair Office, the recorded chart inspected by radar, the list and voucher of charges for repairing the ship by Youlian Dockyard, the examination reports issued by CCS and China Examination Company, and those submitted by the defendants, such as the agreement on ship management, material on investigation issued by Hongkong Maritime Affair Office, and the written notes about the hearing. This Court holds that this case relates to the controversy over the damage of collision. Since two defendants are companies in Guangxi, China, this court is entitled the jurisdiction in term of relevant laws when the plaintiff brings the litigation to this court. Although the maritime affair happens in the water region of Hongkong, both parties live in mainland and the registered ports lie in mainland. It is prescribed in Clause 3 of Article 273 of Maritime Code of the People’s Republic of China that the case on the controversy over the damage of collision shall apply to the law of flag country only if the nationality of both ships involved in the case are the same no matter the spot on which the collision happens. Therefore, this case shall apply to Convention on the International Regulations for Preventing Collisions at Sea (1972) and relevant laws of China. It is not in the nature of things that “M/V Xiongchang 1” is objectively or factually seaworthy even if it is managed in other’s name because its actual owner, i.e. the defendant Jinwan Ltd., is not qualified for being engaged in ocean transportation. All crew, from the captain to the sailor on duty, do not master professional technique and basic knowledge for ocean transportation, are unable to inspect with the radar system, and are unfamiliar any regulations on lookout and on crossing narrow sea-routes prescribed in Conventions on the International Regulations for Preventing Collisions at Sea, even do not know at all. While crossing the sea-route, the crew neglect to observe carefully the situations and, therefore, fail to find “M/V Xunlong 2” in high speed in time. There are only ten seconds from its finding the latter to the collision. Till now, the collision has been unavoidable. In term of Article 5 and Clause 4 of Article 9 of Conventions on the International Regulations for Preventing Collisions at Sea (1972) prescribing that the ships shall not cross the narrow sea-route in case that it would disturb the safety of any other ships sailing in the sea-route, “M/V Xiongchang 1” shall bear most liability for negligence because it neglect to keep a lookout and shall not cross the sea-route while other ships are sailing. It does not indicate that “M/V Xunlong 2” is entitled to sail at high speed in the sea-route no matter what time and what situation though Hongkong Sea-route Supervision Department issues the certificate on speed exemption which permits it sails at 30-knot speed in the sea-route. It shall sail at safe speed according to the change of time and spot while the visibility is lower at night than in daytime and it sails in such busy sea-route such as the one at Victoria Port. In fact, it leaves alone the safety of itself and other ships and is neglect to the maritime affair. When it finds the defendant’s ship, there are only 0.4 sea miles. It indicates that “M/V Xunlong 2” neglects to keep a lookout effectually. The ship sailing at 30-knot speed can do nothing to avoid the collision when the distance between two ships is 0.4 sea miles. Till now, the collision has been unavoidable. Therefore, “M/V Xunlong 2” shall bear certain liability for negligence. The plaintiff alleges that “M/V Xunlong 2” whistles one time to remind the other party, but it is prescribed in Convention of the International Regulations for Preventing Collisions at Sea that the hooter must be whistled shortly and urgently for five times, even supplemented by short and urgent flash for five time, under this condition. It is obviously ineffectual by merely whistling for one time. Although “M/V Xunlong 2” steers to the left at once, the fact that the dependant’s ship collides on it at the angle of 90° indicates that the measure is ineffectual. Obviously, it is impossible for the ship sailing at high speed to take effectual measures for dodging under the condition like this. The evidences also show that both ships fail to alter their route or decelerate successfully till they collide. In accordance with the principles that the negligence arising to the collision is the leading criterion for deciding the ratio of liability and whether to take proper measures to avoid the collision is the secondary criterion for deciding the ratio of liability, along with the provisions in Article 5, 6, 7, 8, 9 and 34 of Convention of the International Regulations for Preventing Collisions at