Plaintiff : JP Morgan Chase Bank Place of business in UK : 125 London Wall ECZY 5AJ, London, England Legal Rep. : Elizabeth Jane Nelson, Managing Director Agent ad litem : Lei Zhengqing and Huang Zhongmin with High Seas Law Firm Defendant : Seastream Shipping Inc. Domicile : 80 Broad Street, Monrovia, Liberia Legal Rep. : Nikolaos Valmas, Director Agent ad litem : Pan Youwen and Fu Boyu of China Ocean Shipping Agency Mao Ming Shuidong Port Ltd. The Plaintiff JP Morgan Chase Bank brought an action before this Court on March 22, 2002 for the ship mortgage dispute between the Defendant Seastream Shipping Inc. and the Plaintiff. This Court accepted the case in accordance with the jurisdiction under Article 6, Para. 2, (6) of the Maritime Procedure Law of the People’s Republic of China. A collegial bench was formed after acceptance to hear the case in public session on July 25, 2002. Agents ad litem Lei Zhengqing and Huang Zhongmin for the Plaintiff attended the court hearing. The Defendant did not attend the court hearing without giving justified reason although it was summoned by writ. A trial by default was made by this Court for the case in accordance with Article 130 of the Civil Procedure Law of the People’s Republic of China. Now the trial of the case has been concluded. It was alleged by the Plaintiff that on June 19, 1997 the Plaintiff and the Defendant and other four Borrowers entered into a Loan Agreement under which it was agreed that the Plaintiff should make available a loan of USD35,000,000 to the Borrowers and the five Borrowers should be jointly and severally liable for the repayment of the loan. It was also agreed under the Loan Agreement that a mortgage should be established on M.T. Mariner owned by the Defendant to secure the repayment of loan by the Borrowers. A Deed of Security was signed between the Defendant and the Plaintiff for the loan, under which the Defendant undertook to assume the guaranty liability in the event other Borrowers fail to repay the principals, interests and expenses under the Loan Agreement. On September 3, 2001, the Plaintiff and the five Borrowers entered into a Supplementary Agreement to amend partly the Loan Agreement and the last date of maturity was amended to be April 30, 2002. Up to March 5, 2002, the total amount of loan principals, interests and expenses payable by the Borrowers to the Plaintiff was USD2,519,304.89, for which the Defendant should assume joint and several liability for repayment. On July 17, 1999, the Plaintiff and the Maritime International Inc. (“MII”)-the parent company of the Defendant, entered into an Uncommitted Overdraft Facility Agreement, under which it was agreed that the Plaintiff should provide an overdraft facility to MII for USD2,000,000 and that MII should make immediate repayment of the overdraft facility on demand by the Plaintiff. On April 20, 2000, the two parties under the Uncommitted Overdraft Facility Agreement confirmed to raise the overdraft facility amount to USD3,000,000. On July 17, 2000, the Defendant and other Guarantors signed a Guarantee Contract with the Plaintiff, under which it was agreed that the Guarantors including the Defendant should assume joint and several liability for repayment of the overdraft. On July 18, 2000, the Defendant and the Plaintiff entered into a Second Priority Deed of Security under which it was agreed that the Defendant should provide a security for the repayment of the overdraft payable by MII to the Plaintiff by setting up a mortgage on M.T. Mariner owned by the Defendant. Up to March 5, 2002, the total amount of overdraft, interest and expenses payable by MII to the Plaintiff was USD4,804,072.37, for which the Defendant should assume guaranty liability. After the Plaintiff and the Borrowers (including the Defendant) signed the Loan Agreement and its amendments, Uncommitted Overdraft Facility Agreement and its amendments, the Plaintiff has fully fulfilled its contractual obligations by extending the loan to the Borrowers (including the Defendant) while the Borrowers (including the Defendant) failed to repay the loan as per the Loan Agreement or were unable to repay the balance of the loan. The Plaintiff accordingly issued notices to the Borrowers (including the Defendant) and the Guarantors, informing them that the unpaid balance of the loans was overdue. The Plaintiff asked this Court to adjudicate the Defendant to repay the loans due, overdraft, interests and expenses amounting to USD7,045,208.64, to order the Defendant to undertake the ship arrest application fee, creditors’ rights registration fee and the court fee for the subject case, and to affirm that the Plaintiff have the right of mortgage over the M.T. Mariner on basis of the above creditor’s right and that the Plaintiff have the right to share the ship auction proceeds on a priority basis. During the period for adducing evidence, the Plaintiff presented to this Court the following evidential documents: 1) Loan Agreement; 2)Supplementary Agreement to the Loan Agreement; 3) Deed of Security; 4)Registration Certificate of Ship Mortgage; 5) Uncommitted Overdraft Facility Agreement; 6) Supplementary Agreement to Amend the Uncommitted Overdraft Facility Agreement; 7) Guarantee Contract; 8) Second Priority Deed of Security; 9) Certificate of Second Priority Mortgage; 10) Loan Repayment Notice; 11) Certificate of Registry of M.T. Mariner; 12) Letter of Confirmation of debt by the Defendant and 13) Notice of repayment of overdraft. The Defendant accepted the service of court documents via its appointed agents ad litem but did not present any evidential document. Nor did it make any defence. Through the trial, the collegial bench ascertained as follows with regard to evidential documents of this case: On the face of the Plaintiff’s Evidence 1-Loan Agreement presented by the Plaintiff, there is no the signature of the Plaintiff, the Defendant or other Borrowers. Although the Plaintiff later did provide to this Court the Loan Agreement between the Plaintiff and the Borrowers as notarized by the notary public in UK, the notarized contract text did not meet the legal requirement as no legalization formalities were gone through therefore. The Plaintiff’s Evidence 2- Supplementary Agreement to the Loan Agreement and Evidence 3- Deed of Security could, by cross-verification, confirm the existence of Loan Agreement and the amount loaned by the Plaintiff to the Defendant under the Loan Agreement being USD35,000,000, the facts of which the collegial bench accepted. But the collegial bench did not accept other contents under the Loan Agreement. The Plaintiff’s Evidence 10-Loan Repayment Notice was unilaterally made by the Plaintiff. Since the Plaintiff’s Evidence 12- Letter of Confirmation of debt by the Defendant could only verify that the Plaintiff had sent a Loan Repayment Notice to the Defendant but could not verify the specific content of the Loan Repayment Notice. Therefore, the collegial bench only recognized the fact that the Plaintiff had sent a Loan Repayment Notice to the Defendant but did not recognize the content of the Loan Repayment Notice. The Plaintiff presented its Evidence 13-Overdraft Facility Repayment Notice in an attempt to prove that on July 13, 2002 it urged the agent of the Defendant to repay the overdraft. But as this document was made unilaterally by the Plaintiff and there was no other evidence to corroborate that the Plaintiff had sent this notice, the collegial bench did not recognize this evidential document. All other evidential documents were notarized by the notary public in the country of origin and legalized by Chinese’s Embassy in such country and the Defendant did not raise objection. The collegial bench through examination did not find any defect that would prejudice the evidential effect of the evidences. Therefore, all other evidential documents were recognized. On basis of the above evidential documents recognized, the collegial bench ascertained the following findings of facts: On June 19, 1997, the Plaintiff and the Defendant, Mariner Shipping Inc., Montemar Shipping Inc., Seaward Shipping Inc. and Taramar Shipping Corporation entered into a Loan Agreement, under which it was agreed that the Plaintiff would make available a loan of USD35,000,000 to the above five Borrowers. On September 3, 2001, the Plaintiff and the above five Borrowers including the Defendant signed a Supplementary Agreement to the Loan Agreement, under which it was confirmed that up to even date with the signing of the Supplementary Agreement to the Loan Agreement, the amount of loan extended was USD10,130,987. The Supplementary Agreement made part amendments to the Loan Agreement and the way of loan repayment was agreed as follows: the first installment through the sixth installment should be made consecutively. The first two repayment installments should be USD843,250 respectively and the following four repayment installments (including the sixth installment) should be USD593,250 respectively. The last sum to be repaid would be USD6,071,487. The last date of maturity was amended to be April 30, 2002. The first repayment installment should be made on September 15, 2001 and the following each repayment installments should be made at intervals of 45 days. In the Supplementary Agreement to the Loan Agreement, the Borrowers also agreed to pay all expenses, costs and disbursements (including lawyer’s fee) incurred by the Plaintiff for preparing, negotiating, securing and implementing or attempting to enforce the Supplementary Agreement to the Loan Agreement. On June 27, 1997, the Plaintiff and the Defendant signed a Deed of Security, under which it was agreed to establish a mortgage of first priority over M.T. Mariner owned by the Defendant in favor of the Plaintiff to secure the repayment of the loan of USD35,000,000. On June 27, 1997, the Plaintiff and the Defendant went through the ship mortgage registration formalities for M.T. Mariner with Bahamas Ship Registrar in London by virtue of the above mentioned Loan Agreement and Deed of Security. In the Registration Certificate of Ship Mortgage, it was stated that the Defendant established a mortgage over the 64 shares owned by the Defendant in M.T. Mariner and her crafts in favor of the Plaintiff to secure the repayment of sums currently due or owing to the Mortgagee under the Loan Agreement, Deed of Security and other guarantee documents including the principals, interests and other sums which can be specified. On July 7, 1999, the Plaintiff and MII signed an Uncommitted Overdraft Facility Agreement, under which it was agreed that the Plaintiff should provide an overdraft facility to MII for USD2,000,000 and that MII should make immediate repayment of the overdraft on demand by the Plaintiff. On July 17, 2000, the Defendant and other Guarantors Mariner Shipping Inc., Montemar Shipping Inc., Seaward Shipping Inc. and Taramar Shipping Corporation entered into a Guarantee Contract with the Plaintiff, under which it was agreed that the five Guarantors including the Defendant should assume joint and several liability for repayment of the overdraft in amount of USD2,000,000. On July 18, 2000, the Defendant and the Plaintiff entered into a Second Priority Deed of Security under which it was agreed that the Defendant should provide a security for the repayment of the above mentioned overdraft by setting up a mortgage on M.T. Mariner owned by the Defendant. On July 18, 2000, the Defendant went through the ship mortgage registration formalities for M.T. Mariner with Bahamas Ship Registrar in London by virtue of the above mentioned Uncommitted Overdraft Facility Agreement and Second Priority Deed of Security. In the Registration Certificate of Ship Mortgage, it was stated that the Defendant established a mortgage over the 64 shares owned by the Defendant in M.T. Mariner and her crafts in favor of the Plaintiff to secure the repayment of sums currently due or owing to the Mortgagee under the Uncommitted Overdraft Facility Agreement, Second Priority Deed of Security and other guarantee documents including the principals, interests and other sums which can be specified. On September 3, 2001, the Plaintiff and MII, the Defendant, Mariner Shipping Inc., Montemar Shipping Inc., Seaward Shipping Inc. and Taramar Shipping Corporation signed a Supplementary Agreement to the Uncommitted Overdraft, under which it was confirmed that up to even date with the signing of the Supplementary Agreement to the Uncommitted Overdraft Facility Agreement, the total amount of overdraft extended to MII was USD1,993,615.64 and the Uncommitted Overdraft Facility Agreement was partly amended. On March 7, 2002, the Plaintiff sent repayment notices to the Defendant for the above two loans. On April 5, 2002, the Defendant sent a reply (Letter of Reply) to the Plaintiff indicating that, the Defendant confirmed receipt of the repayment notice sent by the Plaintiff on March 7, 2002 in accordance with the Loan Agreement dated June 19, 1997 and the Guarantee Contract dated July 17, 2000 and confirmed that up to March 15, 2002 the overdraft amount due under the Uncommitted Overdraft Facility Agreement was USD4,804,072.37 and the amount due under the Loan Agreement was USD2,241,136.27. The Defendant