Content

I. Maritime Trial Briefs

Great increase of cases of dispute over multimodal transport and freight forwarding contracts

Increase of cases of dispute over liability for ship collision damage

Unchanged frequent occurrence of cases of dispute over seafarer service contract

Gradual increase of maritime administrative cases

Decrease of ship arrest cases

Increase of cases for registration of maritime claim

 

II. Producing Electronic Evidence According to Law

--Problems and advices on the application of electronic evidence in freight forwarding disputes

Collection and preparation of electronic evidence

Notarization of electronic evidence preservation

Determination and enhancement of electronic evidence’s probative force

 

III. Filing Claims under Disputes over the Delivery of Cargo without Presentation of Original Bill of Lading According to Law

--Problems and advices on the delivery of cargo without presentation of original B/L

Claim for delivery of cargo without presentation of original B/L while holding no original B/L

Claim for delivery of cargo without presentation of original B/L while no original B/L has been surrendered for taking delivery

Litigation filed by the alleged B/L pledgee

 

IV. Filing Claims for Cargo Loss According to Law

-- Problems and advices on ascertainment of cargo loss

Ascertainment of cargo loss subject to “estoppel”

Ascertainment of cargo loss subject to “actual loss”

Ascertainment of cargo loss subject to allocation of burden of proof

 

V. Regulating Shipping Safety Order by Law

--Problems and advices on disputes arising from ship collisions

Ship allision accident with bridge due to ship’s fault navigation

Ship collisions due to pilots’ negligence

Determination of losses of spare parts, accessories and supplies of ships

 

VI. Establishing Limitation Fund of Liability for Maritime Claims According to Law

--Problems and advices on application for establishment of limitation fund

Objections beyond the examination scope for limitation fund cases

Halving the amount of limitation fund in accordance with provisions of MOT

Establishment of limitation fund of liability for barges

 

VII. Filing Maritime Administrative Litigations According to Law

-- Problems and advices on filing a maritime administrative litigation

Fishermen’s application for inland fishing license

Scope of administrative litigations

How should an administrative counterpart raise litigation according to the amended Administrative Procedure Law

 

VIII.Exercise of Rights of Actions

-- Problems and advices on false litigation

Crewmembers’ misstatement of wages by use of shipping companies’ negligence

Malicious collusion between litigants to confirm ownership through litigation

False litigations by lawyers and parties subject to execution for participating in distribution

 

I. Maritime Trial Briefs

 

In the year 2014, Guangzhou Maritime Court accepted a total of 2326 new cases, an increase of 10.87% over last year, and closed 2431 cases, an increase of 15.65% over last year. The case closing rate of the year 2014 reached 92.33%, an increase of 5.07% increase over last year, and 202 cases were unclosed, a decrease of 34.20% compared with last year. The newly accepted cases involved the total subject amount of CNY 6.084 billion, a decrease of 9.03% compared with last year; and the total subject amount of the closed cases was CNY 5.291 billion, a decrease of 20.27% compared with last year.

 

In the new cases accepted by Guangzhou Maritime Court in 2014, there were 1343 litigation cases in first instance, 296 enforcement cases and 687 procedure cases. In the 1343 litigation cases, there were 9 administrative cases in first instance and 1334 maritime and admiralty cases in first instance, in which 244 cases involved foreign, Hong Kong, Macau or Taiwan elements, accounting for 18.29% of the maritime and admiralty cases in first instance.

 

Among the maritime and admiralty cases in first instance, there were 287 cases concerning dispute over multimodal transport contract, accounting for 21.51% of the first-instance maritime and admiralty cases; 227 cases concerning dispute over contract of carriage of goods by sea, accounting for 17.02%; 266 cases concerning dispute over seafarer service contract, accounting for 19.94%; 152 cases concerning dispute over freight forwarding contract, accounting for 11.39%; 108 cases concerning dispute over supply of ship stores, accounting for 8.10%; 72 cases concerning dispute over liability for ship collision damage, accounting for 5.40%; 37 cases concerning dispute over ship charter party, accounting for 2.77%; 32 cases concerning dispute over contract of ship building, sales, repair or dismantling; 18 cases concerning dispute over marine insurance contract, accounting for 1.35%; 18 cases concerning dispute over liability for loss of life or personal injury at sea, accounting for 1.35%; 13 cases concerning dispute over liability for ship allision damage, accounting for 0.97%; 12 cases concerning dispute over port operation, accounting for 0.90%; 10 cases concerning dispute over channel or port dredging contract, accounting for 0.75%; 8 cases concerning dispute over ship ownership or coownership, accounting for 0.60%; 6 cases concerning dispute over contract of cargo custody at port, accounting for 0.45%; and 68 cases concerning other maritime and admiralty disputes, accounting for 5.10%.

 

Among the 9 maritime administrative cases in first instance, 5 cases were filed for dissatisfaction with administrative punishment; 1 for dissatisfaction with administrative coercive measure; 1 for dissatisfaction with administrative coercive measure and dispute over administrative compensation; and 2 for other matters.

 

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There was a total of 687 procedure cases, of which there were 588 cases of application for registration of maritime claim, accounting for 85.59% of the special maritime procedure cases; 44 cases of application for ship arrest, accounting for 6.40%; 27 cases for pre-litigation property preservation, accounting for 3.93%; 5 cases of application for maritime injunction, accounting for 0.73%; 4 cases of application for arrest of goods onboard, accounting for 0.58%; 3 cases of application for declaration of citizen’s death, accounting for 0.44%; 3 cases of application for maritime evidence preservation, accounting for 0.44%; 2 cases of application for auction of goods onboard, accounting for 0.29%; and 11 special procedure cases in other types, accounting for 1.60%.

 

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Altogether 1433 cases (including cases left over from previous years) were closed, of which 609 cases were closed with a judgment rendered, accounting for 42.09% of the closed first-instance cases; 385 cases were taken as nol pros due to non-payment of litigation costs, accounting for 26.87%; 175 cases were closed with plaintiffs’ voluntary dismissal due to mediation or other reasons, accounting for 12.21%; 234 cases were closed with a mediation award rendered, accounting for 16.33%; 15 cases were referred to other jurisdiction, accounting for 1.05%; 7 cases were closed with action rejected, accounting for 0.49%; and 8 cases were closed in other manners, accounting for 0.56%.

 

 

24 ships were arrested in light of law, a decrease of 73.03% as against last year. Totally 18 ships and one shipment of goods onboard were auctioned, of which the auction of the goods onboard was abortive, 6 ships are auctioning, 4 ships were successfully auctioned off, and 8 ships had abortive auctions (the abortive auctions were attributable to the depression in shipping market, due to which no one paid deposit to participate in the auction). The number of ships successfully auctioned off is the same with that of last year, and the total auction amount reached CNY 57.8361 million, an increase of 201.07% as against last year.

 

Cases handled by this court in the year 2014 show the following features:

 

--Great increase of cases of dispute over multimodal transport and freight forwarding contracts. In 2014, the shipping market remained mired in depression, and both upstream and downstream enterprises in the shipping industry chain suffered significant decline in business performance and dropping risk resistibility, which resulted in the frequent occurrence of conflicts and disputes and the large number of maritime cases, specially the spate of cases involving transportation. Specifically, there were 287 cases of dispute over multimodal transport contract, a 27.7 times increase compared with last year, and 152 cases of dispute over freight forwarding contract, a 0.6 times increase compared with last year.

 

--Increase of cases of dispute over liability for ship collision damage. In 2014, 72 cases of dispute over liability for ship collision damage were newly accepted by court, representing a 2.78 times increase compared with last year. This increase was resulted from the following reasons: (1) relatively more ship collision accident than those in last year; (2) continuous depression and excess capacity of shipping market in recent years—after collision occurred, the probability for the two parties to reach out-of-court settlement decreased, and when negotiation failed, action would be lodged before courts; (3) series cases arising from the same collision accident, e.g. dozens of containers that belong to different cargo owners fell overboard due to a ship collision, for which the cargo owners filed separate claims against the liable party.

 

--Unchanged frequent occurrence of cases of dispute over seafarer service contract. In 2014, a total of 266 cases of dispute over seafarer service contract were accepted by this court, 143 cases in 2013 and 433 cases in 2012. By comparison with the 20 cases accepted in 2011 and 62 cases in 2010, the cases of dispute over seafarer service contract kept a high incidence in the recent three years, which was resulted from the depression of shipping market that caused partial shipping companies to face bankruptcy and fail to pay seafarer salary.

 

--Gradual increase of maritime administrative cases. Under the appointment of the Higher People’s Court of Guangdong Province, this court began to have jurisdiction over maritime administrative cases in 2011, and accepted 3 maritime administrative cases in that year, 2 cases in 2012, 5 cases in 2013 and 9 new cases in 2014. The gradual increase of maritime administrative cases shows an increasing willing of administrative counterparts to solve administrative disputes by legal means, which will be conducive to the exercising of administrative power and protection of rights according to law.

 

--Decrease of ship arrest cases. The number of cases applying for ship arrest in 2014 is 44, a decrease of 92 cases as compared with the number of 136 cases in the last year, and the quantity of ships arrested decreased from 89 to 24. The decrease was caused by this court’s intention to control the number of Chinese ships arrested and endeavor to avoid arresting Chinese vessels in non-urgent cases or when there were alternative measures, for the purpose to avert influence on the normal running of shipping companies and guarantee the harmony development of shipping economy.