Sea (1972), both parties shall bear liability for the collision, among which the defendant’s ship shall bear 70 percent whereas the plaintiff’s ship shall bear 30 percent. This court do not support the plea claimed by the defendant Jinwan Ltd. that the plaintiff’s ship shall bear most liability because it does not conform to the fact what the court finds. Although it costs the charge of HK$1,500,880 for “M/V Xunlong 2” paying to Youlian Dockyard, those charge for repairing the leading propeller and engine which lie under the water level, replacing the releaser and joining to the life rafts and window curtain and purchasing new carpet shall not been counted for repairing the damage caused by the collision because all damages to the ship caused by the collision lie above the water level. The charge resulted from the temporary transportation during the holidays of National Day shall not been counted because it is not the necessary damage caused by the collision. The charge for mooring shall not been counted because it is the cost expenditure for operation. The charges of HK$151,402.50 mentioned above shall not been counted into the damage of collision and shall be excluded from the charge for repairing to Youlian Dockyard, namely, the charge for repairing “M/V Xunlogn 2” is HK$1,349,477.50 and shall be protected in the light of the ratio of the liability for collision. This Court supports the plaintiff’s claims for the towage of HK$45,745, the charge of HK$73,020 for repairing the life rafts, the charge of HK$32,100 for examination and the charge of HK$15,638.30 for arrange accommodation for the passengers involved the collision because above charges are necessary resulted from the collision. The party who shall bears the liability for collision shall compensate the charge of HK$600,000 for hiring other passenger ships to replace “M/V Xunlong 2” from September 8 to September 29, 2000, because it can be considered as the damage for the sailing date. Since “M/V Xunlong 2” can be used to transport during the holidays of National Day, which indicates that it is able to sail after being repaired, it is unnecessary to be sent to the dockyard again. Thus, the charge of HK$190,911 for hiring other passenger ship cannot be supported. The charge of HK$391,708 for fuel and HK$9,894.80 for lube during the period of hiring ships and the charge of HK$119,017 for using the port are the cost expenditure which does not relate to the damage of collision and shall not be protected. This Court does not support the plaintiff’s claims for the charge of HK$15,020 on transportation and communication for dealing with the collision, charge of HK$2,931 for investigation, charge of HK$5,000 for legal consultation and charge of HK$64,137 for counsel fees because the plaintiff is unable to submit enough evidences. In sum, the damage for repairing and other charges resulted from the collision is HK$2,115,980.80 in total, and “M/V Xiongchang 1” shall compensate 70 percent, i.e. HK$1,481,186.56. The defendant Jinwan Ltd. shall bear the leading liability for compensation because it is the owner of “M/V Xiongchang 1”. Although the defendant Shipping Company is not the owner of the ship, it agrees and helps Jinwan Ltd. to register “M/V Xiongchang 1” in itself name, which makes it to be the jural owner of ship who enjoys the capacities of possession, utilization, profit and disposition. Therefore, it shall bear the liability for compensation and reconversion in case the ship is involved into the tort. In addition, Shipping Company is subjectively fault and objectively neglectful because it helps Jinwan Ltd. to obtain the license of transportation and has never supervised the ship actually though it manages the ship for Jinwan Ltd. nominally. After the agreement expires, it neither applies to withdraw above license and relevant certificates in its name nor declare to cancel the relation of management in public, which makes it possible for Jinwan Ltd. to continuously transport in its name. It can be affirmed that two defendants prolong the term of agreement and Shipping Company is still obligate to manage “M/V Xiongchang 1” till the collision. As a result, Shipping Company shall bear the joint and several liability for compensation. This Court decides as follow pursuant to Article 169 of Maritime Code of the People’s Republic of China prescribing that both parties shall bear the liability for compensation at the ratio of negligence in case they are both fault to the collision and that both parties shall bear the liability for compensation at the ratio of negligence prescribed in the former clause in case the collision causes the damage of the collided ships and those goods on board, and Article 130 of General Principles of