confirmed that the above loans remained un-repaid up to the present and also confirmed its joint and several liability with other Borrowers for the above loans. The Defendant believed that it was impossible for other Borrowers to repay the loan after this ship was sold. The Defendant authorized the Plaintiff to present this Letter of Confirmation to the court in Guangzhou, China. The Defendant did not intend to defend against the claims pursued by the Plaintiff before the court in Guangzhou against M.T. Mariner. The Defendant had no sufficient fund to repay the above loans and did confirm not to raise any objection to the Plaintiff’s application for judicial sale of M.T. Mariner by the court in Guangzhou. The Defendant authorized its local agent-China Ocean Shipping Agency Mao Ming Shuidong Port Ltd. to accept the service of court documents for arresting and auctioning M.T. Mariner, judgment and writs etc. During the court hearing, the Plaintiff confirmed that the amounts of the two loans (including the loan, overdraft and relevant expenses) were free from any mistake. The ship’s registration document of M.T. Mariner as excerpted by Bahamas Ship Registrar in London on February 8, 2002 showed that M.T. Mariner was a steel tanker built in South Korea in 1976 with gross tonnage being 130,421MTs and net tonnage being 100,598MTs. She was registered in Nassau, Bahamas. The total 64 shares on the vessel were fully owned by the Defendant. Three mortgages were separately established on the ship: mortgage over the 64 shares of the ship on June 27, 1997 to secure the repayment of the loan and interests to the Plaintiff; mortgage over the 64 shares of the ship on July 18, 2000 to secure the repayment of the loan and interests to the Plaintiff and the mortgage over the 64 shares of the ship on September 20, 2001 to secure the repayment of debt and interests to Puertollano Compania Naviera S.A. The mortgage registration document did not state clearly the amount of debt secured, the interest rate and the repayment period. The Plaintiff presented the legalized notarial certificate issued by Richard John Saville-the notary public in London which verified the authenticity of the above ship mortgage document, certified the compliance of the ship mortgage document with the currently effective legislation of Bahamas and proved that it was made in accordance with the requirement of Bahamas Ship Registrar in London and that it was correct and valid. On March 14, 2002, the Plaintiff filed an application with this Court for arresting M.T. Mariner on the ground that the Defendant delayed in repaying USD7,323,377.26 as secured loans and interests to the Plaintiff and demanded a security of USD7,800,000. On March 15, this Court handed down a ruling, approving the Plaintiff’s application for arrest of ship and ordering the Defendant to provide a security of USD7,800,000 within 30 days. M.T. Mariner was arrested at the same day. On March 22, after the Plaintiff brought the subject case before this Court, the Plaintiff applied for auctioning M.T. Mariner on the ground that the Defendant refused to provide security as ordered and that it was unsuitable for M.T. Mariner to remain under arrest. After examination, this Court made a ruling on March 29 to sell the ship by auction and keep the auction proceeds. On May 9, M.T. Mariner was sold by this Court by auction and it was bought by the Plaintiff at the price of USD5,940,000. On May 14, M.T. Mariner was handed over by this Court to the Plaintiff in the waters off Mao Min Shuidong port and the arrest of the ship was lifted. The Plaintiff paid in advance RMB5,000 to this Court as application fee for arresting and auctioning M.T. Mariner. During the period for the auction public notice was posted. The Plaintiff paid RMB500 to this Court as claim registration fee to register its claim in order to share the ship auction proceeds. This Court incurred ship keeping and watching fee, auction fee and Customs tonnage in a total amount of USD678,628.17 for arresting and auctioning M.T. Mariner. The balance of the auction proceeds of M.T. Mariner was USD5,261,371.83 after the above mentioned arrest and auction fees and tonnages were deducted. The collegial bench holds unanimously that this was a case of dispute over ship mortgage involving foreign elements. In accordance with Article 271 of the Maritime Code of the People’s Republic of China, “the law of the flag state of the ship shall apply to the mortgage of the ship”. In this case, the flag state of the mortgaged M.T. Mariner was Bahamas. Therefore Bahamas Merchant Shipping Act shall apply to the resolution of the dispute over ship mortgage. The Plaintiff presented to this Court the English text of Bahamas Merchant Shipping Act which had been notarized by notary public in Bahamas and legalized by Chinese Embassy in Bahamas. The Act was certified to be promulgated on November 29, 1976 with effect from December 31, 1976 and remained effective at the material time. The Chinese translation of “Mortgage” (from Article 33 through Article 41) was certified to be true to the original language by notarization. The Plaintiff and the Defendants etc. Borrowers signed the Loan Agreement on June 19, 1997, under which the Borrowers including the Defendant borrowed a loan of USD35,000,000 from the Plaintiff. The Plaintiff and MII entered into the Uncommitted Overdraft Facility Agreement on July 7, 1999, under which the Plaintiff agreed to provide an overdraft of USD2,000,000 to MII. The Plaintiff and the Defendant signed Guarantee Contracts for the two loans respectively, under which the Defendant agreed to assume guaranty liability for the two loans and joint and several liability for repayment of the loans. According to the Supplementary Agreement to the Loan Agreement, the period for repayment of the last installment would be expired on April 30, 2002. According to the Uncommitted Overdraft Facility Agreement, the overdraft loan would become due on demand by the Plaintiff. The Plaintiff sent repayment notice to the Defendant on March 7, 2002. Therefore, the Defendant should have repaid in full the overdraft facility on March 7, 2002. All contracts/agreements involved in this case are the declaration of true will of the parties. They did not harm the public interest of the People’s Republic of China or violate the compulsory provisions of law. Therefore, those contracts/agreements are lawful and valid and should be binding upon the parties. The parties should perform their obligations under such contracts/agreements. Although the Plaintiff did not provide the evidence to prove the exact amount of loans, the Plaintiff and the Defendant did confirm that up to March 15, 2002 the amounts of the two loan principals, interests and relevant expenses owed by the Defendant to the Plaintiff were USD4,804,072.37 and USD2,241,136.27 respectively, totaling USD7,045,208.64. The Defendant should repay in full the above mentioned debts. The Defendant established mortgage over its M.T. Mariner to secure the repayment of the two loans and went through mortgage registration formalities with the Ship Registrar of flag state-Bahamas Ship in London. Bahamas Merchant Shipping Act does not provide for other indispensable requirements except the time for registration. The Act provides in Article 33, Para. 1 and Para. 2, that “the registered ship or her shares can be the security for loan or other valuable consideration. When the required mortgage document is presented, the initial registrar should allow the registration as a record. The registration of mortgage should be made in the sequence following the filing of application for registration before the initial registrar. The registrar should make a memorandum to announce the mortgage that has been registered and indicate the actual time of registration in the record.” Articles 35 provides that “If more than one mortgages have been registered over the same ship or same share, no matter whether there is express, implied or constructed notice, the sequence of priority should be determined according to the date of registration, not the date of mortgage.” Article 37 provides that “each registered mortgagee shall have the right to dispose of the ship or shares within the limit of his registered scope and issue valid receipt for purchase price. If more than one mortgages have been registered over the same ship or same share, without the unanimous consent of the previous mortgagees, the subsequent mortgagees may not sell the ship or the shares, except as per the ruling of a competent court.” According to the ship mortgage registration in Bahamas Ship Registrar, the ship mortgages established to secure the repayment of the two loans in the present case were of first mortgage and second mortgage in sequence. The registration of the two ship mortgages did not violate the provisions of Bahamas Merchant Shipping Act in respect of ship mortgage. The relevant legalized notarial certificate also proved that registration of the two mortgages complied with the law of Bahamas and was valid. In accordance with the above provisions of Bahamas Merchant Shipping Act, the Plaintiff had the first priority and second priority mortgages over M.T. Mariner for the two loans of USD2,241,136.27 and USD4,804,072.37 invovled in the case before she was auctioned by this court. Because the Defendant failed to pay up part of the loans secured by the above ship mortgages after the loans become mature, the Plaintiff had the right to apply to the court for auctioning M.T. Mariner and to have its loans paid in priority from the auction proceeds of M.T. Mariner. To sum up, in accordance with Section 35 and Section 37 of Bahamas Merchant Shipping Act, the judgment is handed down as follows: The Defendant Seastream Shipping Inc. is ordered to pay USD7,045,208.64 to the Plaintiff JP Morgan Chase Bank to discharge the loan, overdraft facility, interests and relevant expense. The Plaintiff JP Morgan Chase Bank on account of its claims had the right of mortgage with respect to M.T. Mariner before this Court sold her by auction and should share the auction proceeds of M.T. Mariner on a priority basis. The court fee in amount of RMB302,386, ship arrest application fee in amount of RMB5,000 and creditor’s right registration fee in amount of RMB500 should be undertaken by the Defendant. As the above fees had been advanced by the Plaintiff, this Court will not refund them and the Defendant should directly pay these fees to the Plaintiff. The above monetary obligations should be fulfilled within 10 days from the date this judgment takes effect. If not satisfied with this judgment, either party can make appeal to the Higher People’s Court of Guangdong Province within 30 days upon service of this judgment by filing with this Court the Statement of Appeal in the number of the counter parties. Presiding Judge : Zhan Simin Judge : Xian Jiankang Acting Judge : Yu Xiaohan July 25, 2002 Clerk : Mo Fei

Plaintiff (defendant in counterclaim): Zhao Yangsheng, male, born on November 19, 1968, Han nationality, living in Zhaozhai Village, Naozhou Town, Dong Hai Dao Economic Development Zone, Zhanjiang City Plaintiff (defendant in counterclaim): Liang Hongfang, male, born on June 14, 1959, Han nationality, living in Yingming Village, Naozhou Town, Dong Hai Dao Economic Development Zone, Zhanjiang City Agent ad litem acting for above two plaintiffs: Zhong Yonghua, lawyer of Hai Dong Law Firm, Zhanjiang Agent ad litem acting for above two plaintiffs: Qin Guanquan, lawyer of Guangdong Yue Hai Law Firm Defendant (plaintiff in counterclaim): Guangzhou Gao Hua Yachts Manufacturing Co., Ltd. Address: Shenjing Village, Changzhou Town, Huangpu District, Guangzhou Legal representative: Qiu Zhanwei, chairman Agent ad litem: Zhang Zhaohui, lawyer of Guangzhou Zhong Lian Law Firm Agent ad litem: Chen Leiming, assistant lawyer of Guangzhou Zhong Lian Law Firm With regard to the case of dispute arising from the contract of construction filed by the plaintiffs Zhao Yangsheng and Liang Hongfang against Guangzhou Gao Hua Yachts Manufacturing Co., Ltd. (hereinafter referred to as “Gao Hua Co.”), this court accepted it for handling on October 18, 2000 and thereafter formed a collegial bench in accordance with law, and organized the parties concerned to exchange evidences on November 14. Gao Hua Co. raised a counterclaim on November 27. This court organized the parties to exchange evidences for the second time on December 14 and held open hearings on the same day. The plaintiffs Zhao Yangsheng and Liang Hongfang and their agents ad litem Zhong Yonghua and Qin Guanquan, as well as the agents ad litem of the Defendant Gao Hua Co. Zhang Zhaohui and Chen Leiming attended the court hearings. Trial of this case has now been finalized. The Plaintiffs Zhao Yangsheng and Liang Hongfang complained that on February 21 and June 25, 1998 respectively they entered into a Contract for Construction of 56-Seat High Speed Reinforced Glass Passenger Ship and a Supplementary Agreement thereof with the Defendant, appointing the Defendant to construct two high speed passenger ships for the Plaintiffs and to deliver the ships to the latter within 100 working days as of the date of signing of the Contract. On January 22, 