 

--Increase of cases for registration of maritime claim. A total of 588 cases for registration of maritime claim was newly accepted by this court in 2014, representing a 17.37 times increase as compared with last year. For the reason of the increase, under the background of depression of coal exchange market and excess capacity in bulk shipping market, a shipping company met fund break due to its mismanagement; several ships were applied for arrest and auction by banks and other creditors, and seafarers whose salaries were unpaid and the upstream and downstream enterprises having debtor-creditor relationship with the company all submitted the application for registration of maritime claims, claiming for realization of their creditor’s rights.

 

 

II. Producing Electronic Evidence According to Law

--Problems and advices on the application of electronic evidence in freight forwarding disputes

 

(I)    Collection and preparation of electronic evidence

 

In a marine freight forwarding dispute, the freight forwarder A accepted the logistics company B’s entrustment to book shipment and obtain containers from a shipping company, and paid the costs including warehouse and container rentals for B. Due to B’s refusal to pay such costs, A sue B and make a claim for compensation of such advanced costs. The prima facie evidence submitted by A to the court was QQ chat record that reflected a relatively complete communication and consultation process of freight forwarding business, and the transfer of scanned copies of B’s licenses/certificates including business license, organization code certificate, tax registration certificate, road transport license, etc. through QQ. B as the Defendant confirmed the person in the QQ chat record was its employee, and contacted A for the matter of export transport, but denied the establishment of business and defended the advanced costs were irrelevant with it, B did not submit evidence to the court. On the basis of discretional evaluation of the electronic evidence submitted by the Plaintiff by evidence exchange, court presentation and court inquiry, given no contrary evidence provided by the Defendant, the court finally admitted the evidence.

 

Electronic evidence, namely data message, is a new evidence type provided by the Amendment to the Civil Procedure Law of the People’s Republic of China (hereinafter referred to as the “Civil Procedure Law”). It is also provided by Clause 2 of the UNCITRAL Model Law on Electronic Commerce that “data message means information generated, sent, received or stored by electronic, optical or similar means”. Electronic evidence is quite commonly presented in freight forwarding disputes, as in the industry of freight forwarding, for the economization and convenience of business, QQ, email[1] and other electronic tools are usually used in the communication, consultation and establishment of business, as a result of which no documentary or physical evidence can be provided when dispute occurs, and electronic evidence becomes the main or even only evidence that can be provided to prove the content of business. In the case that the litigant has relatively insufficient ability to collect and prepare electronic evidence and/or their unwilling or inability to perfect the evidence form, electronic evidence can be lost, damaged, tampered or deleted very easily, rendering its probative force to be seriously impaired or even derived. The electronic evidence’s such characteristics of deleting and modifying easily destines the vulnerability of its completeness and trueness, and thus the litigant’s insufficient ability to adduce evidence usually will make it hard for the court to admit the electronic evidence.

 

We advise that litigants should collect and prepare electronic evidence in light of laws and improve own ability of evidence adducing. The means, method and procedure taken to obtain electronic evidence should in all cases conform to law, with no violation of the mandatory legal provisions; otherwise, the electronic evidence will be excluded as illegal evidence. Moreover, not only legitimacy, objectivity and promptness should be satisfied with in the evidence collection, scientific and reasonable methods of evidence collection should also be mastered. The following measures may be taken by litigants in collecting and preparing electronic evidence: fixing electronic evidence into statutory evidence forms or other evidence forms acceptable to court by technical means; asking for internet service provider’s assistance in collecting and extracting relevant saved data; notarization of electronic evidence preservation; preservation of electronic evidence in litigation; etc. If the litigant is unable to collect evidence on its own, professional technical personnel can be employed to help the evidence collection.

 

(II)  Notarization of electronic evidence preservation

 

In the freight forwarding disputes tried by this court, some litigants are unwilling to have the electronic evidence notarized and preserved, due to the relatively small disputed subject amount and relatively high notarization cost, which further raises the risk of court’s unacceptance of electronic evidence. Notarization of electronic evidence can not only enhance the probative force of the electronic evidence and thus increase the winning rate, but also prevent the electronic evidence from loss or damage. Therefore, the notarization of electronic evidence preservation is of very important significance.

 

The notarization of electronic evidence shall be practiced in light of law. Firstly, notarization is not coercively required, that is, litigants are entitled to the option to have the electronic evidence notarized. Except for the electronic evidence originated abroad that involves subject identity, litigants are entitled to choose whether to go through notarization formalities, but those choices not to effect notarization should bear the possible legal consequence of failure on burden of proof. Secondly, the court will give more specific litigation guidance in respect of notarization of electronic evidence. At the time of a case placed on file, judges usually remind the litigants to have electronic evidence third-party notarized so as to reduce the possibility of evidence being forged or tampered. In cases that litigants insist on no notarization, the judges will clarify the litigation risks to them and make it clear that the electronic evidence submitted by them without be notarized may be denied by the court. Finally, notary agencies should process the notarization in strict compliance with relevant rules. According to Article 15 of the Guiding Opinions on Notarization of Electronic Evidence Preservation promulgated by China Notary Association, notary officers must record the full course of entering network, opening relevant websites (webpages), downloading, printing (or disc burning), etc. in order and the name and version of all programs used, carefully examine whether the downloaded content is consistent with that seen on the webpages, and take video of the preservation course, if necessary.

 

We advise litigants should have the electronic evidence notarized by qualified notary agencies before submitted as the prima facie evidence. According to Article 69 of the Civil Procedure Law, a people’s court shall regard legal facts and documents notarized under statutory procedures as a basis for deciding facts, unless there is any contrary evidence which is sufficient to overturn the notarization.

 

(III)      Determination and enhancement of electronic evidence’s probative force

 

The probative force of electronic evidence refers to the significance/function of the electronic evidence in manifesting the facts to be proved. In court investigation, not only the objectivity, relevancy and legitimacy of the electronic evidence, but also its reliability and completeness will be examined by the court, which requires rather high reliability on the creation, preparation, storage, transmission and collection of the electronic evidence. According to Article 8 of the Law of the People’s Republic of China on Electronic Signature, the following facts shall be taken into consideration when making examination on the truthfulness of any data message as evidence: (1) the reliability of the method for creation, storage, transmission of data message; (2) the reliability of the methods for keeping the integrality of the contents; (3) the reliability of the methods for identifying the addresser; (4) other relevant factors. The integrality of electric evidence includes both the integrality of the electronic evidence itself and the integrality of the computer system it relies on. Integral electronic evidence should include the data message (original data message), subsidiary information and system environment. The electronic evidence whose integrality is damaged is usually hard to be regarded as the basis for ascertaining case facts.

 

Litigants should be well aware of such common rules to determine the strength of electronic evidence’s probative force: electronic evidence notarized has stronger probative force than those not notarized; electronic evidence created in normal business activities has stronger probative force than those created for the purpose of litigation; and in general, electronic evidence saved by a neutral third party has stronger probative force than those saved by the litigants. In freight forwarding disputes, electronic evidence submitted by the litigants are usually the prima facie evidence used to determine the facts, while sometimes they are isolated evidence without support of other evidence. For the isolated evidence, judges will examine them with strict eyes, urge litigants to further perfect the evidence form, and remind litigants of the importance of trading safety and that they should improve their ability of evidence producing to make up the insufficiency of electronic evidence’s probative force. Certainly, contrary evidence should also be submitted for the counterparty to refute or deny the probative force of the electronic evidence.

 

The electronic evidence’ characteristics of deleting easily, modifying easily, copying easily and difficulty to distinguish copy and original render the electronic evidence to have relatively weak probative force which should be corroborated by other means or other evidence. Corroborated evidence is the evidence having independent evidential value corresponding to the substantive evidence, submitted to reinforce and guarantee the substantive evidence’s probative force. It is suggested that litigants obtain the corroborated evidence for the electronic evidence by the following means: (1) having the electronic evidence notarized and preserved by notary agencies or obtaining certification issued by independent professional electronic certification bodies; (2) asking internet service providers who master the electronic evidence to provide the electronic evidence and attend the court for testimony; (3) applying for expert witness’ testimony in court. By the said means, the probative force of electronic evidence can be reinforced and the litigants’ ability to adduce evidence can be improved.

 

 

 

III. Filing Claims under Disputes over the Delivery of Cargo without Presentation of Original Bill of Lading According to Law

--Problems and advices on the delivery of cargo without presentation of original B/L

 

(I)    Claim for delivery of cargo without presentation of original B/L while holding no original B/L

 

In a case of dispute over compensation for loss of delivery of cargo without presentation of original B/L, the export agent company A and the clothing manufacturer B signed an export cooperation agreement that A should act an agent to handle the cargo export formalities, collection of foreign exchanges and other businesses and provide financing services. Thereafter, B entered into a transportation agreement with the logistics company C and issued a booking note to C. On the booking note, B was indicated as the consignor, the American trade company D as the consignee, and E as the shipping company. With respect to the cargo concerned, C issued a B/L form to A who was stated as the shipper on the B/L form. As the actual carrier, E issued a full set of original Bs/L for the cargo concerned which indicated B as the shipper. After the cargo concerned arrived at the port of destination, B instructed C to telex release the cargo which thus was taken by D. A then filed a lawsuit against B, C, D and E before the court, requesting the four companies to bear joint liability for losses incurred from the delivery of cargo without presentation of original B/L. Through trial, the court of first instance ascertained that A was not a qualified claimant of the case since it was not the holder of the original B/L, and thus dismissed A’s claim by rendering a ruling. Despite A’s petition for appeal, the court of appeal maintained the ruling of first instance.