Civil Law of the People’s Republic of China prescribing that they shall bear joint liability if two or more persons jointly infringe upon another person's rights and cause him damages: 1. The defendant Jinwan Ltd. shall compensate the plaintiff Xunlong Ltd. the total sum of HK$1,481,186.56 for the damage for repairing and relevant damages. The defendant Shipping Company shall bear the joint and several liability. Above compensation shall be paid of in ten days after the judgement becoming effective; 2. The plaintiff’s other claims shall be dismissed. The cost of this case is ￥29,340, among which the plaintiff shall bear ￥9,340, the defendant Jinwan Ltd. shall bear ￥10,000 and the defendant Shipping Company shall bear ￥10,000. Two defendants shall pay off to the plaintiff in ten days after the judgement becoming effective. This court will not refund the plaintiff the charge paid in advance. If any party refuses to accept this judgement, it may submit its appeal petition to this court within 15 days after service of this judgement, together with a sufficient number of duplicated copies for each person the opposing party to have one copy, and the appeal shall be filed with the Higher People’s Court of Guangxi Chuang Regional Autonomy. The appeal fee of ￥29,340 shall be submitted in advance within 7 days since the term of appeal expires (the name of account is the special account for litigation fee of Guangxi Higher People’s Court, the number of account is 886100010, the bank is Gucheng Road Branch of Agriculture Bank, Naning City), otherwise it would be regarded as withdrawing the appeal automatically. Presiding Judge: Zhang Desheng Judge: Zhang Qiancheng Judge: Ni Xuewei Date: December 19, 2001 Court Clerk: Xiao Xinbo

Defendant-Appellant: Ha’erbin Hualong Traffic Construction Ltd. Address: Youyi Road No. 392, Daoli District, Ha’erbin, Helongjiang Province. Legal Representative: Han Shoude, president Authorized Deputy: Zhang Shuwen, general manager Authorized Attorney: Tao Zengtian, attorney-at-law of Xincheng Law Firm, Ha’erbin Plaintiff-Appellee: Helongjiang Branch, China Bright Bank Address: Diduan Street No. 8, Daoli District, Ha’erbin, Helongjiang Province Responsible Person: Du Jianzhong, president of Helongjiang Branch Authorized Deputy: Tang Zhiwei, clerk of Helongjiang Branch Defendant in original instance: Helongjiang Technical Cooperation Group on International Engineering Address: Youyi Road No. 392, Daoli District, Ha’erbin, Helongjiang Province. Legal Representative: Han Shoude, president Authorized Attorney: Tao Zengtian, attorney-at-law of Xincheng Law Firm, Ha’erbin The applicant, Ha’erbin Hualong Traffic Construction Ltd., refuses to accept the 1998-He-Jing-Chu-Zi-30 civil judgement on the cases of controversy over recoursing imprest decided by Higher People’s Court of Helongjiang and appeals to this court. This Court has duly organized a collegial panel including the presiding judge Wangyun, the deputy judges Chen Jizhong and Qian Xiaocheng, and held a trial. Ren Xuefeng is the court clerk. The case has now come to a close. This court has affirmed the following facts: On May 15, 1995, He’erbing Hualong Traffic Construction Ltd. (hereinafter referred to as Hualong Ltd.) applied Ha’erbin Branch of China Investment Bank (hereinafter referred to as Investment Bank) to issue a LC in order to purchase grabs made in South Korea. On May 18, Investment Bank issued a 540-day usance irrevocable documentary LC with the number of L/C3095025. The sum recorded on the LC is $1,540,000, and its beneficiary is South Korea Modern Co. The payment date is December 13, 1996. Both parties agreed that the above LC is a freely negotiable LC, and is subject to The Uniform Customs and Practice for Documentary Credits (1993 revision ICC Publication 500) and engage us in accordance with the terms thereof (hereinafter referred to as UCP500). On the same day, Helongjiang Technical Cooperation Group on International Engineering (hereinafter referred to as International Engineering Group) secured for the 80 percent of $1,540,000 recorded on the LC of Hualong Ltd., i.e.