1999, the Defendant delivered the ships. The Plaintiffs named the two ships “Fei Shun” and “Fei Li” and put them into operation. The average daily revenue of each ship from operation amounted to RMB 5,000. On September 19, 2000, in order to recover the outstanding building costs for the ships, the Defendant detained privately “Fei Shun” and diesel oil valuing RMB 1,400, the electric drills valuing more than RMB 500, as well as three sets of HF walkie talkie valuing RMB 6,000 onboard the said ship. For purpose of retrieving the aforesaid properties, the Plaintiffs incurred traveling expenses in amount of RMB 15,000. Furthermore, the Defendant’s unauthorized detainment of the ship had also inflicted the following losses upon the Plaintiffs: RMB 7,500 resulting from idleness in work, RMB 613/month of navigation management fee, RMB 2,100 of berthage, RMB 1,000 of tax and passengers’ harbor dues, RMB 5,000/day of operating costs, and RMB 7,500 of wages for the crewmembers. The Plaintiffs requested the court to order the Defendant to: (1) immediately return the passenger ship “Fei Shun” or to make a compensation for the cost of the ship at RMB 880,000; (2) return 372 kilograms of diesel oil, 3 sets of HF walkie talkie, 2 sets of maintenance and repairing tools, etc.; (3) indemnify direct operational losses in amount of RMB 150,000, traveling expenses at RMB 15,000, losses due to idleness in work at RMB 7,500, navigation management fees at RMB 613, berthage at RMB 2,100, and expenses of tax and passengers’ harbor dues at RMB 1,000. Within the time limit for adducing evidences, the Plaintiffs submitted the following evidences: (1) Contract for Construction of 56-Seat High Speed Reinforced Glass Passenger Ship and the Supplementary Agreement thereof; (2) Certificate for Delivering and Taking Delivery of Ships; (3) Certificate on Survey of Ship; (4) Certificate on Nationality of Ship; (5) Certificate for Transportation Operations of Ship; (6) receipts of building costs for the ships; (7) written notes of answers to inquiries by the local police station of Shalan Town, Taishan City dated September 19, 2000; (8) receipts of passengers’ harbor dues and berthage of “Fei Shun” and “Fei Li” from May to July, 2000; (9) Bill of Dispatch of Diesel Oil issued by Guangdong Provincial Petroleum Enterprises Group, (Zhenjiang) Jinda Development Co. to Hong Da Co.; (10) payroll of “Fei Shun” from January to September, 2000; (11) Statement of Income and Expenditure of “Fei Shun” from January 1 to September 15, 2000; (12) receipts of navigation management fees of “Fei Shun” and “Fei Li” for December 1999; (13) invoices for wharf hires of “Fei Shun” and “Fei Li” from October 1999 to February 2000; (14) Invoice dated July 30, 1999 of air-conditioners purchased; (15) 6 receipts of maintenance and repairing fees incurred by “Fei Shun” and “Fei Li” from March to October 1999; (16) receipts of harbor dues of “Fei Shun” for August and December 1999; (17) evidence of sales of oil issued by Xia Hai Gas Station to Naozhou fleet; (18) 24 pieces of invoice for traveling fees; (19) 30 pieces of invoice for costs of accommodation and meals. The Defendant Gao Hua Co. defended and counter-claimed that it was reasonable and legitimate for it to take back one of the two ships in accordance with the provisions of Paragraph 2 of Article 7 of the Supplementary Agreement, because the two Plaintiffs had delayed payments of the construction expenses of the two ships for a long time. Therefore, the Plaintiffs are not entitled to demand return of the ship. Besides, the names of owners of the “Fei Shun” appearing in different certificates are not consistent, varying from ZhaoYangsheng, Liang Hongfang to Hong Rongliang and so on. Hence, the Plaintiffs’ right of action is not certain. As for losses in operations, which could only be incurred upon operators of ships, that is, passenger transport companies, the Plaintiffs, alleged to be the shipowners, are not entitled to claim for compensation. Moreover, the evidences and materials produced by the Plaintiffs are not directly related to this case. Therefore, the Defendant requested to dismiss the claims of these two Plaintiffs. The Defendant, acting in conformity with the above-mentioned construction Contract and the Supplementary Agreement thereof, constructed and delivered two passenger ships to the Plaintiffs. The Plaintiffs, however, failed to pay, as had been agreed upon, the ship constructing sums progressively as scheduled. On January 23, 1999, the two parties sat to calculate the accounts for constructing the ships, ascertaining that the Plaintiffs still owed the Defendant RMB 510,000, and mutually agreeing that the Plaintiffs shall pay RMB 150,000 to the Defendant by the end of March 1999 while the remaining sum shall be paid up as provided for in the Contract. However, by May 10, 2000, the Plaintiffs paid only RMB 190,000 to the Defendant, with the remaining RMB 320,000 not being paid up to the present. The Defendant requested the court to order the Plaintiffs: (1) To pay the cost of construction of ships in amount of RMB 320,000 overdue; (2) To pay the penalties in amount of RMB 80,000 for overdue payment (by calculating on basis of 0.03% per day from March 30,1999 up to the date of actual payment); (3) To compensate the Defendant for his losses in amount of RMB 20,000 resulting from this litigation. The Defendant Gao Hua Co. submitted the following evidences and materials within the time limit for adducing evidences: (1) Contract for Construction of 56-Seat High Speed Reinforced Glass Passenger Ship and the Supplementary Agreement thereof; (2) Certificate for Delivering and Taking Delivery of Ship; (3) the IOU issued by the Plaintiffs on January 23, 1999. Responding to the counterclaim of the Defendant, the Plaintiffs Zhao Yangsheng and Liang Hongfang argued that the Defendant failed to deliver the ships as scheduled with delay for 100 working days, nor did it issue invoices for the payment of the ship building costs as contracted. And less than one year after delivery of the two ships, the air-conditioning systems and the stern shafts of the two ships broke down and the Defendant failed to bring them back to normal operations. As a consequence, the Plaintiffs had to pay RMB 29,199 for the repairs thereof. Considering that the Defendant had seriously violated the contract and agreement, the Plaintiffs was therefore entitled to suspend paying for the rest of the costs for ship construction and to offset the repairing costs. The provisions of Paragraph 2 of Article 7 of the Supplementary Agreement are in violation of the relevant provisions of law and the principle of fairness and, therefore, should be regarded as an invalid clause. In view of that, it was illegal for the Defendant to detain the ship based on that clause. And the request for compensation of penalties and losses resulting from the litigation as claimed by the Defendant are groundless in law and in facts. While being cross-examined in the court hearings, neither parties contested the evidential documents such as the Contract for Construction of 56-Seat High Speed Reinforced Glass Passenger Ship and the Supplementary Agreement thereof, the Certificate for Delivering and Taking Delivery of Ship, the receipts of payments for costs of ship construction, the IOU, the various certificates of the “Fei Shun” and the written notes of answers to inquiries by the local police station of Shalan Town, Taishan City, etc. Therefore, the collegial bench confirmed the foregoing documents. The following facts have been ascertained with the help of the above confirmed evidences: On February 21, 1998, the two Plaintiffs, as Party A, and the Defendant, as Party B, entered into the Contract for Construction of 56-Seat High Speed Reinforced Glass Passenger Ship. On June 25, the two parties to the Contract further concluded a Supplementary Agreement. According to the Contract and Agreement, Party B shall construct two high speed passenger ships at the cost of RMB 880,000 each for Party A and shall deliver them to Party A within 100 working days as of the date of signing the Contract. Should Party A fail to effect the payments of constructing costs progressively as scheduled in the Contract, he shall have to pay a fine for delaying payment at 0.05% per day of the sum payable in the corresponding period. The place of delivery of the ships was the wharf of Party B. Party B guaranteed a one-year free maintenance for the ship structure as of the date of going out of the dockyard of the ship and a two-year free maintenance for serious problems with respect to the ship structure. Subparagraphs 2 & 3 of Article 4 (II) of the Supplementary Agreement provide that upon delivery of the ships, Party A shall pay to Party B RMB 1,000,000 and the remaining sum shall be paid off within 6 months as of the date of going into operation of the ships by Party A. Paragraph 2 of Article 7 of the Supplementary Agreement further stipulates that should Party A fail to pay off the remaining sum as agreed on in the Contract 6 months after the commencement of operations, and should such failure remain for another 6 months, Party A shall unconditionally return one of the ships to Party B. On January 22, 1999, the representatives for the Plaintiffs and the Defendant delivered and took delivery of the ships at the wharf of the Defendant, and concluded a Certificate for Delivering and Taking Delivery of Ship, which stated that the Plaintiffs had checked and accepted the high speed passenger ships constructed by the Defendant. On the 23rd, the two parties sat to calculate the accounts in relation to the costs of construction of ship. Based on the result of such settlement, the Plaintiffs issued an IOU, stating that they still owed RMB 510,000 as cost of construction of ships to the Defendant and promising to effect the payment in amount of RMB 150,000 by the end of March 1999 and to pay the rest as provided for in the Contract. Thereafter, the Plaintiffs named the two ships “Fei Shun” and “Fei Li” respectively and went through formalities for obtaining various certificates for the ships. The Certificate for Registry of Ship Ownership of the “Fei Shun” states that the owners are Zhao Yangsheng, Liang Hongfang and Hong Rongliang. The Certificate for Transportation Operations of Ship states that the operator of the ship is Zhanjiang Naozhou Passenger Transportation Co. and the date of issuance is February 8, 1999. But in fact, Zhanjiang Naozhou Passenger Transportation Co. is merely the nominal operator of the “Fei Shun”. The actual operators of the ship are the Plaintiffs, who pay management fees to the said company. The Plaintiffs paid RMB 10,000 on April 5, 1999, RMB 20,000 on April 14, RMB 20,000 on May 13, RMB 100,000 on June 10, RMB 30,000 on June 18 and RMB 10,000 on May 10, 2000, totaling RMB 190,000, to the Defendant. In order to recover the remaining sum, the Defendant detained the “Fei Shun” at Shanzui Wharf Shalan Town, Taishan City on September 19. Responding to such detainment, Mr. Qiu Zhanwei, Chairman of the Defendant, and the Plaintiff Zhao Yangsheng respectively went to the police station of Shalan Town to report the case, requesting the local police station to handle it. The police station considered the Defendant’s detaining the ship in reliance upon the provisions of their Agreement, namely, Party B is entitled to take back one ship should Party A fail to effect payment of ship constructing costs in due course, to be a civil dispute. Also taking into account that Zhao Yangsheng hoped to settle the dispute by himself and the Defendant, the police station dismissed the case. Thereafter, the Defendant steered the “Fei Shun” back to his wharf and kept it under custody afloat there. With respect to the disputes between the two parties over the facts of this case, the collegial bench ascertains the following: I. Whether there were any diesel oil, electric drills and walkie talkies onboard The Plaintiffs furnished the Diesel Oil Dispatch Bill issued by Guangdong Provincial Petroleum Enterprises Group, (Zhenjiang) Jinda Development Co. to Hong Da Co. and the evidence for sales of oil issued by Xia Hai Gas Station to Naozhou fleet on August 1, 2000 to evidence the existence of diesel oil, electric drills and walkie talkies onboard. The Defendant contended that there was no sign whatsoever on the Diesel Oil Dispatch Bill or the evidence for sales of oil indicating that they were relevant to this case. The collegial bench adopted the Defendant’s argument and held those evidences having no connection with this case and thus having no effect of proving for this case, and refused adoption of those evidences. II. With regard to losses in operations and in charges and dues For purpose of proving that the detainment of the “Fei Shun” had incurred losses in operations and in charges and dues totaling RMB 161,213, the Plaintiffs produced the following evidences and documents: receipts of passengers’ harbor dues and berthage of the “Fei Shun” and “Fei Li” from May to July 2000; payroll of the “Fei Shun” from January to September, 2000; Statement of Income and Expenditure of the “Fei Shun” from January 1 to September 15, 2000; receipts of navigation management fees of the “Fei