 

In recent years, some export agent companies have provided highly risky financing services as well as agent services for export companies in order to obtain handsome profits. When failing in recovery of debts and loans due to the export companies’ poor operations, the export agent company would, in the name of shipper, make claim against the carrier for losses arising from delivery of cargo without presentation of original B/L, attempting to impute the financing risk or the risk under trading contract to the carrier. However, the export agent company usually is neither the holder of original B/L nor able to adduce evidence that could prove its identity of contractual or actual shipper of the cargo concerned. Even though the export agent company holds the B/L form and is indicated as the shipper on the B/L form and other export declaration documents, it still cannot be proved to enjoy rights as the holder of original B/L. Pursuant to Provisions of Supreme People’s Court on Several Issues concerning the Trials of Cases on Delivery of Cargo without Presentation of Original B/L, in the cases concerning compensation for losses incurred from delivery of cargo without presentation of original B/L, the person who has the right to claim for the compensation above shall be the holder of original B/L, so the export agent company who does not hold the B/L shall not have the qualification of plaintiff. Therefore, it is legally groundless and thus hardly possible for the export agent companies to shift risks by filing such litigations claiming for losses incurred from delivery of cargo without presentation of original B/L.

 

We suggest that export agent companies should prudently provide financing services as well as assess, predict and avoid financing risk when engaging in agent businesses; and export trading companies should comply with the order of trading market consciously, envisage and undertake the business risk under trading contracts, and not get involved or engaged in any illegal financing business. Under such s circumstance that only the holder of original B/L is entitled to file litigation for losses arising from delivery of cargo without presentation of original B/L, which has been stipulated expressly by PRC judicial interpretation, it is a waste of limited judicial resource and a vexatious litigation behavior that the non-holder of original B/L claims for losses incurred from delivery of cargo without presentation of original B/L. In addition, the agent ad litem shall provide specific guidelines for the parties involved, clarify the provisions of PRC laws and regulations and litigation risks, and guide the parties involved to recognize the accurate cause of action and choose the qualified defendant to sue, so as to protect the legitimate rights and interests of the parties involved.

 

(II)  Claim for delivery of cargo without presentation of original B/L while no original B/L has been surrendered for taking delivery

 

The foreign trading company A appointed B to carry a shipment of steel bars from an Asian port to an African port. For the shipment of cargo, a straight B/L was issued by B stating the shipper was A while the consignee was the African company C. Afterwards, for evading custom taxes, A issued a letter of undertaking to B requesting B to spilt the B/L into 3 separate Bs/L and change the cargo description from cargo of high tax rate to that of low tax rate with other contents unchanged. After the cargo concerned arrived at the port of destination, B delivered the cargo to the local port operator at the discharging port due to its concerns that the cargo might be confiscated by local government because of the inconsistency between the actual cargo and the description and the consignee’s delayed pickup. And the local port operator delivered the cargo to C. C showed that it would not dispose of the cargo without permission, and confirmed that it would be willing to deliver the cargo to A upon B’s instruction when A presented the original B/L. A came to realize that the cargo had been taken by C 3 month after the arrival of cargo at the destination port, and thus filed a litigation for the delivery of cargo without presentation of original B/L, requesting B to undertake the liability of compensation for breach of contract. Both courts of first and second instances opined that A could neither prove B failed or was unable to deliver the cargo, nor present the original B/L for taking delivery, and it even waived the right to take delivery at court, so its direct request against the carrier for undertaking the liability of compensation for delivery of cargo without presentation of original B/L is not in accordance with the PRC laws and shall be dismissed.

 

The courts held that it is the basis for the carrier to deliver cargo that the B/L holder presents the original B/L. The shipper or B/L holder had never presented the original B/L requesting for delivery of cargo since the cargo concerned arrived at the destination port till the litigation was filed, but instead, waived the right to take delivery and directly claimed against the carrier for loss of cargo payment, which indicated that the shipper or B/L holder had no true willingness to exercise the right to take delivery under the B/L, so the carrier shall not undertake the liability of compensation for delivery of cargo without presentation of original B/L. This case was initiated by the dispute over the sales contract of cargo between the shipper A and the consignee C: A who failed to collect the whole cargo payment and were unwilling to bear the loss of delivery or return of cargo turned to request the carrier B to undertake the liability, attempting to shift the risk under the trade contract to the carrier. Certainly, the carrier also had fault in the said case, for instance, changing the cargo description out of rules, and delivered the cargo to the consignee for evasion of the customs supervision. However, the carrier later took some remedial measures to comprehend and control the whereabouts of the cargo concerned so that it was still able to deliver the cargo at the shipper’s instruction, which avoided the risk of missing or out of control of the cargo.

 

We advise, during the process of international trade, the shipper or the holder of B/L should actively exercise its rights under B/L, continuously focus on the flowing situation of the cargo, present the original B/L for taking delivery whenever noticing that the carrier may have delivered cargo without presentation of original B/L so as to retrieve or mitigate loss. Both parties of the sales contract shall rationally evaluate the business risks under the trading contract and actively transfer and disperse the risks by insurance and other legal means instead of imputing the risks onto the carrier. And the carrier shall issue B/L or make notes on the B/L with due diligence, and shall not separate or reissue the B/L out of rules to connive the illegal act of the parties under trading contract, which would lead to disruption of trade order. The carrier shall master the situation of cargo control at all times, and take active remedial measures to retrieve the control of cargo where losing the control of cargo temporarily, so as to prevent or mitigate losses arising from delivery of cargo without presentation of original B/L.

 

(III)      Litigation filed by the alleged B/L pledgee

 

In the above two cases, the Plaintiffs alleged that they were the owners or pledgees of the cargo who were entitled to initiate the claim for compensation for loss of B/L right; as the seller of sales contract, they attempted to collect full cargo payment on time by holding the original B/L. This litigation request is related to the legal nature of B/L, that is, whether a B/L has the function to ensure the seller of sales contract to collect full cargo payment on time, and whether the right exercised by the shipper against the consignee through holding the B/L is the pledge included in the security interests upon the B/L or not.

 

Article 71 of the Maritime Code of People’s Republic of China (hereinafter referred to as the “Maritime Code”) prescribes that “A bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same. A provision in the document stating that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking.” Thus the carrier’s undertaking is for the delivery of cargo upon presentation of original B/L rather than for the seller’s collection of cargo payment under the sales contract, and the B/L shall not have the function to assure on-time collection of cargo payment. Pursuant to the Article 223 of the Property Law of People’s Republic of China[2] and Article 75 of the Guarantee Law of Property Law of People’s Republic of China[3], a B/L may serve as the object of pledge of rights, which, however, is only allowed in an accessory contract under a certain master contract in relation to the B/L itself. Where the B/L is pledged, parties shall engage a written contract stating that the pledge shall be effected with the delivery of B/L. The B/L pledge claimed by the Plaintiff has different nature from the pledge of right provided in PRC law as security interests and is incompliance with the legal provisions on documentation pledge. For the uncollected cargo payment under the sales contract, the Plaintiff’s claim for outstanding cargo payment against the carrier was in fact attempting to impute the trading risk to the carrier under the relationship of carriage of goods by sea, and thus shall not be supported.

 

We advise that the shipper or B/L holder shall understand the functions of B/L correctly. According to the Maritime Code, a B/L shall have three functions, respectively the evidence of the contract of carriage of goods by sea, the evidence of taking over or loading of the goods by the carrier, and the evidence based on which the carrier undertakes to deliver the goods against surrendering the same. The litigants shall file the litigation requests or defense opinions in accordance with the Maritime Code; otherwise, the litigation requests or defense opinions will not be supported by law. The carrier shall collect goods and issue bills of lading in due diligence and not get involved in affairs of trading contract for more freight so as to avoid unnecessarily extra and derivative risks.

 

IV. Filing Claims for Cargo Loss According to Law

-- Problems and advices on ascertainment of cargo loss

 

(I)    Ascertainment of cargo loss subject to “estoppel”

 

In a dispute over multimodal transport contract, the shipper who found the ceramic cargo in a container consigned by it was damaged when taking delivery at the destination port, issued a letter of claim to the multimodal transport operator. The letter of claim stated the process of discovering the cargo damage, the number and extent of damaged cargo, the amount and calculation basis of economic loss thus incurred. No objection was brought forward by the multimodal transport operator when receiving the letter of claim. The shipper, after its claim was rejected by the operator, filed a lawsuit before the court, and the operator made a defense that the shipper was unable to prove the scope of loss. The judgment in force holds that the multimodal transport operator who did not bring forward any objection when receiving the letter of claim, or submit any evidence to prove the residual value of the cargo, shall undertake the liability of compensation for the cargo loss indicated in the letter of claim, and finally supports all requests of the shipper.

 

A critical doctrine of common law is referred to in the ascertainment of cargo loss in the said case—“estoppel”. Literally, estoppel is a doctrine that precludes a person from denying his own representations made or acts taken previously, for the purpose to guide people to take responsibility for the representations and acts they have conducted and not overthrow them for self-interest when performing civil activities or civil procedures. Although there is no such term or specific provisions of estoppel in PRC laws and judicial interpretations, both the provision of Article 77 of the Maritime Code that “the bill of lading issued by the carrier or the other person acting on his behalf is prima facie evidence of the taking over or loading by the carrier of the goods as described therein. Proof to the contrary by the carrier shall not be admissible if the bill of lading has been transferred to a third party, including a consignee, who has acted in good faith in reliance on the description of the goods contained therein.”, and the provision of Article 85 of the Special Maritime Procedure Law of People’s Republic of China that “the parties shall not reverse his own presentations in the Maritime Accident Investigation Form and the evidences that he has presented, unless he has new evidence and have justifiable reasons for his failure to present during the time limit for presenting evidences”, reflect the spirit of the estoppel doctrine. The doctrine also has many embodiments in the general principles of Civil Procedure Law of the People’s Republic of China, e.g. principle of good faith[4] which requires the party who has conducted the act of admission shall be responsible for his own act; the principle of stable procedure that provides any party shall not take the liberty to overturn the fact he has admitted already.