$1,232,000, by issuing an irrevocable contract of guaranty to Investment Bank. International Engineering Group promised to pay all money within the secured money absolutely in three days after receiving the written notification sent by Investment Bank on condition that Hualong Ltd. fails to pay the money recorded on the LC on time, and would like to compensate all damages caused by the liability for paying money on time and to pay the liquidated damages at the rate of 10 percent of secured money. On June 1, 1995, Investment Bank modified the LC in answer to the request of Hualong Ltd., adding $231,000 to the sum recorded on the LC. Then, South Korean Modern Co. negotiated at Seoul Branch of Singapore Oversea Chinese Bank (hereinafter referred to as Seoul Branch). Investment Bank notified Hualong Ltd. as soon as receiving the documents for importing submitted by Seoul Branch on July 18, 1995, and accepted after Hualong Ltd. agreed to accept. On July 27, 1996, Hualong Ltd. wrote to Investment Bank and requested not to pay South Korea Modern Co. because of the poor quality of its grabs. At the same time, Hualong Ltd. brought the litigation against Dalian Office of South Korea Modern Co. to Ha’erbin Intermediate People’s Court (hereinafter referred to as Intermediate Court), claiming attachment by blocking the capital recorded on the LC. Intermediate Court decided to block the above capital. After the payment date of the LC matured, Seoul Branch notified Investment Bank to pay the money recorded on the LC in the name of negotiating bank and demurred at the ruling made by Intermediate Court. Intermediate Court cancelled the block on February 17, 1998, and Investment Bank paid $1,771,000 recorded on the LC to Seoul Branch on March 2. On May 25, 1998, Investment Bank brought the litigation against Hualong Ltd. to the court of original instance when failing to recourse imprest, and claimed Hualong Ltd. to pay the imprest of $1,771,000 and the relevant interest of $77,924 from the date of paying the imprest to June 22, 1998 (counted at the four-of-ten-thousandth rate per day) and International Engineering Group to bear the joint and several guaranty liability of $1,232,000 and to pay the liquidated damages of $123,200. The fact is affirmed that Investment Bank paid the interest of $134,704.32 for paying in delay to Seoul Branch on June 26, 1998. It is also affirmed that, in term of Guang-Yin-Fa-1999-96 “Urgent Notice on Issues about State Exploitation Bank and China Bright Bank Transferring and Taking-over the Whole Assets, Debts and Branches of China Investment Bank”, China Bright Bank takes over the whole assets, debts, 137 offices of twenty-nine branches and the management departments in Shanxi Province and Inner Mongolia Regional Autonomy which belong to China Investment Bank. China Bright Bank enjoys all creditor’s rights and bears all debts. The original Ha’erbin Branch of China Investment Bank is taken over by Helongjiang Branch of China Bright Bank (hereinafter referred to as Bright Bank). Moreover, it is affirmed that, International Engineering Group dose not pay the charges for the second instance of this case though it has submitted the appeal petition to this court in the legal term for appeal. On May 17, 1999, this court notified International Engineering Group to pay the charges of ￥83,510 for the second instance in 7 days by issuing the notification of 1999-Jing-Zhong-Zi-208, on which it is written that the appeal would be regarded to be withdrawn voluntarily in case the relevant charges are not paid on time. International Engineering Group did not pay the above charges on time, although it signed on the notification on May 28. Helongjiang Higher People’s Court holds: The LC transaction is different from the contract of sales because the former is the transaction of documents independent of the latter which indicates the former cannot be influenced by the latter. Only if the documents conform to the LC, the issuing bank is obligate to pay in the stipulated term. It tallies with the normal custom about international settlement for Investment Bank to accept the documents for importing after examining the compliance between documents and terms of the LC and receiving the permission of Hualong Ltd. in accordance with UCP500. Investment Bank’s responsibility has been changed from those to the LC to the absolute payment to the documents till this time. Therefore, Hualong Ltd. should bear the liability for the interest damages to pay in delay because it neither conforms to the provisions of law nor tallies with the international custom for Hualong Ltd. to refuse the payment due to the quality questions of grabs, to request attachment by blocking the capital recorded on the LC. Hualong Ltd. is obligated to pay off the imprest for Investment Bank. The contract of guaranty issued by International Engineering Group is valid, for the declaration of will is true and conforms to the provisions of law. Thus, International Engineering Group is obligate to bear the joint and several liability for the debt of Hualong Ltd. within the secured sum and pay the liquidated damages. This Court hereby decided as follow pursuant to Article 4 and Article 108 of General Principles of Civil Law of the People’s Republic of China, and Clause 1 of Article 21 of Guaranty Law of the People’s Republic of China: 1. Hualong Ltd. shall pay Investment Bank the imprest of $1,771,000 and relevant interest of $77,924 (counted till June 22, 1998) in 10 days after the judge becomes in effective, and pay the damage of $134,704.52 for the interest arising from the delay payment and relevant interest counted from June 26, 1998. 