Shun” and the “Fei Li” in December 1999; invoices for wharf dues of the “Fei Shun” and the “Fei Li” from October 1999 to February 2000; and receipts of harbor dues of the “Fei Shun” in August and December 1999. The Defendant held that as the payroll and the Statement of Income and Expenditure were made by the Plaintiffs themselves, without being authenticated by relevant legal authorities, they could not reflect the real situation and were thus without any evidencing force. Moreover, none of the passengers’ harbor dues, berthage of the ship, navigation management fees, wharf dues and harbor charges and so on as shown on the receipts and evidences occurred during the period when the “Fei Shun” was taken back and, therefore, they all had no connection with this case. The collegial bench adopted the view of the Defendant and held that the evidences produced by the Plaintiffs were not directly connected with this case. Hence, the collegial bench shall not adopt those evidences of the Plaintiffs. III. Regarding the cost of the air-conditioners and the charges for repairs thereof The Plaintiffs submitted the Invoice for purchase of air-conditioners dated July 30, 1999 and 6 receipts of repair charges of the “Fei Shun” and “Fei Li” on slipway incurred during March-October 1999 to support their claim that the relevant expenses in amount of RMB 29,199 should be deducted from the ship-construction costs. The Defendant refuted that the cost for air-conditioners and the charges of repairs of the ships do not fall within the agreed scope of guaranteed free maintenance of the ship’s structure, and therefore should be borne by the Plaintiffs themselves. The collegial bench held that although the Defendant’s name and address were written on the invoice for purchase of air-conditioners, which seemingly indicated that this sum was paid for and on behalf of the Defendant, yet, the Plaintiffs failed to adduce evidence to prove that the Defendant approved of or appointed them to purchase the air-conditioners on his behalf. Even though the air-conditioners in question were actually used by the “Fei Shun” or the “Fei Li”, they were beyond the range of free maintenance of the ship’s structure as mutually agreed. The Items of Charge on the receipts of on-slipway repairs respectively noted “Individual repairs charges” or “on-slipway repairs charges” for the “Fei Shun” or the “Fei Li”, which was not sufficient to prove that the items of repairs fell within the scope of guaranteed free maintenance in respect of ship’s structure as previously agreed. Therefore, the Defendant’s confutation was tenable and the collegial bench shall not accept the relevant evidencing documents produced by the Plaintiffs. IV. About the transportation expenses and the accommodation costs The Plaintiffs submitted 24 invoices of transportation expenses and 30 invoices of costs of accommodation and meals to prove that they had incurred expenses for transportation, accommodation and meals amounting to RMB 15,000 in their attempts to get back their ship under detainment. The Defendant held that there were no records on the above receipts showing the time and purposes for which the charges were actually incurred, so the said receipts were irrelevant to this case. The collegial bench supports the Defendant’s point of view and does not adopt those untenable evidences submitted by the Plaintiffs. Mr. Hong Rongliang has declared to waive his substantive rights and declined to attend the court hearings of this case. Therefore, the collegial bench shall not summon him to the hearing. In summary, the collegial bench unanimously holds that: This case is categorized as a case of dispute over the contracts for construction of ships. Although the Plaintiffs initiated this litigation on the ground of dispute over damages resulting from the detainment of ship, yet the essential nature of this dispute over ship detainment is that over effectiveness of the clause regarding the terms of payment of ship-construction costs in the Contract of construction, which belongs to dispute over contract rather than controversy over act of tort. Mr. Hong Rongliang, though registered to be one of the owners of the ships in question, was not a party to the Contract of construction or the Supplementary Agreement. In addition, he has declined to attend the hearings of this case, and has also declared to waive his substantive rights with respect to this case. Hence, his absence in the court hearings does not affect the rights and obligations of the parties to this case and the normal handling of this case. The parties to the ship-construction Contract and its Supplementary Agreement are eligible and their contents are in accordance with law. They should be deemed to have reflected the true intents of the parties to them, and is thus ascertained as effective. The provision of paragraph 2 of Article 7 of the Supplementary Agreement, to the effect that should the Plaintiffs fail to pay off the ship-construction costs within the time limit, they should unconditionally return one of the ships to the Defendant, is a clause in respect of liabilities for breach of contract. The wording of such clause is definite and specified and is binding upon both parties to the Contract. The Plaintiffs’ allegation that such clause is in violation of the provisions of law and is invalid shall not be tenable. In the course of performance of the Contract, the Plaintiffs took delivery of the ships, obtained various certificates for the ships, and have legally obtained the ownership of the ships. However, this does not affect the Defendant’s contractual right to take back one of the ships to compensate for the remaining and outstanding sum of ship-construction costs and the overdue fine under the circumstance that the Plaintiffs fail to effect payment for the rest of construction costs in time in accordance with the provision of paragraph 2 of Article 7 of the Supplementary Agreement. Thereafter, the Plaintiffs refused to pay the remaining sum of the construction costs on the ground that the Defendant failed to issue invoice for their payments. Such allegation of the Plaintiffs was not well grounded, and the Plaintiffs’ act had constituted a violation of the Contract. In view of the Plaintiffs’ failure to pay off the construction costs, the Defendant detained the “Fei Shun” and kept it in his dockyard without plaintiff’s permission. Such action of the Defendant was not appropriate. However, this does not affect the Defendant’s substantive rights on the detained ship. Therefore, the Defendant is entitled to keep the “Fei Shun” in custody as compensation for the yet-to-be-paid construction costs and the overdue fine thereof. The Plaintiffs have no right to demand the Defendant to release the detained ship or to compensate for their losses resulting from the detainment. Meanwhile, the Plaintiffs’ obligation to pay the rest of the costs and the overdue fine to the Defendant should be deemed to have been performed. All of the corresponding requests of the Plaintiffs and the corresponding counterclaims of the Defendant are not tenable and shall all be dismissed. The Defendant should have assumed certain liabilities for compensation for his inappropriate and unauthorized detainment of the ship. However, as the Plaintiffs failed to convincingly prove any losses in operations and expenditure they have sustained as a consequence of the Defendant’s detaining the ship, the Plaintiffs’ corresponding request should be dismissed. With regard to the Plaintiffs’ requests of the Defendant to return the diesel oil, walkie talkies and the maintenance tools onboard, as well as to offset the costs of purchasing air-conditioners and the charges for repairing ships from the remaining sum of the ship-construction costs payable by the Plaintiffs, they should be dismissed as not well-supported by evidences. The Defendant’s request to order the Plaintiffs to compensate for his losses resulting from this litigation in amount of RMB 20,000 lacks factual and legal basis, and is thus dismissed. Summing up the above and in accordance with the provisions of Article 111 of the General Principles of Civil Law of the PRC, the judgment is hereby given, as follows: I. The litigation requests of the Plaintiffs Zhao Yangsheng and Liang Hongfang are dismissed; II. The counterclaims of the Defendant Guagnzhou Gao Hua Yachts Manufacturing Co., Ltd. are dismissed. The fee for acceptance of the case amounting to RMB 19,268 shall be borne by the Plaintiffs, while that for acceptance of the counterclaim totaling RMB 11,030 shall be assumed by the Defendant. Should there be any dissatisfaction to this Judgment, a statement of appeal with copies in the number of the opposite party may be submitted to this court within 15 days upon service of this Award. The court of appeal shall be Guangdong Higher People’s Court. Presiding Judge: Xiong Shaohui Judge: Xiang Minghua Acting Judge: Li Yichuan (chop of Guangzhou Maritime Court) Date: January 10, 2001 Certified True Copy Clerk: Mo Fei

Plaintiff: Guangdong Provincial Oceanic and Fishery Administration.　 Domicile: No. 10, Nancun Road, Guangzhou, Guangdong Province. Legal Representative: Li Hujiang, director general. Agent ad Litem: Xu Guangyu, lawyer from Guangdong Zongxin Law Firm. Agent ad Litem: Zhou Chongyu, lawyer from Guangdong Zongxin Law Firm. Defendant: Nantong-Tianshun Shipping Co., Ltd. Domicile: No. 50, Qingnian Dong Road, Nantong, Jiangsu Province. Legal Representative: She Peng, board chairman. Agent ad Litem: Lin Yihua, Chen Yusheng, lawyers from Guangdong Yonghang Law Firm. Defendant: Yangzhou-Yuyang Shipping Co.,Ltd. Domicile: No. 32, Siwangting Road, Yangzhou, Jiangsu Province. Legal Representative: Song Xingting, board chairman. Agent ad Litem: Chen Xiangyong, Yuan Hui, lawyers from Wang Jing & CO. Law Firm. Defendant: Tianjin-Kobe International Marine Shipping Co., Ltd. Domicile: Room 2, No. 70, Xihao Road, Heping District, Tianjing. Legal Representative: Song Xingting, board chairman. Agent ad Litem: Chen Xiangyong, Yuan Hui, lawyers from Wang Jing & CO. Law Firm. Defendant: China Shipowners’ P&I Association. Domicile: Ritan Bussiness Building, No.15A, Guanghua Road, Jianguomen Wai Avenue, Beijing. Legal Representative: Chen Zhongbiao, board chairman. Agent ad Litem: Chen Xiangyong, Yuan Hui, lawyers from Wang Jing & CO. Law Firm. The Plaintiff, Guangdong Provincial Oceanic and Fishery Administration, brought up a complain to this court in July 2nd, 2001, on a dispute over compensation fund for oil pollution damage, versusing Nantong-Tianshun Shipping Co.,Ltd (hereinafter referred to as Tianshun Co.), Yangzhou-Yuyang Shipping Co.,Ltd (hereinafter referred to as Yuyang Co.), Tianjin-Kobe International Marine Shipping Co., Ltd (hereinafter referred to as Kobe Co.) and China Shipowners’ P&I Association. This court set up a collegiate bench in accordance with law and calls together the parties to exchange evidences in the court on September 26. On September 27, pretrial conference was convoked and the cases was tried openly. The following persons presented themselves on the court: Xu Guangyu and Zhou Chongyu, the agents ad litem of the plaintiff, Lin Yihua, the agent ad litem of the defendant Tianshun Co., and Chen Xiangyong and Yuan Hui, the agents ad litem of the defendants Kobe Co., Yuyang Co. and China Shipowners’ P&I Association. On October 31, 2001, this court ruled for suspending the action in accordance with law, on the reason that the trial of this case had to consider the judgment (2001) GMF No. 109 and the judgment (2001) GMF No.163 on damage compensation of ship collision Tianshun Co., Kobe Co. and Yuyang Co., which had not reached a conclusion at that time. Guangdong Supreme People’s Court ruled Tianshun Co. of voluntary withdrawing the appeal on September 19, 2002, on the reason that Tianshun Co., took exception to the Civil Judgment (Ref. 2001 GMF No. 109) and the Civil Judgment (Ref. 2001 GMF No. 163) rendered by this court, lodged an appeal but did not pay the acceptance fee in advance according to prescribed time-limit. This court resumed the trail of this case in accordance with the reason discontinuing the action has been removed for the Civil Judgment (Ref. 2001 GMF No. 109) and the Civil Judgment (Ref. 2001 GMF No. 163) have taken effect. Cross-examination has been called on December 9, 2002 and May 19, 2003, on evidences supplied by the parties, evidences obtained by this court and relevant conclusions of judicial expertise. The plaintiff Guangdong Provincial Oceanic and Fishery Administration states: ship “Tongtianshun” belonging to Tianshun Co. has collided with ship “TianShen” belonging to Kobe Co. at the sea area near Jing Hai, east of Guangdong. By the collision, Tongtianshun ran ground and sank and the oil carried by the ship leaked into the sea, which was grievously polluted the alongshore-sea area from Jing Hai to Shen Quan and from Jing Hai to Jia Zi. In this accident the direct economical loss on nature aquatic products is RMB3,307,300, the economical loss on nature resource of fishery is RMB9,992,190 and the survey fee of losses paid by the plaintiff in the accident is RMB427,600, totally RMB13,656,800. Ship “TianShen” is operated and managed by the defendant Yuyang Co. and the defendant China Shipowners’ P&I Association is the insurer of compensation liability for oil pollution damage made by “TianShen”. The plaintiff asks this court to order the four defendants to compensate, jointly and severally, the plaintiff RMB13,656,800, plus interests (calculating from June 21st, 2001 to the actual paying day on the lending rate of the People’s Bank of China on the corresponding period), and the acceptance fee of this case. Within the period of adducing evidences, the plaintiff provides the following evidences: 1. Survey Report on Loss of Fishery Resource Caused by Oil Leaking from “Tongtianshun”(hereinafter referred to as the Survey Report on Loss of Fishery) and its exhibits wrote by Guangdong Provincial Oceanic and Fishery Environmental Monitoring Center (hereinafter referred to as the Monitoring Center); 2. Photos of the polluted sea area; 3. Information of wind farm and weather; 4. Receipts of the survey fee; 5. 