 

In practices, the doctrine of estoppel as a basic principle governing civil and commercial behaviors and civil procedures has quite many embodiments in relationships of carriage of goods by sea, ships and maritime procedures which are governed by the Maritime Code, so the doctrine shall be paid sufficient attention to by parties who are engaged in marine operations or involved in maritime procedures. We suggest, parties to contract of carriage of goods by sea or multimodal transport shall timely examine the cargo condition when delivering and taking delivery of the cargo, inform the counterparty of any abnormality discovered without delay and reserve evidence accordingly, and actively express their opinions when receiving the notices of poor cargo condition or cargo damage, so as to avoid loss of right caused by the delay in exercising rights.

 

(II)  Ascertainment of cargo loss subject to “actual loss”

 

Along with the speeding up of cargo transportation, relatively shortening of nautical distances in the world, disputes over delivery of cargo without presentation of original B/L under the foreign-related contracts of carriage of goods by sea occur frequently. Seen from the situations of trials concerning such cases, the most common defense extended by the carrier is that the B/L holder has not suffered loss since it has collected the full cargo payment. In a dispute over the delivery of cargo without presentation of original B/L accepted by this court, the Defendant as the carrier had no objection to the act of delivery of cargo without presentation of original B/L, but alleged that the Plaintiff had collected full cargo payment and provided the bank slip of remittance made by the foreign consignee as evidence. However, when investigating with the receiving bank for the recently one-month transactions record of the Plaintiff, the court found there was no such remittance and thus rendered the judgment that the carrier shall bear the liability of compensation for losses arising from delivery of cargo without presentation of original B/L. Unsatisfied with such judgment, the carrier filed an appeal. During the trial in appeal, the court of second instance found out that the cargo payment remitted by the consignee did not hit the foreign exchange account of the Plaintiff, but instead hit the Plaintiff’s verification-pending account, and was later transferred by the Plaintiff to its another account. The court of second instance thus dismissed all requests of the Plaintiff.

 

A B/L is a document of title, holding which shall be regarded as the possession of the cargo concerned. Delivery of cargo to the consignee who does not hold the original B/L is equal to putting the B/L holder’s right of the cargo into a situation out of control and infringing the legitimate right enjoyed by the B/L holder; therefore, the carrier who conducts such a delivery of cargo without presentation of original B/L shall be liable to compensate. However, the assumption of such liability shall be subject to the actual loss suffered by the B/L holder. In the Convention of National Maritime Trials hosted in July 2012, the fourth civil tribunal of the Supreme People’s Court pointed out that “where the shipper or B/L holder claims for compensation in respect of delivery of cargo without presentation of B/L, if there is evidence proving that the shipper or B/L holder has collected partial cargo payment, the loss compensation amount shall be determined as the cargo value at the time of shipment plus freight and insurance and deducting the cargo payment having been collected. If there is evidence proving that the shipper or B/L holder has collected full cargo payment, the claim for compensation for cargo loss shall not be supported.” China has foreign exchange control, and checking the account transaction history of the B/L holder is a common method to ascertain whether it has collected cargo payment or not. It is noteworthy that according to the PRC regulations on settlement of foreign exchanges, the cargo payment in foreign currency remitted by the consignee could not hit the account of the export company directly, but hit the verification-pending account first, and then the payment could be transferred out by the company with the amount, time and receiving account determined at its own discretion.

 

We suggest, after the occurrence of delivery of cargo without presentation of original B/L, the shipper or B/L holder shall check its own verification-pending account and receiving account in the meantime to ascertain suffering actual loss or not, and file the litigation after confirming no cargo payment is received. Meanwhile, the carrier, after receiving the Notification on Response to Prosecution and Writ of Summons from the court, shall positively get in touch with the consignee to know remittance situation of cargo payment. Where the consignee has paid for the cargo, the carrier shall actively collect evidence, i.e. remittance voucher of the consignee, and check the verification-pending account and receiving account of the Plaintiff at the same time to ascertain whether the shipper has received the cargo payment so as to provide effective defense during the court proceeding.

 

(III)      Ascertainment of cargo loss subject to allocation of burden of proof

 

In a dispute over contract of carriage of goods by inland waterway, some packages of the raw chemicals consigned by the shipper were found wet damaged when discharged at the port of destination. After disposing of the wet damaged cargo at a reduced price, the shipper filed a claim against the carrier for the cargo loss. Both the courts of first and second instances opined consistently that the carrier shall bear the compensation liability for the wet damage, as no evidence could be produced by the carrier to prove that the wet damage was caused by the event that entitles the carrier to be exempted from liability. However, since the shipper also failed to submit any effective evidence to prove the specific damage condition and the price difference of the cargo before and after the wet damage, and the sales contract between the shipper and a third party provided by the shipper was a copy lacking of probative force, the shipper shall bear the legal consequence for incapability of adducing evidence. The courts dismissed the Plaintiff’s all requests in the end.

 

It is provided by Article 64 of the Civil Procedure Law of the People’s Republic of China that “A party shall have the responsibility to provide evidence in support of its own propositions.” And Some Provisions of the Supreme People's Court on Evidence in Civil Procedures enacted by Supreme People’s Court prescribes that “Where there is no evidence or no sufficient evidence to prove the allegation of fact brought forward by the parties involved, the negative consequences thus incurred shall be undertaken by the party which is responsible for adducing evidence.” In a contract of carriage of goods by sea, the burden of adducing evidence to prove the cargo loss shall be borne by the shipper or the consignee who claims for loss. The claimant, at first, shall prove that the cargo condition has changed during the responsibility period of the carrier, and such a change is not apparent but a change of internal quality of cargo which would lead to a decrease in value. In addition, the claimant is required to prove that the change of cargo condition would cause its economic loss and the specific amount of loss incurred. The said economic loss could be the difference of prices before and after the damage, and could be reasonable repair costs or percentage of depreciation of cargo as well.

 

Indicated by the cases above, the shipper’s proving the cargo is the premise for it to successfully claim for loss, and is also critical to the determination of the carrier’s liability  and the extent of such liability, and thus shall be paid much attention to by the both parties under the contract of carriage. We suggest that after occurrence of cargo damage, the shipper or consignee had better to inform the shipper and other relevant parties promptly for carrying out a joint inspection or survey. In the case of the carrier’s refusal in cooperation, the shipper could take the liberty to appoint a competent inspection or survey company to conduct an on-site inspection and then accomplish written opinions which may be used as the basis of claim in the future. The appraisal opinion shall clarify the situation and specific extent of cargo damage, original quality standard, quality grade after damage, etc., and attach the method, process and basis of such appraisal used by the appraisal organization accordingly. If the cargo loss is calculated on the basis of price difference, the shipper or consignee then shall positively adduce evidence to prove that they have suffered loss of acquirable interests, provide powerful evidence for determination of cargo price, including price under sales contract, written statement or opinions issued by bureau of commodity price and price appraisal organization, price transaction data indicated on large-scale transaction website, etc. The shipper or consignee shall improve evidence form and enhance the probative force of evidence as well; otherwise, it may undertake the negatively legal consequences.

 

V. Regulating Shipping Safety Order by Law

--Problems and advices on disputes arising from ship collisions

 

(I)    Ship allision accident with bridge due to ship’s fault navigation

 

In a case of dispute over damage compensation arising from allision between vessel and bridge, under the circumstance of restricted visibility on river and channel lights unidentifiable, an underway self-discharging sand barge owned by a shipping company failed to strengthen look-out, choose a safe anchoring place and proceed at a safe speed according to the traffic and transportation laws and regulations, but sailed at risk, which resulted in the vessel’s deviation from the main channel and allision with bridge piers, and thus the collapse of three bridge piers and the bridge deck. The expressway company, who had the right to collect tolls and operate the bridge, brought a lawsuit against the shipping company and the ship owner, claiming for compensations for the losses of highway tolls caused by the collapse of the bridge. Through the trail, the court held that the accident concerned was an allision of ship with bridge with unilateral responsibilities on the ship side, and rendered the judgment that the shipping company and the ship owner shall be jointly and severally liable for the losses of highway tolls which amount to more than CNY 19 million.

 

This court has tried a number of cases of disputes over damage compensation arising from vessel’s allision with bridge in recent years, and found these cases share the following characteristics and regular patterns: firstly, all accidents occurred in navigable waters of inland rivers in the Pearl River Delta; secondly, all accidents were under unilateral responsibilities on ships colliding with bridges, and were mostly caused by the faults in ship management or navigation, such as overload, overspeed, misconducts in close-quarters situations, etc.; thirdly, all accidents had caused substantial economic losses with the average total loss of millions, and even tens of millions, of yuan. The causes of vessels’ allision with bridges are intricate, including any fault or negligent act of crewmembers, shipping companies, administrators of bridges, supervision departments, etc., e.g. some crewmembers’ incapability to eliminate navigation safety problems due to low safety awareness and weak sense of duty; shipping companies’ insufficient manning of vessels, poor safety management and inadequate safety skill trainings on crewmembers; bridge administrators’ negligence in managing navigation safety facilities and failure to set navigation aids sufficiently, clearly and accurately and take necessary anti-allision measures; and channel and shoreline supervision department’ overlapped functions or defect management in some aspects.