2. International Engineering Group shall bear the joint and several liability for paying off within the secured sum of $1,232,000 and relevant interest, and pay the liquidated damages of $123,200. The cost of the case shall be borne by Hualong Ltd. Hualong Ltd. refuses to accept the judgement of original instance and claims in the appeal petition that: 1. The obviously fraudulent will of South Korea Modern Co. results the economic damage in great sum to the appellant, which has been confirmed by the Merchandise Examination Bureau by issuing the certificate to demand for reimbursement. In term of relevant provisions in Fa-Jing-Fa-1989-12 document issued by the Supreme People’s Court on June 12, 1989, it is reasonable for the appellant to request to block the assets belonging to South Korea Modern Co., i.e. the money recorded on the LC, especial it is prescribed in the provisions to block the money gingerly instead of prohibitively. However, the court of original instance decides that the appellant’s request violates the law, which obviously is erroneous application of laws. 2. The ruling on blocking the money recorded on the LC made by Intermediate Court is valid and the appellee shall enforce the ruling. However, the ruling on attachment lasts 444 days that exceeds the term of payment recorded on the LC. In accordance with Article 17 of UCP500, the appellee shall not pay. On the contrary, in order to protect its own reputation, the appellee not only pays without special authorization but also compensates the so-called damages, which violates the international custom and shall bear all liability. 3. The court of original instance decides that the appellant shall pay the interest of $77,924 counted from the date of payment, i.e. March 2, 1998, to June 22, 1998, which is 110 days in total. So high interest is not prescribed in China, and is obviously unfair for the appellant to pay above interest. 4. On May 18, 1995, the appellant entrusts the appellee to modify the content of LC, in which the term of repair promised by the imported equipment is 2,880 working hours that are included in the 540-day usance term. Then, any matters appearing in the above course should be considered as the facts that the beneficiary breaches the LC. The appellee shall refuse to pay due to the beneficiary’s breach, which also is the important reason for the court to block the LC. Nevertheless, the appellee pays the money presumptuously without considering the modified content. Thus, the appellee shall bear the liability. It is unfair for the judgement of original instance to hold that the appellee shall not be investigated for its breach whereas International Engineering Group shall perform its promise for securing the payment. The appellant requests to withdraw the original judgement and dismiss all of the appellee’s claims, and the appellee shall bear the cost of this case. Investment Bank alleges: 1. It is correct for the court of original instance to decide that Intermediate Court mistakenly blocks the capital recorded on L/C3095025. (1) The litigation against South Korea Modern Co. brought to Intermediate Court by the appellant is on the controversy over the quality of productions rather than swindling case; (2) The appellant partially cites the Fa-Jing-Fa-1989-12 document. It is said following the cited sentences that the people’s court shall not enforce the attachment in case that China Bank has accepted the bill of exchange because China Bank shall bear responsibility for absolute payment to the document instead of that to the usance credit. In this case, the appellee accepts the bill of exchange recorded on the LC on July 18, 1995, and its responsibility has been changed to the absolute payment to the document. 2. The appellee is not false to pay and compensate in the light of international custom after Intermediate Court quashes the attachment. No legal basis exists to support the appellant’s claim that the court should decide this case in accordance with UCP500 and it is force majeure, i.e. the ruling of attachment made by the court, that halts the implementation. 