10 pieces of Work Qualification of Pollution Survey; 6. Follow Report on Monitoring Loss of Nature Fishery Resource Caused by The Accident of Oil Leaking from “Tongtianshun” (hereinafter referred to as the Follow Report on Monitoring Loss of Fishery) wrote by the Monitoring Center; 7. Annual Report Form for Monitoring & Counting The Fishery Resources in The North Fishery Yard of South Sea in Year 2001; and 8. Annual Report Form for Monitoring & Counting The Fishery Resources on The North Fishery Yard of South Sea in Year 2002. The defendant Tianshun Co. defends: the plaintiff is not the proper subject. As a state administration department, the plaintiff has no right to claim the civil compensation of oil pollution damage. After the collision happened between “Tongtianshun” and “TianShen” in Shantou sea area, “Tongtianshun” beached and sank and Tianshun Co. took effective means for antipollution, including blocking pipes under water, pumping oil and laying antipollution rails, all at once. Thus, actually, the oil pollution accident did not happen. The middle and long-term loss claimed by the plaintiff has not the loss happened yet. On the reason that the plaintiff has not suffered any loss, its claim has not fact basis and its claim on Tianshun Co., bearing the joint and several liability of oil pollution damage, has no law basis either. Therefore, the defendant asks the court to dismiss the plaintiff’s claim on the defendant Tianshun Co. Within the period of adducing evidences, the defendant Tianshun Co. provides the following evidences: 1.The copy of Maritime Affairs Report; 2. The Searching and Blocking Report; 3.The Agreement of Pollution-Clean and The Agreement of Pumping Oil, 4.The Scheme of Pumping oil and The Complete Report of Pumping oil, 5.The photos of the scene of the accident, 6. The Survey Report of The Collision Accident wrote by Shantou Maritime Safety Administration. The defendant Yuyang Co. defends: the plaintiff has no right to claim for the compensation on fishery resource of the State. After the collision, “Tongtianshun” wrongly choose the beaching site, causing the ship sank on the rocks during beaching. The sailors did not block the pipes on the oil cabin before the derelict, thus the collision accident is not the direct reason causing oil leaking from “Tongtianshun”. Suppose the ship leaked oil, wrongly beaching should be the direct reason causing oil pollution, not ship collision. The doctrine of no-fault liability applies in the compensation of pollution damage of sea environment and the subject bearing the liability is the person directly liable on causing the pollution damage. The shipowner of “TianShun”, the ship did not leak oil, is not the subject of legal relation of environment pollution in this case and should not bear the liability of oil pollution. Thus, no effective evidences can proof the pollution loss nether law basis for the plaintiff asking Yuyang Co. to bear the joint and several liability on oil pollution damage. The defendant asks this court to dismiss the plaintiff’s claim on the defendant Yuyang Co. Within the period of adducing evidences, the defendant Yuyang Co. provides the following evidences:1. Copy of Certificate of Registry of “TianShen”; 2. Copy of Maritime Traffic Accident Report of “TianShen”; 3. Copy of Survey Report of “TianShen”; 4. Evaluation Suggestion on Survey Report of Fishery Loss written by expertise He Ruiqiang (hereinafter referred to as the Evaluation Suggestion by He Ruiqiang); 5. Communique of Marine Environmental Quality of Guangdong Province in 2001 issued by the plaintiff in April 1, 2002; and 6. Introduction of units directly under the plaintiff and the Monitoring Center which is published on the website of the plaintiff. The defendant Kobe Co. defends: Kobe Co. is the registered shipowner of “TianShen”. At the time the collision happened, Kobe Co. had already chartered “TianShun” as a bareboat to Yuyang Co. to operate. During the bareboat charting period, the leaseholder is the occupier and the user of the bareboat. The captain and crew on the ship shall be allocated by the leaseholder and operation of shipping and safety management shall be under care of the leaseholder. Kobe Co. does not bear any liability. The defendant asks this court to dismiss the plaintiff’s claim to Kobe Co.. Within the period of adducing evidences, the defendant Kobe Co. provides the following evidences: 1. Copy of Certificate of Shipowner of “TianShen”; 2. Bareboat Charter Party of “TianShen”; 3. Evaluation Suggestion by He Ruiqiang; 4. Communique of Marine Environmental Quality of Guangdong Province in 2001 issued by the plaintiff in April 1, 2002; and 5. Introduction of units directly under the plaintiff and the Monitoring Center which is published on the website of the plaintiff. The defendant China Shipowners’ P&I Association defends: China Shipowners’ P&I Association is the insurer of oil pollution liability of “TianShen”, but not “Tongtianshun”. In order to prevent “TianShen” from being detained, China Shipowners’ P&I Association has already offered the guarantee of RMB4million to the plaintiff. The shipowner of “TianShen”, the ship did not leak oil, is not the person liable to the oil pollution damage. Moreover, the conditions for China Shipowners’ P&I Association fulfilling the guarantee liability have not been achieved yet till the oil pollution liability being confirmed. On the reason that there is nor fact basis neither law basis for the plaintiff’s claim to China Shipowners’ P&I Association, the defendant asks the court to dismiss the plaintiff’s claim. Within the period of adducing evidences, the defendant China Shipowners’ P&I Association provides the following evidences: 1. Copy of Ship Initiation Certificate; 2. Copy of Guarantee Correspondent; 3. Evaluation Suggestion by He Ruiqiang; 4. Communique of Marine Environmental Quality of Guangdong Province in 2001 issued by the plaintiff in April 1, 2002; and 5. Introduction of units directly under the plaintiff and the Monitoring Center which is published on the website of the plaintiff. During the litigation, being applied by the defendant Tianshun Co., this court transfers documents of oil pollution accident of “Tongtianshun” investigated by Shantou Maritime Safety Administration, including: 1. Reconnaissance Report of The Scene of Ship Pollution Accident; 2. Report of Ship Pollution; 3. Report of Eyewitnesses of The Pollution; 3. Report of Witnesses; 4. Five copies of Record of Inspect and Inquiries, etc. On January 10, 2003, this court entrusted Guangdong Huanan Maritime Center of Judicial Expertise to examine and analyze the Survey Report of Fishery Loss by the Monitoring Center. After the analysis, Guangdong Huanan Maritime Center of Judicial Expertise provided Judicial Expertise Analysis Report of Documentary Evidences and exhibits to this court. This court transfers the evidences referred in the Civil Judgment (Ref. 2001 GMF No. 109) and the Civil Judgment (Ref. 2001 GMF No. 163), which are relevant to this case. By cross-examining, except the Copy of Certificate of Ship Owner of “TianShen”, Copy of Certificate of Registry of “TianShen” provided by the defendant Kobe Co. and the defendant Tianshun Co. and the Copy of Ship Initiation Certificate and the Copy of Guarantee Correspondent provided by China Shipowners’ P&I Association, the plaintiff has objections to the other evidences provided by the four defendants. The four defendants have no objection to the evidences provided by each one; however have objections to all the evidences provided by the plaintiff. The plaintiff does not approve the evidences transferred by this court and Judicial Expertise Analysis Report of Documentary Evidences and exhibits, however the four defendants approve the said evidences. Because the accident photos which were offered by the plaintiff and the defendant Tianshun Co. cannot reflect the pollution quantize degree of the relevant sea area and the whole situation in an all-round way, the collegiate bench does not hold the photos can be regarded as the basis to get a verdict alone in this case. The collegiate bench confirms the effect of the four evidences without demur by the above-mentioned parties, and the evidence 2 and 3 provided by the defendant Yuyang Co. are verify with the content of the effective judgment made by this court. Summing up the evidences mentioned above and the condition of the cross-examination, the facts of this case held by collegial bench are as following: 1. Function of the plaintiff Based on Project on Function Scheme, Inside Organizations and The Size of Personnel of Guangdong Provincial Oceanic and Aquatic Product Department (YGO[1994] No.60) issued by General Office of People’s Government of Guangdong Province and Project of Reforming Organs in People’s Government of Guangdong Province (YI[2000] No.2) issued by the People’s Government of Guangdong Province and Guangdong Provincial Party Committee, the original name of the plaintiff is “Guangdong Provincial Oceanic and Aquatic Product Department”, which has been changed to “Guangdong Provincial Oceanic and Fishery Administration” in February 2000. It is a department directly under the People’s Government of Guangdong Province, in charge the comprehensive management of seas and fishery all over the province, functioning at comprehensive management of seas, supervising sea environmental protection, executing laws related to fishery administration and sea supervising and enhancing the management of trades on fishery. 2. Evidences and Facts of the collision in this case The facts of the ship collision accident which have been held in the Civil Judgment (Ref. 2001 GMF No. 109) and the Civil Judgment (Ref. 2001 GMF No. 163) made by this court on July 24, 2002, are as following: On June 16, 2001, “Tongtianshun” left Lanshan Harbor, Shandong Province to Sanya Harbor, carrying 7,390 tonsss of gypsum. On June 20, 2001, “TianShen” left Hongkong to Shanghai, carrying 165 containers with totally 1,230.2 tonsss of goods. At time 0500, June 21, both ships shipped to the sea area near Shibei Mountain, east of Guangdong Province. The course heading of “Tongtianshun” was 240°and the speed was 10.5 knot; the course heading of “TianShen” was 71°and the speed was 13.5 knot. It was foggy at that time and the visibility range was bad which was around 1nm to 2nm. Crewmen on both ships were neglect vision watch and did not send watchman, moreover, both ships sailed at full speeds which were beyond the safe speed. Failing to realize the danger of collision as soon as possible, “Tongtianshun” had blindly kept its cause heading and speed till it was away from “TianShen” 0.4 nm; then it turned hard port to dodge “TianShen”. “TianShen” failed to realize the danger and blindly kept its cause heading and speed as well, until the CPA between the two ships was 0.2 nm. It took measures to dodge while finding “Tongtianshun” turning hard port. Since “TianShen” did not replaced naphtha, the ship could not stop even it changed and shut down. At around 0635, since the first collision happened at No.2 cargo bay at the starboard of “Tongtianshun” and left side of the front of “TianShen”, the second collision happened at the starboard buttock of “Tongtianshun” and the port midship of “TianShen”. The site of the collision was N. Lat. 22°58'.0 and E. Lon. 116°33'.8. After the collision happened, the captain of “Tongtianshun” got up to the bridge, finding that water intake was serious in No.2 cargo bay, No.2 cabin at the upper side and No.4 cabin, which was double-deck, at the lower right side. On the reason that the ship deviated to right side in a fast speed and toppling danger was supposed to happen, the captain ordered to beach. During beaching, “Tongtianshun” collided on the rocks at N. Lat. 22°56'. 