 

We suggest the ship operators should uplift their safety awareness, eradicate overloading of vessels, and improve the management and training of crewmembers, in order to enhance their navigation skills and safety responsibility awareness. The bridge maintenance companies should strengthen their daily maintenance, and inspections on the navigation capacity of bridges, so as to ensure the normal use of navigation safety facilities and navigation aids. The channel and maritime supervision departments should reinforce their supervision and management over shorelines and vessels, intensify the penalties on acts which are hazardous to shipping safety, and guide crewmembers to abide by the shipping safety order.

 

(II)  Ship collisions due to pilots’ negligence

 

In a case of dispute over liability for damage arising from ships collision, two pilots were dispatched by the pilot station to pilot and dock the ship, but neither a pilotage plan complying with regulations was made, nor was the pilots’ duties addressed. Under the circumstance of restricted visibility on the entrance route and complicated navigation environment, the ship sailed at a sea speed over the speed limit under the pilots’ command. During the pilotage, neither the pilots had ever introduced the pilotage plan to the Master, nor had the Master reminded the pilots after he detected the risk of collision by radar. At last, the ship collided with a self-discharging sand barge that was crossing the main channel, which resulted in the sinking of the ship, 2 deaths and 3 disappearances. The direct economic loss caused by this accident was about CNY 25 million.

 

The accident was resulted from several causes, among which the problems in respect of ship pilotage are especially noteworthy. Firstly, the pilot station failed to make eligible pilotage plan and address the pilots’ duties in accordance with relevant regulations. Secondly, the communication between the pilots and the ship was inadequate, the safety awareness of whom shall be bettered. Thirdly, the Master failed to duly perform his duty in the management and navigation of the ship while the pilots were onboard. As per Article 39 of the Maritime Code, “the duty of the Master in the management and navigation of the ship shall not be absolved even with the presence of a pilot piloting the ship”. Thus, in the event that the pilot is onboard to pilot and dock the ship, the Master remains as the person liable for managing and navigating the ship. In this case, the Master neither raised any objection against the pilots’ instruction to sail at sea speed, nor suggested the pilots to take port speed. Therefore, after the collision, the liability for overspeed sailing shall still be borne by the ship.

 

We suggest the pilot stations should prefect their pilotage rules, management systems and operational guidelines, make eligible pilotage plans and address pilots’ duties before the pilotage service according to the Provisions on the Administration of Vessel Pilotage, conscientiously strengthen their trainings for pilots to comprehensively improve pilots’ safety awareness and professional skills. Masters and deck officers should enhance their communication and cooperation with pilots, and supervise pilots’ piloting. Masters should take avoiding actions directly if necessary, in order to avoid collision accidents.

 

 

(III)      Determination of losses of spare parts, accessories and supplies of ships

 

In a case of dispute over liability for damage arising from ships collision, a bulk carrier sunk due to her collision with another vessel, and was then disintegrated and removed from water. The owner of the bulk carrier (Plaintiff) initiated an action to claim compensation from the opponent vessel (Defendant) for loss of 9 items, including loss of the ship value, loss of hire and losses of engine spare parts, deck stores, motorman’s tools and supplies. The Plaintiff submitted several lists unilaterally made by itself as evidence for the losses of engine spare parts, deck stores, motorman’s tools and supplies, while the lists were rejected by the court as they were made by the Plaintiff unilaterally and no evidence was provided to prove that those supplies and spare parts were actually purchased and used for the sunken ship.

 

As per Article 65.1 of the Civil Procedure Law, “a party shall provide evidence for its claims in a timely manner”. The value of the sunken ship, loss of hire, etc. could be determined by appraisal reports issued by assessment companies or special auditor’s reports by accounting firms. However, as for loss of engine spare parts, motorman’s tools, supplies, etc., since there is no available standard for appraisals or references, the aforesaid method is inapplicable. Thus, the items lists unilaterally produced by the Plaintiff after the occurrence of the accident shall be deemed as statements presented by parties, which does not have probative force in the event of no corroboration from other evidence (e.g. purchase invoices, supplies registration form, etc.) and thus are not supported by the court.

 

We suggest the owners or operators of ships should keep financial instruments such as purchase orders of ship spares properly, and number as well as record the information of quantities, names, models and use of the purchased spare parts, data and supplies. Ship operators could also take and save photos or videos of spare parts, accessories and supplies on the ships. These methods will not only effectively evidence the claims for relevant losses after sinking of ships, but also facilitate regulating the daily management of ships.

VI. Establishing Limitation Fund of Liability for Maritime Claims According to Law

--Problems and advices on application for establishment of limitation fund

 

(I)    Objections beyond the examination scope for limitation fund cases

 

In a ship collision case, a bulk carrier collided with a fishing boat in the central Yellow Sea, which caused damage to the bow of the fishing vessel and the sinking of the bulk carrier and the cargo it carried. No casualty was caused in this accident. The owner of the fishing vessel applied to the court for constituting a limitation fund of liability for maritime claims other than those for loss of life or personal injury with regard to the maritime claims in the concerned maritime accident. The objector asserted that the owner of the fishing vessel was not entitled to constitute a limitation fund of liability for maritime claims on the basis that the fishing vessel fell outside the scope of “ship” stipulated in Article 3.1 of the Maritime Code[5] and the fishing vessel was unseaworthy. The court held that since the concerned fishing vessel was permitted to navigate and operate in greater coastal area, the subject fishing vessel was a ship suitable for sailing on the sea. Fishing vessels are not ruled out from the “ships” regulated by the Maritime Code, and this subject fishing vessel shall be deemed as a vessel entitled to liability limitation, so the objection raised by the objector was groundless. As for the objector’s view that the vessel was unseaworthy and the applicant was not entitled to liability limitation, since it involved the judgment on whether the applicant had the substantial right to have its liability for maritime claims limited, which shall be considered and determined during the substantive hearing of the case, the court dismissed the objection. The court rebutted the objections raised by the objector and permitted the applicant to establish the limitation fund of liability for maritime claims.

 

In fund cases we have tried, objectors tended to raise the following objections to assert that applicants are not entitled to constitute funds: the maritime accident was resulted from an reckless act or omission of the vessel with knowledge that such an accident would probably be caused; the vessel is fully or primarily responsible for the maritime accident; the vessel is unseaworthy; the collision accident had caused oil pollution damage and according to Article 208 of the Maritime Code, the vessel shall not be entitled to liability limitation; some credit rights involved are illimitable; etc. Such objections would usually be dismissed or rejected to examine by courts as they are beyond the examination scope for limitation fund cases. Whereas fund cases are procedural cases examining the constituting scope of funds, the application for constituting limitation fund of liability for maritime claims shall be regarded as a matter independent of substantial rights. Since the aforesaid objections raised by the objectors related to the examination on whether the applicant had the substantial right to have its liability limited, which required substantive hearing to determine whether the liable party fulfilled the conditions stipulated in Article 209 of the Maritime Code to disqualify it from invoking the liability limitation, those objections should not be tried nor determined during the stage of fund establishment. Nevertheless, as for the objectors’ view that some credit rights involved (such as contamination clean-up cost and wreckage removal cost) are illimitable, since it falls within different domain with the application for establishment of limitation fund, and the applicant’s application for constituting a limitation fund for the limitable credit rights arising from the accident does not affect the compensations related to other illimitable credit rights, the court rejected to examine this objection raised by the objector.

 

We suggest objectors should act upon Article 83 of the Interpretation of the Supreme People’s Court on the Application of the Special Maritime Procedure Law of the People’s Republic of China[6], objections should be raised with regard to the three essential factors, i.e. qualification of the applicant, the nature of the credit right involved in the accident, and the amount of the fund to be established, and objections beyond the examination scope for limitation fund cases shall not be supported by courts. The views of objectors or creditors concerning the liable party’s entitlement to liability limitation could be put forward when creditors initiate the action for claim confirmation after the establishment of funds. For cases initiated for confirmation of claims arising from the same maritime accident, in the event that a written objection to the liable party’s entitlement to liability limitation is submitted by the creditors, the court shall terminate the procedure for claim confirmation and initiate an ordinary procedure; while if partial maritime creditors do not file written objections, the court shall suspend the procedure for claim confirmation and resume it after the final ruling of the ordinary procedure has been rendered. Creditors shall adhere to the aforesaid legal procedures and protect their own civil rights and interests in accordance with law.

 

(II)  Halving the amount of limitation fund in accordance with provisions of MOT

 

In a ship collision accident, a container ship collided with a sand piling barge in the vicinity of a navigation channel of a port, causing the sinking of the sand piling barge. The owner of the container ship applied to the court for constituting a limitation fund for maritime claims liabilities other than those for loss of life or personal injury. It was ascertained that the container ship concerned was approved to provide “temporary container transportation service between domestic coastal ports”. The objector considered the concerned container ship as a vessel capable of sailing in international waters, instead of a vessel engaging in coastal transportation, and thus held Article 210.1 of the Maritime Code shall be applicable to calculate the limitation of liability. The court held that “those [ships] engaging in transport services between the ports of the People's Republic of China” stipulated in Article 210.2 of the Maritime Code shall be determined by the nature of the voyage where the maritime accident happened, rather than the area which the vessel was capable to sail in. Since at the time of the subject accident, the concerned container ship was engaging in voyage between domestic ports, which means Article 4 of the Provisions Concerning the Limitation of Liability for Maritime Claims for Ships with a Gross Tonnage Not Exceeding 300 Tons and Those Engaging in Coastal Transport Service As Well As Those for Other Coastal Operations (hereinafter referred to as the “Provisions Concerning the Limitation of Liability for Maritime Claims”) issued by the Ministry of Transport of the People’s Republic of China (hereinafter referred to as “MOT”) shall be applied to calculate the limitation. Hence, the court rejected the objector’s objection.