3. There is no relater between the LC and the trading controversyr existing between the appellant and South Korea Modern Co. In accordance with Article 3, Article 4 and Article 15 of UCP500, the LC is independent of the contract of sales or any other contract on which it bases. It is the documents rather than the goods, services or any other deeds involved in the documents that the bank deals with when operating the LC. In this case, the appellant claims that the beneficiary has accepted all modified content on the LC and confirmed the compliance between documents and terms of the credit after the appellee examines. As far as the issue that whether the content of the LC is enforced in practice, which has nothing to do with the LC, it cannot be the reason for the appellee refusing to pay for the LC. 4. Since the appellant dose not pay the relevant interest after being urged by the appellee many times, the interest should be counted from the day that the appellee is forced to pay the sum of $1,771,000 recorded on the LC to the day that the appellee brings the litigation, which is 110 days in total. In accordance with the state regulations on banking accounting, the above imprest shall be regarded as overdue loan whose interest is counted at the rate of four ten-thousandth per day. Thus, the so-called high interest does not exist. 5. Since the judgement of original instance decides the facts definitely and applies the laws correctly, Investment Bank claims to dismiss the appeal and affirm the judgement of first instance. International Engineering Group alleges: 1. The guaranty is void due to its illegal form. In accordance with Article 13 of Guaranty Law of the People’s Republic of China, the guarantor and the creditor shall reach the contract of guaranty in written form. However, in this case, International Engineering Group only issues a deed of security, which obviously dose not conform to the above regulations and has no legal validity. The judgement of original instance mistakenly confirms an important fact by confusing the deed of security with the contract of guaranty. 2. Even if the deed of security is valid, International Engineering Group bears the guaranty liability only when the creditor refuse to perform the debt because the deed of security is general guaranty in the light of Guaranty Law. It is prescribed in Article 25 of Guaranty Law that the term of guaranty shall be six months counted from the date of expiration of the term for performing the principle debt in case the guarantor and the creditor dose not stipulate the term of guaranty for the contract of general guaranty. In the course of stipulated term of guaranty and the term of guaranty prescribed in the above article, the guarantor shall be exempted from the guaranty liability in case the creditor dose not bring the litigation or apply the arbitration against the debtor. Although the date of payment for the secured person, Hualong Ltd., is on December 13, 1996, the secured person dose not bring the litigation until June 22, 1998, which undoubtedly exceeds the prescribed term of guaranty. Therefore, the guaranty liability shall be exempted. 3. It is definitely prescribed in Guaranty Law of the People’s Republic of China that the guarantor of general guaranty is entitled to refuse to bear the guaranty liability to the creditor before the controversy over the principle contract has not been judged or arbitrated and the debt cannot be performed after mandatorily enforcing the debtor’s assets in term of law. Therefore, the guarantor is obligate to pay the debt for the debtor only when the debt cannot be performed after mandatorily enforcing the debtor’s assets. No breach of contract exists at all. Especially when the maximum quota of liquidated damages prescribed in laws is 5 percent, it lacks legal basis for the court of original instance to decide International Engineering Group to pay the liquidated damages at the rate of 10 percent. International Engineering Group claims to dismiss the second decision in the judgement of original instance and decide International Engineering Group is exempted from the joint and several liability for satisfaction and the liability for paying the liquidated damages. This Court holds that Investment Bank brings the litigation to the court of original instance according to the agreement on requesting to issue the LC with Hualong Ltd., the guaranty relation with International Engineering Group and the fact of paying the sum recorded on the LC to the negotiating bank abroad. It is definitely stipulated in the additional articles to the requisition for the LC that the LC involved in this case applies UCP500, which conforms not only to the true will of both parties but also to relevant provisions on the application of law of civil relation involved foreign elements in General Principles of Civil Law. Therefore, the jural relation of LC involved in this case shall apply the relevant provisions of UCP500, according to which the following facts are to be examined that whether Investment Bank accepts and pays in term of above international custom and is entitled