62 and E.Lon.116°30'.98, then the hull kept sinking. At time 0729, the captain claimed to the derelict and the crew left in two lifeboats. Two hours later, all the crew waiting at the scene were saved by fishing boats nearby. After the accident, Tianshun Co. entrusted Guangzhou Sea-Salvage Bureau to search and block the neaped “Tongtianshun” on June 25, 2001. Salvage team closed five water-proof doors on the engine room and temporarily blocked 11 pipes on the oil cabin, such as air pipes and survey pipes. On June 30, 2001, on the Searching and Blocking Report issued by Guangzhou Sea-Salvage Bureau, the disrepair condition of “Tongtianshun” is written: there are a 0.8m long, 3cm width crack under the engine room at the larboard of the ship and a 2.2m-2.5m long, 3cm-10cm width crack in the front of the middle part of No. 2 cabin. According to the diver’s judgment, the two said cracks were made by leaving over the rocks. The outside board of the ship at the front part of the larboard, 3m behind the start point of bilge keelson has been bumped to concave, but damage has not found. There is a 6m-6.5m long crevasse at the front part of the middle of No.2 cabin at the starboard. The crevasse is neat and the outside board has bumped into the hull around 40cm. Both ends of the crevasse wide 10cm and the largest width in the middle is 46cm. It is 3m high from the bilge keelson, from which some gypsum leaked. Being trusted by Guangdong Yonghang Law Firm that retained the agent p.p. of Tianshun Co., Guangdong Marine Engineering Consultants & Surveyors checked and examined “Tongtianshun” and made a Checking Report on July 11, 2001, stating that in the Searching and Blocking Report issued by Guangzhou Sea-Salvage Bureau, the crevasse at the front of the middle part of the starboard can be reasonably ascribed to the collision accident said by the captain and the damages on other parts can be reasonably ascribed to beach accident said by the captain. “Tongtianshun” is a steel bulk cargo ship, which is 133.9m long, 18m wide and 9.1m deep. Its total tonsss are 6,633 and net tonsss are 3,339. The mainframe of the ship is internal-combustion engine, with power of 4,027kw. “TianShen” is a steel container ship, which is 109.6m long, 18m wide and 8.3m deep. Its total tonsss are 4,388 and net tonsss are 2,377. The mainframe of the ship is internal-combustion engine, with power of 4,310kw. Before and after the collision in this case, the possessor of “Tongtianshun” is Tianshun Co. and its registered harbor is Nantong, Jiangsu; the possessor of “TianShen” is Kobe Co. and its registered harbor is Tianjing. Tianshen Co. chartered “TianShun” as a bareboat to Yuyang Co. without handling the bareboat charting registration at the ship register department. During the voyage of the accident, both “Tongtianshun” and “TianShen” allocated the qualified crew based on the lowest safety allocation and Eligibility Certificates of Sailors and Seaworthiness Certificates of Ship were in period of validity. The Civil Judgment (2001GMF No. 109) and the Civil Judgment (2001 GMF No.163) hold: based on degree of fault, “Tongtianshun” and “TianShen” should share the fault liability of the collision accident in 60% and 40%. Due to no bareboat charter of “TianShun” being registered, the bareboat charter cannot resist the third party in accordance with law and Kobe Co., the possessor of the ship, and Yuyang Co., the actual leaseholder, should bear joint and several liability to the collision fault of “TianShun”. It is appropriate for the captain of “Tongtianshun” to take measures to beach and ground by considering the safety of the ship, the cargoes and people on the ship under the danger conditions. The crew of “Tongtianshun” was unable to expect and avoid the sinking during beaching and running ground. It has no fact basis and law basis for Kobe Co. and Yuyang Co. to claim that the sinking of the ship was caused by fault of improper beaching taken by the crew of “Tongtianshun” and the extra loss should be bore by Tianshun Co., thus the claim should not be supported. The fee for searching and blocking, the fee for pollution cleaning and the fee for oil-pumped paid by Tianshun Co. are the loss caused by the collision and should be compensated jointly and severally by Kobe Co. and Yuyang Co.. Finally, the two judgments order Yuyang Co. and Kobe Co. compensate Tianshun Co. RMB2, 819, 083.03, plus interests, jointly and severally and Tianshun Co. compensates Yuyang Co. RMB274, 026.42, plus interests. The two judgments have taken effect. 3. Evidences and Facts of Oil Pollution Damage During the trail, the plaintiff and four defendants consistently confirm that “Tianshen” did not leak oil after the collision accident, neither any evidences prove the oil leaking from “TianShen” in this case. The collegiate bench asserts this fact confirmed by the parties. The plaintiff has dispute with the four defendants over the matters that whether “Tongtianshun” leaked oil after the collision accident and the damage degree of oil pollution and both sides provide different evidences severally. 1). Evidences provided by the plaintiff In order to prove the facts of oil leaking of “Tongtianshun” and oil pollution damage, the plaintiff provides evidences from eight aspects and the main content is as following: (1). In the Survey Report of Fishery Loss and exhibits by Monitoring Center, stating: in the forenoon of June 21, 2001, “Tongtianshun” and “TianShun” collided in the offing of Jing Hai, Huilai County, Jieyang, Guangdong Province. The hull of “Tongtianshun” was broken and the ship grounded on the rocks outside Zishen Harbor (about N. Lat. 22°56'. 68 and E.Lon.116°30'. 94). The fuel on the ship leaked into the sea area where it grounded. With a great amount of oil floating in the offing, a large scale of pollution in this sea area was caused. After the accident happened, the Monitoring Center started the survey to collect evidences and evaluation on June 22, on the fishery resource loss made by the pollution based on relative law and regulations of the country. Investigators went up to the scene by light boats and saw “Tongtianshun” grounded on the rocks outside Zishen Harbor. The desk upwards the hull was above the sea, sloping slightly, and black and brown oil effused to the offing under the water which was near the hull. The water surround the hull floated fuel and the oil belt towards south west of “Tongtianshun” presents dark brown with pungent smell of fuel throwing off on the sea area. June 21, it mainly blew east wind and southeaster on the sea area the accident happened with speed 4-6m/second. Under the effect of wind power, tide and ocean current, the oil leaking from “Tongtianshun” excursed and diffused on the sea area near the sunken ship. On June 22 and 23, the oil pollution excursed to the seacoast of Qianzhan and Shenquan. There is oil drops in gill of dead fish rushed to the beach of Qianzhan by tidewater. Through surveying, no other paroxysmal oil leaking or pollution accident happened near the seacoast area and littoral of Lufeng County, Huilai County and Chaoyang County in a long time before and after June 21, 2001, except “Tongtianshun”. The surveying and evaluating range is the water area of N. Lat. 22°56'-23°00' and E.Lon.116°12'-116°37', that is, the sea area of Nanhai County-Shenquan- Qianzhan –Jinghai seacoast. The Monitoring Center set 22 sampling stages within the surveying area, determining the titer of petroleum in seawater by UV-spectrophotometry with an instrument of Model UV-2501PC produced by Koichi Tanaka Co., Japan. Based on the sample of seawater collected according to the national standard of Sea Monitoring Criterion and Water Quality of Fishery, the pollution situation of the sea area in this accident is analyzed as: oil leaking from “Tongtianshun” caused an obvious hoist on the titer of petroleum in seawater of a large scale of sea area. The titer of petroleum in seawater seriously exceeds the standard (limit of the Water Quality of Fishery) in the water area around Zishen Harbor-Shibei Mountain-Hali Cliff-Mianqian Reefs, where the titer exceeding 10 times is around 130 sq. km. within which the titer exceeding 20 times is around 80 sq. km. On the reason that the accident happened at the time of suspending fishing operations in Summer, the resources of swimming organism within the sea area was evaluated on the basis of fishing resource monitoring data of ocean in Guangdong Province. After the accident happened, the Monitoring Center set up 3 surveying stages in the surveying sea area and rented a resources trend monitoring ship “Yuehuilai 41365” to survey the swimming organism in the scene by trawling through. They analyzed changes of the fishery resources in the surveying area, calculated direct economical loss of sea products in the polluted sea area and carried on expert’s assessment on the loss of natural fishery resource caused by the oil leaking accident, based on Regulation of Calculation Fishery Loss of Pollution Accident in Water Area (F[1996]No.14) issued by Agriculture Ministry. On June 28, the surveying team surveyed the scene and estimated the loss of water products in natural sea area caused by this accident in according to the scene survey and the data of monitoring resources trend. Due to the suspending fishing operation in June and July, no monitoring data of trawl is available. From 1998 to May 2000,the average product is 78.1-103.5kg./hour and the average product in May in these three years is 91.2kg./hour. The average rate of fish obtaining in the surveying pollution area is 22.8kg./hour. Compared with the average rates of near three years, the average rate of fish obtaining drops 67.65-80.26%, that is, 75% on average. The largest parrying rate is estimated as 30% by considering the parrying affect the swimming organism reflects to the polluted environment. Therefore, the loss rate of the swimming organism resource caused by this oil leaking accident is estimated as 45%. Before the pollution, the density of the swimming organism resource is 2.6055 tons/sq. km. which has been calculated by unifying measurement unit. After the pollution, the loss of the swimming organism of the heavy polluted area (80 sq. km) is 93.789tonss(2.6055×0.45×80). The average price of water product in June at Huilai County, the pollution area, is RMB35, 260/tonss, thus the direct economical loss of the swimming organism is RMB3, 307, 300. With abundant natural marine lives resource containing along the coast of Huilai, the product of ocean fishing was 68, 000 tons in 2000. The petroleum that is danger to the ocean organisms mainly includes: dead effect, ecological effect, physiology and behavior effect, peculiar smell effect, etc. The sea area in the accident is an important area for breeding and growing economical fish and shrimps along the seacoast of Guangdong Province and a natural protection area of Xi Shi She, a kind of fish; further, it is a good fishing yard of fishery. Oil pollution kills and wounds a great lot of bait organisms in the water area, causing regional unbalance of the ecology. The infectant would last quite a long time to effect the ecological environment of the water area and cause the parrying affect of the swimming organisms, which would decay the fishery function for a period of time in the sea area of the accident. It needs a long time to recover the ecology environment and marine lives resource polluted by the oil; thus, to recover the fishery resource of this polluted water area to its normal level needs at lease three years. Based on Regulation of Calculation Fishery Loss of Pollution Accident in Water Area by the Ministry of Agriculture, the account of economical loss of the nature fishery resource should not be less then 3 times of the loss of the aquatic products in the directly economical loss. Hereby, the economical loss of natural fishery resource of the water area from Shenquan, Huilai County to Jinghai caused by the oil leaking accident is RMB9, 921, 900, which is calculated on three times of the direct economical loss. From June 22 to July 21, the actual expenses the Monitoring Center paid to survey and track the oil pollution accident is RMB427, 600. The said direct economical loss of the aquatic products, the loss of natural resource and expenses for surveying the losses of pollution are totally RMB13, 656, 800. The exhibits of the Survey Report of Fishery Loss by the Monitoring Center are mainly the data related to monitoring records and surveying results, including: list of fees for surveying and monitoring, proof for using boats of fishing administrative department, records of trawl fishing, retail price of the aquatic products provided by International and Commerce Administration Bureau of Huilai County, sample records of monitoring water quality, analysis records of oil in the water, analysis report of monitoring water quality, data of wind form and weather, data of tide and Annual Report Forms for Monitoring & Counting The Fishery Resources (from January 1998 to May 2001). All the exhibits are the basis of the Survey Report made by the Monitoring Center and the data they carry confirm the content of the Survey Report. 