 

Article 4 of the Provisions Concerning the Limitation of Liability for Maritime Claims issued by MOT provides that “the limitation of liability for maritime claims for ships with a gross tonnage not exceeding 300 tons engaging in carriage of goods between the ports of the People's Republic of China as well as those for other coastal operations shall be calculated on the basis of 50% of the limitation of liability provided for in Article 3 of these Provisions, and that for ships with a gross tonnage exceeding 300 tons shall be calculated on the basis of 50% of the limitation of liability provided for in sub-paragraph (1) of Article 210 of "Maritime Code of the People's Republic of China". In limitation fund cases, the applicants and the objectors usually have great disputes on whether the MOT provisions are applicable. The applicants or the liable parties certainly intend to apply the Provisions Concerning the Limitation of Liability for Maritime Claims issued by MOT in order to halve the amounts of funds established, so that the cap of their compensations would be substantially lowered. This would significantly influence the interests of the objectors or the creditors. Where there are disparities between the navigational capacity and operation scope of the vessel and the sailing route the vessel actually performed on the voyage concerned, for instance, for inland ships sailing on Hong Kong or Macao routes, seagoing vessels sailing between coastal ports, etc., what reasons and standards should be based on to constitute their limitation funds? In the light of the Guiding Case No.16 published by the Supreme People’s Court on 31 January 2013, i.e. “the case of application of China Shipping Development Co., Ltd. Tramp Co. for constituting limitation fund for maritime claims”, the court’s effective judgment held that whether a vessel could be categorized as “those [ships] engaging in transport services between the ports of the People's Republic of China” shall not be determined by the navigable areas and navigational capacity of the vessel stated on its Seaworthiness Certificate, but instead, should be construed as ships engaged in transport services between the ports of the People's Republic of China on the accident voyage. Therefore, the nature of the transport services which was being provided on the accident voyage shall be based on to establish the funds, and therefore, the objector’s objection could not stand.

 

We suggest parties and their agents ad litem should raise their claims or objections by reference to Guiding Cases, as the court would not support those claims contrary to the essence of the Guiding Cases. Additionally, the applicants or liable parties shall be aware of the legal risk existing in provision of international transport services beyond their operation scope by vessels with lower navigational capacity, i.e. limitation for liability stipulated in Article 210.1 of the Maritime Code shall be applied, and the applicants or liable parties may not lower their compensation liability substantially by invoking the Provisions Concerning the Limitation of Liability for Maritime Claims issued by MOT.

 

(III)      Establishment of limitation fund of liability for barges

 

In a ship allision accident, a steel barge contacted the terminal due to dragging anchor during the course when it was towed by two tugboats to avoid typhoon. The allision caused damage to and shifting of the pier of the terminal, and dents and damage to the barge, but no casualties. The owner of the barge applied for constituting a limitation fund of liability for all maritime claims that may be caused by the accident concerned other than those for loss of life or personal injury. The owner also applied for calculating the limitation by the tonnage of the barge. The objector claimed to regard the barge and the two tugboats as a whole and calculate the amount of the limitation fund by the overall tonnage of the three vessels, since the unpowered barge was being towed by the two tugboats at the occurrence of the accident. According to the investigation, the barge and the tugboats were owned by different companies. While none of the owner, charterer, operator, salvor or insurer of the tugboats applied to the court for establishing limitation fund. The court of the first instance held that the principle of “one limitation for one accident” regulated in Article 212 of the Maritime Code[7] does not imply that only one liability limitation fund can be constituted for one maritime accident; since the barge and the tugboats were owned by different companies, the amount of the limitation fund applied by the owner of the barge shall be calculated by the tonnage of the barge. Thus the court of the first instance rejected the objector’s assertion. Dissatisfied with the ruling, the objector appealed against it, while the court of the second instance dismissed the appeal and sustained the original ruling.

 

Article 163 of the Maritime Code provides that “if death of or personal injury to a third party or damage to property thereof has occurred during the sea towage due to the fault of the tugowner or the tow party, the tugowner and the tow party shall be liable jointly and severally to that third party” are concerning substantial liabilities and thus shall not be applied to the examination for application for establishment of limitation fund. Hence, the overall tonnage of the vessels both towing and towed shall not be the calculation basis of the amount of the limitation fund. The limitation of liability for maritime claims is a right of defense and shall be effected upon the liable party’s request. Establishing the limitation fund of liability for maritime claims is a right rather than an obligation of the party liable for the accident, so neither are other parties entitled to require the obligee to apply for the establishment of the fund, nor do they have the rights to require any non-privies to establish the fund on behalf of the obligee, and even the court shall not take the initiative to establish the limitation fund or judges by invoking the rules of limitation fund for liabilities. In the aforementioned case, since the barge and the tugboats belonged to different companies and no evidence was provided to prove that the owner of the barge was the charterer, operator, salvor or insurer of the tugboats, the owner of the barge was not entitled to apply for establishment of the fund on behalf of the interested parties of the tugboats. The objector’s assertion that the amount of the fund to be established shall be the sum of respective compensation limitations calculated by tonnages of each vessel had no legal justification, and was not sustained by the court.

 

We suggest parties should abide by the calculation method stipulated in Chinese laws for liability limitation concerning the sea towage operation. The stipulation of Article 163 of the Maritime Code regarding joint and several liabilities due to tugowner and tow party cannot serve as the basis for calculating the amount of the fund. Only when the objector adduces evidence to prove that the owner of the barge is identical with the owner of the tugboats, or proves that the owner of the barge is the charterer, operator, salvor, insurer or other obligees of the tugboats, it becomes reasonable to calculate the amount of the fund on the basis of the overall tonnage of the barge and the tugboats.[8] When the obligees of tugboats or barge are not identical, they are entitled to constitute the limitation funds for liabilities separately based on respective tonnages of their vessels. This is not against the principle of “one limitation for one accident”.

 

VII. Filing Maritime Administrative Litigations According to Law

-- Problems and advices on filing a maritime administrative litigation

 

(I)    Fishermen’s application for inland fishing license

 

In a dispute arising out of the permission for fishing, a (temporary) fishing license was issued to the Plaintiff, the owner of a small wooden fishing boat which was built in 1996, by the Defendant, ocean and fisheries department, on 23 April 2003, on which it was indorsed that the expiry date of such license was 23 April 2006. After the expiration of such temporary fishing license, the Plaintiff applied to the Defendant for issuance of new license annually since May 2008, but failed to get permission. The Plaintiff thus brought an administrative action to this court, requesting the court to confirm that the Defendant’s refusal to issue inland fishing license to the Plaintiff was an administrative omission and was against the law, and also to order the Defendant to issue the inland fishing license to them. Upon investigation, the subject fishing boat was a “three-no” vessel (vessel with no name, certificate or port of registry) and lacked the required three certificates (i.e. valid fishing license, fishing vessel registration certificate and fishing vessel inspection certificate). Moreover, the Plaintiff failed to report its vessel during the general survey for fishing boats, and the fishing vessel inspection certificate held by it expired on 31 December 2006. According to the Notice for Checking-up and Rectification of “Three-no” Vessels and Vessels Lacking Required Three Certificates issued by the Ministry of Agriculture of the People’s Republic of China (hereinafter referred to as “MOA”), a “three-no” fishing vessel could only apply for  the (temporary) fishing license and shall accept the annual survey on time. The court held the temporary fishing license and the inland fishing license are two different types of licenses. The Plaintiff could only apply for renewal of the temporary fishing license before its expiration. Thus, the Plaintiff’s claim lacked legal basis and should be rejected. The Plaintiff, unsatisfied with the judgment, petitioned for appeal, while the court of second instance sustained the judgment of the first instance.

 

According to the Provisions on the Administration of Fishery Licensing issued by MOA, fishing licenses can be classified into seven categories. The inland fishing license applies to the permission for fishing operation in inland waters with a valid period of five years, while the temporary fishing license applies to the permission for temporary fishing operation and non-specialized vessels’ fishing operation, with its validity period determined according to actual need but not exceeding 3 years. Therefore, the inland fishing license and the temporary fishing license belong to two different categories which have significant differences in various aspects including the permitted scope, validity period, etc. Owners of “three-no” vessels could only apply for temporary fishing licenses before expiration of their original temporary fishing licenses, but not inland fishing licenses. The Plaintiff’s claim lacks legal basis and should not be supported. The temporary fishing license is a temporary permission for the fishing operation of the “three-no” vessels under administration. It is a transitional policy for checking up and rectifying the “three-no” vessels and vessels lacking the required three licenses, and also for maintaining the order of fishery production. According to the Measures for Administration of Fishery Licensing of Guangdong Province, the temporary fishing license is a license for permitting the fishery production of fishing boats, which are built without approval and should be eliminated, during their transitional stage. Since 2003, MOA started to implement the total quantity control system over the number and power of fishing boats in the whole China, including focusing on reducing the number of fishing boats with temporary fishing licenses. Therefore, the fishing boat owned by the Plaintiff who was temporarily engaged in fishing operation was a “three-no” vessel and lacked the required three licenses, which did not comply with the laws and the policies and fell within the rectification scope determined by the nation.