the right to claim the imprest to the applicant for the credit, Hualong Ltd. It is prescribed in Clause a of Article 3 of UCP500 that the LC is independent of the contract of sales and other contracts which would be the basis for the LC. Even if the LC cites any content of above contracts, the bank has nothing to do with above contract and shall not be obligated to the contracts. Thus, a bank shall not be enslaved to any demand for reimbursement or plea arising from existing relation between the applicant and the issuing bank or the beneficiary when the bank promises to accept and pay the bill of exchange, or to negotiate or perform any other obligation recorded on the LC. It is prescribed in Article 4 that all parties in the LC transaction deal with the bill of documents rather than the goods, services or any other deeds involved in above documents, which establishes the principle of independent abstract for the LC. The LC is an agreement existing between the issuing bank and the beneficiary and shall not be limited by the principle contract of sales after issuing though it bases on above contract. The validity of the principle that the jural relation between the issuing bank and the beneficiary is independent of the principle contract of sales is that the issuing is obligate to pay only if the beneficiary submits the bill of documents conforming to the LC, even if the goods recorded on above documents dose not tally with the stipulation on the principle contract of sales, or there is any stipulation different from the articles in the LC. In this case, Investment Bank accepts after receiving all required bill of documents submitted by Seoul Branch, the negotiating bank, examining the compliance between the documents and terms of the credit and obtaining the agreement of the applicant of LC, which tallies with relevant provision of UCP500 absolutely. In term of Issue 1 of Clause a of Article 14 of UCP 500 that the pointed bank, who has paid, has borne the liability for pay in delay, has accepted the bill of exchange or has negotiating, is obligate to pay, Investment Bank is obligate to pay to Seoul Branch and is entitled the right to be paid by the applicant of LC, Hualong Ltd., for the imprest. The facts shall not influence the issuing bank’s right to pay the sum recorded on the LC when the documents conform to terms of the credit and to request Hualong Ltd. to pay off that whether the LC has been modified and whether the beneficiary breaches the stipulation on quality on the LC. Therefore, the claim of Hualong Ltd. that Investment Bank shall engage itself to the LC and bear the liability for pay without authorization is unreasonable and cannot be supported by this court. In the course of litigation, the reason for plea to refuse the payment that Hualong Ltd. always claims is that the beneficiary is false when reaching the principle contract of sales, which also is its leading reason for appeal. In the light of the principle of independent abstract for the LC, what the bank shall concern with is the bill of documents rather that the goods. Only if above documents conform to the stipulation of the LC apparently, the issuing bank shall pay and not engage itself to the principle transaction. It is not stipulated in UCP500 that whether the beneficiary shall be protected by the principle of independent abstract when it swindles. Some laws and court’s cases in the countries with Anglo-American law system admit the practice situations in the course of international business transaction shall be considered when applying the principle of independent abstract and exception shall be permitted under the special conditions, among which the main one is the beneficiary’s fraud, with the premise of confirming above principle. There are no definitely provisions in laws and regulations that are in force in China on the exception of fraud, which deduces prudent attitude in practice. Nevertheless, the appellant, Hualong Ltd., has never submit any undoubted evidence for its claim that the beneficiary swindles in the course of litigation, and the so-called fact for supporting the fraud actually is some issue on the quality of imported equipment, which is the controversy over quality in the course of performing the principle contract of sales and shall not influence the stipulated method for settling the LC. Therefore, this court decides to dismiss the reason for appeal brought forward by Hualong Ltd. that the beneficiary of the LC involved in this case swindles. Before bringing this litigation, Hualong Ltd. had requested Intermediate Court to block the capital recorded on the LC involved in this case with the reason of quality controversy by taking the beneficiary of above LC as the party against whom as