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(continued) By checking, the Monitoring Center holds the effective first rate Work Qualification for Survey and Appraisal of Fishery Pollution Accidents issued by Fishery Administration and Fishing Harbor Superintendence Bureau of the People’s Republic of China, in which the assured appraisal area is Guagndong Province. On December 9, 2002, Lu Chaohua, researcher of ocean fishery environment, and Li Huiquan, researcher of fishery resource were allocated by the Monitoring Center to be presented in court accepting address inquires by the parties. The said researchers had participated in the pollution survey as vise researchers at that time and been awarded researcher qualification by Personnel Department of Guangdong Province on August 28 2002. (2). Follow Report on Monitoring Loss of Fishery made by the Monitoring Center on November 29, 2002, shows: after one year of the leaking oil accident of “Tongtianshun”, the monitoring data from the resources trend monitoring ship “Yuehuilai 41365” reflect that from August 2001 to September 2002, the rate of fish obtaining of polluted sea area at Huilai changed in the range of 22.30-51.44kg/hour which still has a great gap with the average rate (around 100kg/hour) of the background rate before the accident happened. It is estimated that the damage to the fishery resource needs at least two years to basically restore to the original level of the resource quantity, which is hard to achieve in more than one year. The middle and long-term effects should be considered in calculating the loss of fishery resources, thus, the calculation basis in full reason to get the lowest rate as 3 times of the direct loss of the aquatic products. (3). The data of wind form and weather provided by Guangdong Oceanic Forecasting Station on July 2, 2001, shows: On June 21-25, 2001, flurries of east wind, southeaster, northwester and southwester blew through the seacoast of Huilai. (4). The list of surveying fees shows: on September 19, 2001, the plaintiff paid the Monitoring Center RMB427, 600 as the fees for surveying and monitoring. (5). 10 pieces of Work Qualification of Pollution Survey show: the vice researcher Lu Chaohua, Li Huiquan, etc. and assistant engineer Huang Zeqiang, Yang Yuming, etc., totally ten people from the Monitoring Center, participating the pollution survey in this cases have effective Work Qualification for Survey and Appraisal of Fishery Pollution Accidents issued by Fishery Administration and Fishing Harbor Superintendence Bureau of the People’s Republic of China (6). Annual Report Form for Monitoring & Counting The Fishery Resources on The North Fishery Yard of South Sea in Year 2001 and in Year 2002 provided by Huilai County Ocean and Fishery Bureau confirms the analysis data in Follow Report on Monitoring Loss of Fishery. 2). Evidences provided by the defendant Tianshun Co. In order to proof the inexistence of oil pollution damage existing in the sea are of the accident happened, the defendant Tianshun Co. provides six evidences and the relevant contents are as fllowing: (1). The Searching and Blocking Report states: Guangzhou Sea-Salvage Bureau searched and blocked the neaped “Tongtianshun” on June 25-60, 2001. The seabed under the sunken ship is rock geology. Oil dirt phenomenon appears in the air pipe of the oil cabin and outside the engine room while searching and a few oil drops appears with wave nearby the sunken ship. After blocking, workers did not find oil pollution around the sunken ship by repeating examination and checking. (2). The Agreement of Pollution-Clean, the Agreement of Oil Pumping, the Scheme of Oil Pumping and the Completion Report of Oil Pumping state: on July 6, 2001, Tianshun Co. signed the Agreement of Pollution-Clean with China Ocean Shipping Agency, Shantou, entrusting the agency to clean the oil dirt at the sinking port of “Tongtianshun”. On July 5, 2001, Tianshun Co. signed the Agreement of Oil Pumping with Dali Under-water Project Ltd., Co., Donghai County, entrusting the company to pump the oil from the sunken ship “Tongtianshun”. The concrete pumping job was done by No. 92213 Crops of the Chinese People’s Liberation Army. The army started working on July 8 and finished the oil-pumping job on July 24. The Technology Scheme of Oil-pumping made by the crops on July11, states: “No oil leaking from the oil cabin has been found in according with recent searching job under water.” The Completion Report of Oil Pumping made on July 28, states: except 100tonss heavy oil and 30tonss light oil which were pumped out in this work, no sea pollution is found. 3). Evidences provided by the defendant Yuyang Co., Kobe Co. and China Shipowners’ P&I Association Aim at the objectivity of the Survey Report of Fishery Loss, three defendants, Yuyang Co., Kobe Co. and China Shipowners’ P&I Association, provide three counterevidence together, the relevant contents are as following: (1). Evaluation Suggestion by He Ruiqiang holds: (i) “Tongtianshun” carried heavy oil around 100tonss, No. 0 diesel oil around 30tonss and lubricant around 6tonss while the collision accident happened. After the accident, the air pipes of the oil cabin on this ship has been blocked and around 100tonss heavy oil and around 30tonss light oil have been pumped out the oil cabin on this ship. With limited oil leaking from the ship, a large scale of pollution accident is impossible to happened; thus “black and brown oil belt” described in the Survey Report of Fishery Loss is probably fictive; (ii) the Survey Report of Fishery Loss does not indicate clearly the function of the water area the accident happened, for the standard of water quality of fishery is different with that of shipping intensive area and water area of harbor; (iii) the researchers of the Monitoring Center only collected the water sample on the surface( less than 10m), but not the sample from the middle and the bottom of the water, which did not accord with regulations. The fishery loss evaluated by the Survey Report of Fishery Loss is not limited to the fishery resource on the surface, for the monitoring result of the surface cannot reflect vertical change of the petroleum underwater and cannot be the basis of assessing real criticality of the petroleum to the oceanic organism; (iv) the Monitoring Center ascribed the petroleum in the water to the oil leaking from “Tongtianshun” without making “Finger Identification” to petroleum hydrocarbons, which is unfair. The number of the water samples is insufficient to reflect the actual pollution degree. The Survey Report of Fishery Loss does not indicate the petroleum concentration in the water before the accident. (v) Due to self-purification function of seawater, the damage of the petroleum of the same concentration on open sea would be greatly lower than the result surveyed in laboratory. Moreover, different oil produces different toxicity to the fish, thus the analogy way used in the Survey Report of Fishery Loss is inappropriate, in which does not indicate the category of the oil referring in this case and the duration of the pollution effect; (vi) The Monitoring Center set up only three surveying stages in the surveying area, and has not calculated the death amount of marine organisms and the amount of marine organisms appearing serious poisoned symptom, which dose not accord with Regulation of Calculation Fishery Loss of Pollution Accident in Water Area by the Ministry of Agriculture. Based on the regulation, the round-up survey should set up 8-10 representative points in the survey area and calculate the actual damage on the dead fish amount of poisoning; (vii) Due to the incorrect calculation of the loss of the natural aquatic product, the loss of natural fishery resource calculated on it is also incorrect. The degree of the middle and long-term effect of fishery resource in a pollution accident should be determined by real situation of the catalogue of oil leaking, weather and the state of the sea, but not be calculated on a simple formula and multiples. Suppose the pollution effect lasts a long time, the real result would be concluded only by continuing flowing and monitoring the state in duration. In conclusion, the way of survey used by the Monitoring Center and the conclusion in the Survey Report of Fishery Loss are discussing and should not be adopted directly by the court. He Yueqiang (age 72) has retired from the Evaluation Office of Environmental Infection, Institute of Nan Hai Oceanology, Chinese Academic of Science. On December 9, 2002, he presented in court to accept address inquires by the parties and affirmed that he himself had never been to the scene of the pollution accident. He Yueqing did not provide qualification proofs with respect to himself and his original work unit the Evaluation Office of Environmental Infection, Institute of Nan Hai Oceanology, Chinese Academic of Science. (2) Communiqué of Marine Environmental Quality of Guangdong Province in 2001, which has been verified by this court, issued by the plaintiff on April 1, 2002 shows: in 2001, the water quality of important seawater cultivation bay, Marine Organism Nature Reserve and main oceans in Guangdong Province can basically satisfy the use function and the water quality is worst, on seacoast area at part of bayous infected greatly by drain contamination from the land. The mainly contaminations in seawater are still inorganic nitrogen and phosphate. In 2001, the evaluating result of monitoring the water quality of the sea area along shore of Guangdong Province, including Shantou and Jieshi Bay, shows that mainly items exceeding the standard in the monitoring area are inorganic nitrogen and phosphate and other items basically reach the requires of first rate stipulated in the Standard of Sea-Water Quality, within which the content of petroleum has obviously changes. The content of petroleum of the sea areas, except Guishan Bay, along shore in Guagndong Province is below 0.05mg/L, according with the water quality standard of first and second rate. In the same year, three enormously oil leaking accidents happened in the sea area of Guangdong Province, causing the fishery resource loss of around RMB40, 000, 000. Amount the accidents, “Tongtianshun” collided with “TianShen” in the sea area of Jin Hai, Huilai County, Jieyang. The water area that the titer of petroleum exceeding 10 times of the Water Quality of Fishery of our country is around 130 sq. km., with the loss of fishery resource on RMB13, 730, 000, which was caused by the fuel leaking from “Tongtianshun”. The fishery resource of the fish yeard Taiqian-Yuedong in presented a downward trend year by year since 1994. Although the fish operations was suspended and the obtaining rate of fishing has presented obvious improvement for a time in 1999, it dropped to the level before suspending fish operations, even lower, in the following 2000 and 2001. While from the annual changed graph of the obtaining fishing rate of stern trawler in No.13 Communique Form, the obtaining fishing rate of stern trawler of Taiqian-Yuedong has obvious improvement in 2001, which is higher than those in 1999 and 2000. 10 Marine Organism Nature Reserves listed in the Communique that have been build in Guagngong Province do not involve the sea area from Shenquan to Jiazi, Huilai County. (3) The introduction of units directly under the plaintiff and the Monitoring Center published on the website of the plaintiff, which has been verified by this court, shows: the Monitoring Center is the direct government-sponsored institute under the plaintiff, mainly in charge dynamic monitoring on oceanic fishery resource and serious and acute dead fish event caused by various pollution accidents and providing to relevant departments technology report and expert’s conclusion on dealing with serious dead fish event. 4). Evidences transferred from Shantou Maritime Safety Administration Applied by the defendant Tianshun Co., this court transfers documents of the oil pollution accident of “Tongtianshun” inspectd by Shantou Maritime Safety Administration, including Reconnaissance Report of The Scene of Ship Pollution Accident, Report of Ship Pollution, Report of Eyewitnesses of The Pollution, Report of Witnesses and Five copies of Record of Inspect and Inquiries, etc. All the said evidences focus on the situation that at time 0635, June 21, 2001, “Tongtianshun” collided with “TianShen” in the sea area of Shantou; at time 0755, the captain of “Tongtianshun” claimed to derelict, then the ship grounded. The hull sunk into the water, except the superstructure and the deck of the front ship. After time 1200, oil was found on offing nearby. The next day, Shantou Maritime Safety Administration inspected the scene of oil pollution accident, finding that the offing pollution was caused by oil leaking from “Tongtianshun”. Several oil film belts offing and the oil film area wafted to southwest from the sunken port in length 1.5 NM and width 200m. The investigation conclusion is: it is unable to measure the amount of the oil polluting the sea area, however, by estimating, it should be less than 1tonss. According with the report of Wu Weiliang, chief engineer of the ship, to Shantou Maritime Safety Administration, “Tongtianshun” carried 100tonss heavy oil, 26tonss light oil, 3tonss lubricating oil, 3tonss cylinder oil and 4tonss lubricating oil for complementing machine at that time; therefore, the oil pollution maybe caused by sewage under the cabin of the ship and oil leaking from the air pipe of the oil cabin. The recode of enquiring Yao Xibo, section chief of Pollution-prevent Department of Shantou Maritime Safety Administration, by judges of this court, shows that Yao Xibo was enquired by inquirers in this court on August 23, 2001. He stated: no oil leaking was found at time 7am.