 

We suggested, in order to prevent losses and inconveniences caused by the nullification of licenses, fishermen shall take the initiative to apply for renewal of the licenses, including the temporary fishing licenses, before their expiration. The fishermen engaged in temporary fishing operation or non-specialized vessels’ fishing operation shall gradually sort out and discard their “three-no” fishing boats, obtain the required three licenses, and accept annual survey on time. Also, the ocean and fishery authorities shall intensify the publicity of the laws in relation to the fishing licenses, spread to the fishermen the knowledge of law in relation to the nature, validity period and effect of the seven categories of fishing licenses currently in effect in China, publicize the national policies on fishing production, and guide the fishermen to follow the orders of fishing production.

 

(II)  Scope of administrative litigations

 

In a collision accident, the outbound vessel A (“Vessel A”) navigated by the Plaintiff and her husband collided with the inbound vessel B (“Vessel B”), causing the sinking of Vessel A and the death of the Plaintiff’s husband and daughter. Through the MSA’s coordination, the Plaintiff (as Party B) signed with the owner of Vessel B (as Party A) the Compensation Agreement for Maritime Traffic Accident (hereinafter referred to as “Compensation Agreement”), agreeing that Party A shall make a lump-sum compensation to Party B, and such agreement shall not be denied once signed by both parties. Later on, the municipal MSA issued the Maritime Traffic Accident Investigation Conclusion (“hereinafter referred to as “Investigation Conclusion”), determining that Vessel A who crossed the channel shall bear the major liability while Vessel B shall bear the secondary liability. After receiving the compensation amount and the Investigation Conclusion, the Plaintiff applied for an administrative reconsideration to the provincial MSA, i.e. the Defendant of the case, claiming the Compensation Agreement was such an unreasonable nongovernmental agreement concluded under specific circumstances that had seriously infringed her economic rights and interests. Accordingly, she required an additional compensation from the owner of Vessel B. However, the Defendant held the Compensation Agreement was a civil juristic act which was not within the scope of administrative reconsideration cases, and thus decided not to accept such application. The Plaintiff, dissatisfied with such decision, brought an administrative litigation before this court with respect to the Defendant’s decision to reject the reconsideration application. The court held the dissents of the Plaintiff for both the Compensation Agreement and the Investigation Conclusion were not within the scope of administrative reconsideration cases and administrative litigation cases, and thus rejected the claim of the Plaintiff.

 

According to Article 2 of the Administrative Reconsideration Law of People’s Republic of China[9] (hereinafter referred to as the “Administrative Reconsideration Law”), the object of the administrative reconsideration was a specific administrative act. The Plaintiff’s reconsideration application and the grounds for the application were both pertaining to the reasonableness and the compensation amount of the Compensation Agreement she signed with the owner of Vessel B, but not any specific administrative acts taken by the administrative authorities. Therefore, it does not fall into the scope of administrative reconsideration case stipulated in Article 6 of the Administrative Reconsideration Law. The Defendant’s decision of rejecting the Plaintiff’s application was correct and should be sustained. The Plaintiff asked the court to withdraw the Investigation Conclusion issued by the municipal MSA. However, since the Investigation Conclusion was not issued by the Defendant, i.e. the provincial MSA, and the Decision on Rejecting the Application for Administration Reconsideration issued by the Defendant had no relation to the Investigation Conclusion issued by the municipal MSA, the court held such claim of the Plaintiff was improper. Moreover, according to the existing laws of China, the Investigation Conclusion issued by MSA was not within the scope of administrative reconsideration cases and administrative litigation cases. The Investigation Conclusion is a conclusion of the maritime investigation which constitutes a part of the maritime administrative authorities work for handling maritime traffic accident, rather than an independent and integral administrative act. It does not determine the rights and obligations of the parties and has no substantive influence to the rights and interests of the parties. In the Comments on Whether or not the Determination on the Liability in Traffic Accidents Constitutes Specific Administrative Acts and Falls Within the Scope of Administrative Litigation Cases published by the Legislative Affairs Commission of the NPC Standing Committee of the People’s Republic of China, it is held that:  “the Statement of Traffic Accident Liability Conclusion issued by the traffic administration of a public security organ may be used as evidence of the traffic accident; the act of determination of the traffic accident liability is not a specific administrative act and cannot be lodged an administrative litigation before the people’s court; if any party dissatisfied with the civil compensation in connection with the statement of traffic accident liability, the party could raise a civil action to the people’s court.” Since the Statement of Traffic Accident Liability Conclusion and the Investigation Conclusion shares the same nature as comments for traffic accident liability conclusion, they are both evidences for traffic accident cases and are non-actionable administrative acts. Pursuant to the aforesaid stipulation, in respect of the Plaintiff’s dissents against the Investigation Conclusion, the Plaintiff could neither apply for administrative reconsideration nor raise administrative litigation.

 

We suggest the victim in marine accidents should choose proper defendant(s) and requests when raising litigations to protect their legal rights and interests according to the law. If the victim dissatisfies with the compensation agreement signed with the owner of the opponent ship, instead of raising administrative litigation against the maritime administrative authorities, the victim could raise civil litigation against the opponent party, request the court to review the compensation agreement and raise additional compensation claims. The Investigation Conclusion could be used as evidence in the dispute over collision liability. And whether or not it has the probative force and how strong its probative force is shall be determined according to relevant evidence rules of civil litigations, and whether or not to adopt such evidence shall be ultimately determined by the court.

 

(III)      How should an administrative counterpart raise litigation according to the amended Administrative Procedure Law

 

The Administrative Procedure Law of People’s Republic of China (hereinafter referred to as the “Administrative Procedure Law”) was enacted in 1989 and has been praised as a milestone during the construction of legal system of China. On 1 November 2014, in the 11^th meeting of 12^th NPC Standing Committee, an amendment to the Administrative Procedure Law was passed, and the amendment will come into force on 1 May 2015. The amended Administrative Procedure Law would certainly have great influence on maritime administrative litigations. The main changes caused by the amendment to the case filing and case acceptance procedures for a maritime administrative litigation are as follows:

 

No interference or impediment of administrative authorities to court’s filing of cases. According to Article 3 of the Administrative Procedure Law, administrative authorities and the staffs thereof shall not interfere with or impede the acceptance of administrative cases by the people’s court. The purpose of this article is for protecting the administrative counterpart’s right to sue, and lowering the difficulty in putting administrative cases on record. In order to generally promote the administration by law, the Administrative Procedure Law also built a system that the chief administrative officer shall attend the court hearing and respond to the action by stipulating that “the person in charge of the administrative authorities being sued shall attend the court hearing and respond to the action; if the person in charge could not attend the court hearing, relevant staffs of the administrative authorities shall be authorized to attend.” Such system could be helpful to better the external environment of administrative litigations.

 

Expansion of scope of administrative litigation cases. According to Article 12 of the Administrative Procedure Law, the accepting scope of administrative litigation cases has expanded again. The new Administrative Procedure Law brings the administrative acts including abusing administrative powers for eliminating or restricting competition, illegal fund-raising, apportioning costs, failing to pay minimum living allowance and social insurance according to the law, etc. to the accepting scope of administrative litigation cases, and expands the actionable acts from “specific administrative acts” to “administrative acts”, which provides a smooth and effective remedy way for the administrative counterparts to protect their legal rights and interests.

 

Administrative case under the jurisdiction of the court first putting the case on record. According to Article 21 of the Administrative Procedure Law, if the plaintiff raises an action to two or more courts, the case shall be handled by the people’s court that first dockets the case. It changes the old provision of “handled by the people’s court that first receives the statement of claim”, and becomes identical with the Civil Procedure Law.

 

Extension of time limit for commencement of action to six months. According to Article 46 of the Administrative Procedure Law, except as otherwise stipulated, where a citizen, a legal person or any other organizations raises an action directly to people’s court, such an action shall be raised within six months from the date when they knows or should have known that the administrative act was taken. The new Administrative Procedure Law extends the original three-month time limit to six months and fully protects the administrative counterparts’ right to sue.

 

Oral complaint entitled to administrative counterparts. According to Article 50 of the Administrative Procedure Law, where it is really difficult for the administrative counterparts to write a statement of claim, they may file a complaint orally, and the people’s court shall transcribe the complaint into record, issue a dated certification in writing, and notify the opponent party. This stipulation further lowers the requirement for filing claims, and provides more conveniences for the relevant parties to sue.

 

People’s courts required to register cases placed on file. According to Article 51 of the Administrative Procedure Law, a people’s court receiving a lawsuit shall register it if it meets the condition for filing a lawsuit as set out in this Law, and for the cases where the people’s court could not determine whether or not it meets the conditions, the court should accept the statement of claim, issue a dated receipt in writing, and decide whether to place the case on file or not within seven days. The people’s court shall explain the reasons of their rulings not to place cases on file, and the plaintiff may file an appeal if they have any dissatisfaction with such rulings.

 

VIII. Exercise of Rights of Actions

--Problems and advices on false litigation

 

(I)    Crewmembers’ misstatement of wages by use of shipping companies’ negligence

 

In a series of cases of disputes arising out of service agreement of crewmembers, 54 crewmembers filed claims against the shipping company for the arrears of wages and submitted the wage IOUs stamped by the shipping company. The vessel on which the crewmembers serviced was arrested by the court with part of the crewmembers onboard for maintenance. With experience, the judge preliminarily determined the number of crewmembers remaining onboard the vessel did not conform to the numbers normally needed for vessels with such tonnage. Through investigation, it was found that the shipping company did not verify but directly confirmed the working time and amount of wages reported by the crewmembers when it signed the wage IOUs, causing the wrongful confirmation of the false working times reported by part of the crewmembers. After the judge explained the illegality of false litigation, this part of crewmembers withdrew their claims initiatively.