application is filed. Intermediate Court made the civil ruling that results in the capital recorded on the LC is blocked. Then, Intermediate Court withdraws above ruling. In its appeal petition, Hualong Ltd. claims that the attachment is valid and Investment Bank shall refuse to pay in term of the writ of attachment and Article 17 of UCP500 and bear the liability for paying without authorization. The claims mentioned above also have no factual and legal bases. Firstly, what is prescribed in Article 17 of UCP500 is that the issuing bank can refuse to pay under the condition of force majeure, which dose not exist in this case. Secondly, the LC is an independent promise made by the issuing bank to the beneficiary. In case the fraud cannot be detected from the appearance of the bill of documents and no other undoubted evidences indicate the existence of fraud, it can be thought that the applicant of the LC is not entitled with the right to restrict the bank’s payment. The facts in this case are that the usance LC applied to issue by Hualong Ltd. has been negotiated by Seoul Branch and the issuing band has accepted the bill of exchange recorded on the LC to the negotiating bank. Till now, Investment Bank’s obligation to the LC has changed into the obligation for absolute payment to the bill of documents. In accordance with the provisions in Summary of Symposium on Judgement of Economic Cases Involved Foreign, Hongkong or Macau Elements In Coastal Areas In China filed as Fa-Jing-Fa-1989-12 that was published on June 12, 1989, the people’s courts shall not block the capital recorded on the LC involved in this case. As a result, it is correct for the judgement of original instance that the requisition for attachment dose not conform to the international custom and Hualong Ltd. shall compensate the interest arising from the delay payment. In fact, the relation of rights and obligations to the bill of documents has existed between the issuing bank and the negotiating bank when Investment Bank accepts to the negotiating bank. The negotiating bank has become the bona fide holder and the issuing bank shall be obligate to pay. It is not in error for Investment Bank to pay the sum recorded on the LC to the negotiating bank after Intermediate Court withdraws the ruling of attachment. Investment Bank is entitled to request Hualong Ltd., the applicant of the LC, to pay off relevant money, including the sum recorded on the LC and other charges arising out of the delay payment. Investment Bank paid the imprest of $1,771,000 recorded on the LC for Hualong Ltd., which shall be regarded as the overdue loan in term of the state regulations on banking accounting and the interest rate is four ten-thousandth per day. Therefore, it is correct for the court of original instance to decide that Hualong Ltd. shall pay the interest of $77,924 counted till June 22, 1998. No high interest rate claimed by the appellant exists. The reason for appeal claimed by the appellant lacks factual basis and cannot be supported by this court. Although International Engineering Group brings the litigation to this court in the legal term for appeal, it dose not pay the cost for second instance in the prescribed term. In the light of Clause 2 of Article 13 of Measures for the People’s Court Charging the Cost of Litigation, it shall be regarded as to withdraw the appeal. It is prescribed in Article 35 in Some Rules on Issues of Reforming the Methods of Judging Civil and Economic Case, the second instance shall be dealt with within the parties’ claims and the appeal petition shall not be examined in case the parties dose not claim. Therefore, this court shall not examine the demur on the guaranty claimed by International Engineering Group in the course of second instance. In sum, Investment Bank accepts and pays in accordance with the stipulated international custom and enjoys the right to request Huanlong Ltd. to pay off the imprest recorded on the LC and relevant charges due to delay payment. Since Bright Bank has wholly taken over Investment Bank, Hualong Ltd. shall pay off the debt involved in this case to Bright Bank. The appeal of Hualong Ltd. is unreasonable and shall be dismissed. The judgement of original instance that confirms facts definitely and applies the laws correctly shall be affirmed. This Court hereby decides as follow pursuant to Issue 1 of Clause 1 of Article 153 of Civil Procedure Law of the People’s Republic of China: To dismiss the appeal and affirm the judgement of original instance. The cost of the second instance of this case is ￥83,510, and shall be borne by Hualong Ltd.. This judgement is final. Presiding Judge: Wang Yun Judge: Chen Jizhong Deputy Judge: Qian Xiaochen Date: July 5, 2001 Court Clerk : Ren Xufeng