 

This is a case where the crewmembers used the negligence of the shipping company and reported false wages in order to obtain illegal profits. According to Article 22 of the Maritime Code, as a maritime lien, the crewmembers’ wages have the right to be compensated prior to the general creditor’s rights, and even prior to the maritime mortgage and possessory lien. Therefore, the crewmembers’ report of false wages would not only cause losses to the shipping company, but also damage other creditors’ interests. Also, the shipping company’s negligence on management of the vessel and the crewmembers, as well as its confession or default during the proceedings would probably encourage the false report of wages by crewmembers. Even worse, some shipping companies collude with crewmembers to make false litigations for evading debts after their vessels are arrested or under auction. Therefore, when handling such kind of cases, especially when the defendant is absent in the court hearing, the judges should strictly examine and determine the evidences, and should determine the fact of wage arrearage and the service agreement relationship between parties on basis of all evidences and facts found out by the court, rather than relying on the wage IOUs only.

 

We suggest the shipping companies shall strengthen their management on the crewmembers in their daily work, make proper attendance records of the crewmembers, and remark on the crewmembers’ service books the time of their embarkation and disembarkation with the stamp of the vessel and the signature of the master; for the litigations brought by the crewmembers, the shipping companies shall actively respond to the litigation and cross-examine the working time and amount of wages claimed by the crewmembers so as to protect their own rights and interests. According to Article 111 of the Civil Procedure Law, where a litigation participant forges important evidence and obstructs the trial of cases by the people’s court, the court may impose a fine or detention on the litigation participant according to the severity of such circumstances; and shall affix the criminal liability against the litigation participant if whose conducts are serious enough to constitute a crime. Thus, the crewmembers shall not attempt to obtain illegal interests by forging important evidence; otherwise they would be subject to relevant legal liabilities accordingly.

 

(II)  Malicious collusion between litigants to confirm ownership through litigation

 

The Plaintiff Mr. Li submitted a ship sales contract and requested the court to confirm his ownership of the vessel. During the case filing review, the judge found the Plaintiff was not familiar with the purpose, tonnage and other specific information of the vessel, and could not provide any payment voucher for the sales of the vessel, which was quite abnormal in vessel sales. And during case filing, the Plaintiff and the Defendant kept an amicable communication and had no substantial disputes or arguments. Therefore, the judge suspected this case might be a false litigation. Through detailed inquiries, the Plaintiff admitted that the ship sales contract was temporarily made up by the two parties involved and had not been actually performed. Additionally, the Plaintiff confessed it was the Defendant who instigated him to lodge the action. With the judge’s warning, stricture and education to the Plaintiff about the serious consequence of false litigation, the Plaintiff confessed their faults and dropped the claim.

 

This is a typical case where the Plaintiff and the Defendant maliciously colluded to infringe upon others’ legal rights and interests through litigation. For the dispute with a third party on the vessel’s ownership, the Defendant colluded with the Plaintiff and forged a ship sales contract, attempting to confirm the Plaintiff’s ownership to the vessel through litigation. Thanks to the strict examination of judge, this false litigation was avoided. False litigation is an important crack-down target of Chinese law, and parties engaged in malicious collusion are strictly punished under Chinese law, so as to protect the legal rights and interests of the third party and maintain the normal order of civil procedures. It is stipulated in Article 112 of the Civil Procedure Law that “where the parties, maliciously in collusion, attempted to infringe upon the lawful rights and interests of other parties by litigation, mediation or any other means, the people’s court shall dismiss their claims and impose a fine or detention on the parties according to the severity of the circumstances, and shall affix the criminal liability against the litigants if their conducts are serious enough to constitute a crime”. Thus, even if the Plaintiff successfully had the case placed on file, the court would not support his request, and would possibly impose fines or detention, or even criminal liabilities upon the Plaintiff and the Defendant. Moreover, according to Article 56 (3)[10] of the Civil Procedure Law, a third party dissatisfied with the determination of the vessel’s ownership could institute a revocation action to request the court to revise or withdraw the original judgment, ruling or mediation award. Therefore, the Parties’ attempt of filing false litigation by malicious collusion could hardly succeed.

 

We suggest the litigants of civil procedure shall act in good faith, perform their rights of actions according to the law, and avoid false litigations. The new Civil Procedure Law amended in 2012 increased punishment for false litigations and mediation by adding the Article 112. Therefore, for the dispute over the ownership of the vessel, parties concerned should seek for legal solutions through negotiation or litigations rather than filing false litigations; otherwise they would face serious legal consequences. Also, after the ownership of a vessel is fixed, the owner should have the ownership registered in time so as to prevent unnecessary disputes. And when suffering right infringement due to false litigation, the actual ship owner may institute a third-party revocation action to the court for withdrawing the effective legal documents issued in the false litigation, so as to recover his losses.

 

(III)      False litigations by lawyers and parties subject to execution for participating in distribution

 

In a case of disputes arising from a time charter party, the court supported the Plaintiff’s claims for unpaid hire of vessel upon the Defendant’s confirmation on the facts alleged and the claims made by the Plaintiff. However, this court found out afterwards that the case might be a false litigation, and thus retried the case with our capacity. Through investigation, it was known that the Defendant was the debtor subject to execution in another case. In order to participate in the distribution, the Defendant’s lawyer instigated the parties to forge evidence, fabricate debts, and file false litigations to several courts on basis of such forged evidence. Our court had therefore dismissed the Plaintiff’s claim, revoked the effective judgment of the case, and imposed a fine in sum of RMB 200,000 against the Defendant. And in another case, the lawyer of the Defendant was sentenced to imprisonment for 4 years and 6 months for the crime of impairing testifying.

 

This is a false litigation made by lawyer and litigants for avoiding execution. This kind of behavior not only harms the obligee’s lawful rights and interests, but also largely wastes the judicial and social resources, seriously impairing the judicial and society justice. It is stipulated in Article 113 of the Civil Procedure Law that “where the party against whom execution is sought, in malicious collusion with other persons, evades performance of obligations determined in legal documents by litigation, arbitration, mediation or any other manners, the people’s court shall impose a fine or detention on them according to the severity of the circumstances, and shall affix the criminal liability against them if their conducts are serious enough to constitute a crime”. Also in Article 307(1) of the Criminal Law of the People’s Republic of China, it is stipulated that: “whoever stops with violence, threat, bribe or any other methods a witness to testify or instigates others to make false testimony shall be sentenced to imprisonment for not more than three years or criminal detention; or imprisonment for not less than three years but not more than seven years when the circumstances are severe”. Thus, the Defendant and its lawyer in the subject case were accordingly given relevant civil and criminal liabilities for impairing civil action, for their conducts of evading execution and forging evidence through malicious collusion.

 

We suggest, lawyers as legal workers shall standardize their actions as agent ad litem and protect the principal’s lawful rights and interests according to the law. The lawyers shall not impair the civil procedure or instigate others to make false evidence; otherwise they would face serious legal consequences. Lawyers’ associations shall strengthen their self-discipline and lead lawyers to initiatively follow the occupational standards and professional ethics. Also, judicial administrations shall strengthen their supervision and management over lawyers and lawyers’ associations, and shall take disciplinary measures such as warnings, suspending practices, confiscating illegal gains, or canceling lawyers’ licenses, etc. against the lawyers violating laws and rules. The party against who the execution is sought shall actively fulfill their obligations determined by effective legal documents, and shall not attempt to evade execution through false litigation.

 

Foreword

 

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

 

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

 

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

 

Table of Contents

 

I General Information on Maritime Trials

Large number of cases.

Substantial growth in subject matter of new cases.

Large increase in number of cases involving containers.

Shorter average processing period of new cases of first instance.

Smaller number of enforcement cases.

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

 

II Exercise of Right of Action

—Problems with and guidance on filing a case

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

Problems with pre-litigation mediation.

Problems of agents forging signatures of litigants.

Problems with bringing a related case.

 

III Exercise of Jurisdiction

—Problems with and guidance on exclusive jurisdiction of maritime courts

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

Problems with jurisdiction after pre-litigation maritime attachment.

Problems with the relation between insurance subrogation and the jurisdiction

clause in contracts for carriage of goods by sea.

Problems with scope of cases accepted by maritime courts.

 

IV Regulating the Fishing Boat Market

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

Problems with sale of fishing boats under no written contract.

Problems with sale of fishing boats without registration of transfer.

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

 

V Regulating the Export Market

—Problems with and guidance on export trade

Problems with tax refund failure after export declaration made on purchased

documents.

Problems with payment for exported goods.

 

VI Regulating the Freight Market

—Problems with and guidance on carriage of goods by sea

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

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

Problems with the legal responsibilities after devanning.

 

I. General Information on Maritime Trials

 

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

 

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

 

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

Unit: case

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

 

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

 

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

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Fig 2: Means of closing cases of first instance

Unit: case

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

 

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

 

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

 

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

 

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

 

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

 

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

 

II. Exercise of Right of Action

-- Problems with and guidance on filing a case

 

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

 

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

 

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

 

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

 

(II)   Problems with pre-litigation mediation

 

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

 

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

 

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

 

(III)              Problems of agents forging signatures of litigants

 

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

 

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

 

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

 

(IV) Problems with bringing a related case

 

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

 

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

 

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

 

 

III. Exercise of Jurisdiction

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

IV. Regulating the Fishing Boat Market

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

V. Regulating the Export Market

-- Problems with and guidance on export trade

 

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

 

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

 

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

 

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

 

(II)   Problems with payment for exported goods

 

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

 

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

 

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

 

VI. Regulating the Freight Market

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(III)          Problems with the legal responsibilities after devanning

 

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

 

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

 

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