-8am., June 21, 2001 while the accident happened, then the oil pollution appeared on the surface of the sea at time 13. The oil excursed to southeast at the very beginning, then to northwest at time 1430. There were 3 oil film belts total with the widest 3.5m and 2km long. An effective pollution-clean was achieved and the oil pollution did not diffuse. The oil drops appeared from the air hole on the oil cabin under No. 3 cabin of “Tongtianshun” by the act of wave and water pressure. By leaking search, it is found that the crew did not properly shut down the air hole on the oil cabin while derelict. 5). Judicial Expertise Analysis Report of Documentary Evidences and Exhibits by Guangdong Huanan Maritime Center of Judicial Expertise The Judicial Expertise Analysis Report of Documentary Evidences and Exhibits provided to this court by Guangdong Huanan Maritime Center of Judicial Expertise, after analyzing the Survey Report of Fishery Loss by the Monitoring Center, shows: based on the information of the appearance color and the square of the oil leaking from the ship (dark brown oil pollution belt of 5 sq. km.) and the square of the sea area with oil content exceeding the standard 10times and relevant technology literatures, the total amount of oil leaking in the oil pollution accident of “Tongtianshun” can be calculated around 567.5tonss, which does not accord with the total oil, 154.06tonss, carried by the ship, as “Tongtianshun” stating. Suppose the actual amount of oil leaking can be asserted, the loss of fishery calculated in the Survey Report of Fishery Loss should be changed correspondingly. The means of expert’s evaluation adopted in the Survey Report of Fishery Loss is logical and reasonable. By comprehensive checkup and estimation to the evidences of the five aspects mention above, the collegiate bench holds that both the Monitoring Center and Guangdong Huanan Maritime Center of Judicial Expertise have several qualification of appraisal and the expert’s conclusions made separately have definite science basis; therefore, under the situation that not enough counterevidence to negate, both expert’s conclusions can be regarded as the fact basis on asserting the oil pollution damage in this case. Although the Judicial Expertise Analysis Report of Documentary Evidences, the evidences provided by the four defendant and the evidences transferred by this court are adverse to the Survey Report of Fishery Loss, they cannot reverse the fact of oil pollution damage caused by oil leaking after the collision accident of “Tongtianshun” in the report. Therefore, due to no effect counterevidence, the direct economical loss RMB3, 307, 300 of the swimming organisms in the sea area of the accident and survey fee of the loss caused by pollution RMB427, 600, which has been stated in the Survey Report of Fishery Loss made by the Monitoring Center for the oil pollution accident in this case, should be believed and adoped. The economical loss of natural fishery resource in the Survey Report of Fishery Loss by the Monitoring is RMB9, 921, 900, calculated on the basis of 80 sq. km. heavy pollution area and 3 years to restore the fishery resource. However, from aspects of the amount of oil leaking, the pollution degree of the sea area and the change of obtaining rate of fishing, which have been made effective counterevidence to the loss of natural fishery resource in the Survey Report of Fishery Loss in the said evidences provided by the four defendants, the evidences transferred by this court and the Judicial Expertise Analysis Report of Documentary Evidences and Exhibits provided by Guangdong Huanan Maritime Center of Judicial Expertise, the pollution degree of the sea area of the accident has been proved not as serious as that reflect in the Survey Report of Fishery Loss, specified as follows: (1) All states in the six evidences provided by the defendant Tianshun Co., evidences from Shantou Maritime Safety Administration and the Judicial Expertise Analysis Report of Documentary Evidences and Exhibits provided by Guangdong Huanan Maritime Center of Judicial Expertise indicate that the amount of oil leaking in the accident is much less then that can seriously pollute 80 sq. km. sea area; (2) Communiqué of Marine Environmental Quality of Guangdong Province in 2001 provided by the plaintiff shows that the petroleum content of Yudong seaarea in the year of the pollution accident happened (year 2001) abides by the water quality standard of the first and second rate; thus the pollution accident in this case does not make long-term effect to the water quality which had already restored to normal in that year. Further, from the annual changed graph of the obtaining fishing rate of stern trawler in No.13 Communique Form, the obtaining fishing rate of stern trawler of Taiqian-Yuedong had obvious improvement in 2001, which is higher than the rates in 1999 and 2000. It shows that the pollution in this case does not cause the middle and long-term effect to the fishery resource in the accident sea area and the pollution is actually an exception of the normal discipline that the fishery resource needs at least 3 years to restore. The plaintiff’s claim on the economical loss of nature fishery resource RMB9, 921, 900 lacks evidences and should not be asserted by the collegiate bench. 4. Evidences and fact of the Guarantee Correspondant of the defendant China Shipowners’ P&I Association The Copy of Ship Initiation Certificate and the Copy of Guarantee Correspondent confirmed by the parties shows that the defendant China Shipowners’ P&I Association accepted Tianjing Shipping Co. (the operator of the ship) and Kobe Co. (the possessor of the ship) as members of the Association and become the insurer of “TianShen” , bearing the compensation liability caused by “TianShen” in according with the insurance term of the Association. The limitation of compensation liability of oil pollution caused by the ship is USD1 billion per accident. On July 19, 2001, under the request of Yuyang Co., China Shipowners’ P&I Association issued the Guarantee Correspondant to the plaintiff to avoid the apply of the plaintiff for detaining “TianShun” or other ships possessed or operated by the shipowner. It guarantees to bear the compensation liability caused by the collision between “TianShun” and “Tongtianshun”, which should be born by the shipowner of “TianShen” in according with compromissary agreement reached by the plaintiff and the shipowner of “TianShen” or final arbitration rule made by arbitration court or final judgment made by the court with jurisdiction; however, the highest compensation liability, plus the interest and fees, born by the Association should not exceed RMB 4,000,000. The colleigh bench asserts withal. 5. Facts of attachments in this case During the litigation of this case, the plaintiff applied the attachment on July 2, 2001, asking the court to block the insurance compensation (limited in RMB8,000,000), which the People’s Insurance Company of China, Nantong Branch should pay the defendant Tianshun Co. By the guarantee of the plaintiff, this court ruled to permit the attachment of the said property on July 25 and service the notice to assist in enforcement to the People’s Insurance Company of China, Nantong Branch, ordering no insurance payment to “Tongtianshun”. To apply this attachment, the plaintiff paid to this court the applying fee RMB40,520 and the charges of enforcement RMB10,000. On November 15, 2002, the plaintiff applied the attachment to this court again, asking this court to order Kobe Co. and Yuyang Co. to transfer to the account appointed by this court the ship collision compensation RMB2,545,056.61 plus interest and the litigation fee RMB41,155 that should be compensate to Tianshun Co. jointly and severally, confirmed in the Civil Judgment (2001 GMF No. 109) and the Civil Judgment (2001 GMF No. 163). By the guarantee of the plaintiff, this court ruled to permit the attachment of the said property on November 21. And on December 27, this court enforced the rule of attachment and the guarantee of Yuyang Co., China Pacific Insurance (group) Co. Ltd, Nanjing Branch transferred the said attachment fee to the account of this court, as the agent of Yuyang Co.. To apply this attachment, the plaintiff paid to this court the applying fee RMB13,451 and the charges of enforcement RMB20,000. The members of the collegiate bench are identical at the point that this case is a dispute over oil pollution compensation caused by ship collision. The fault collision between “Tongtianshun” and “TianShen” at the sea area near Shibei Mountain, Yuedong littoral caused the oil carried by “Tongtianshun” leaked into the sea, polluting the sea area from Jinghai to Shenquan, Yuedong and damaging the fishery resources. Based on the facts mentioned above, the claim brought up by the plaintiff belongs to dispute over torts compensation. Resources in the marine sea of the People’s Republic of China belong to the country. Being the representative in specified area of the country, the People’s Governments at all levels have obligation to prevent the country’s resources from damage in their popedoms. Based on the second paragraph of Article 90 of Marine Environment Protection Law of the People's Republic of China, for any damages caused to marine ecosystems, marine aquatic resources or marine protected areas that result in heavy losses to the State, the interested department empowered to conduct marine environment supervision and control shall, on behalf of the State, claim compensation to those held responsible for the damages. Based on Article 6 of Fisher Law of the People’s Republic of China, the fishery administration department of the local People’s Court above the county level in charge the fishery work in its district. Article 3 and the forth paragraph of Article 25 of Implement of Fishery Administration of Guangdong Province issued by the Standing Committee of the Guangdong People’s Congress on March 23, 1990, stipulate separately: “the fishery administration department of the local People’s Court above the county level is the function department of the People’s Court at the same level, in charge the implement and supervision of Fishery Law and detail rules and the Implement.” “Any person or unit pollutes the water area of fishery, damaging fishery resources of fishery work, should bear compensation liability. The compensation fee of damaging fishery resource owned by the whole people should be used to proliferate and protect the fishery resource by the fishery administration department, which cannot be diverted to other use”. As the function department in Guangdong People’s Government charging the comprehensive administration of sea and fishery all over the Province, the plaintiff can brought up civil damage litigation to the person liable, according to law while the state assets and resources under its domination have been infringed. Therefore, the plaintiff is the proper subject to claim the oil pollution damage in this case. Based on Article 124 of General Principles of the Civil Law of the People’s Republic of China, “any person who pollutes the environment and causes damage to others in violation of state provisions for environmental protection and the prevention of pollution shall bear civil liability in accordance with law”, and Article 117 on anyone who encroaches on the property of the state bearing liability of returning the property or reimbursing its estimated price, the person liable in the oil pollution accident should compensate the plaintiff the direct economical loss of nature aquatic products RMB3,307,300 caused by the oil pollution. The person liable should compensate the plaintiff the loss from the day of the oil damage accident happened, which is June 21, 2001, in order that the plaintiff can restore the polluted environment. The interest of RMB3,307,300 is required while overdue, which should calculated from June 21, 2001 to the pay day determined in this judgment in accordance with the interest rate of loan of circulating fund of People’s Bank of China in the corresponding period. The loss, plus the interest, would be handed in to the exchequer while the plaintiff repaid. After the accident, it was very necessary for the plaintiff to entrust the Monitoring Center to survey the loss of pollution and the survey fee relating toe the loss was caused oil-leaking accident. Although the survey fee RMB427,600 paid by the plaintiff was mainly used on the direct economical loss of nature aquatic products RMB3,307,300 and the economical loss of nature fishery resource RMB 9,921,900 which is calculated on the mode of 3 timing the direct economical loss of nature aquatic products has been denied by this court, due to not enough evidence, the survey fee is basically for surveying the direct economical loss of nature aquatic products, which is necessary and reasonable fee caused by the oil pollution accident in this case. Thus, the person liable should compensate the plaintiff the survey fee of RMB 427, 600 for pollution damage. The interest of the survey fee has no directly cause-and-effect relationship with the pollution accident in this case, thus the interest loss claimed by the plaintiff cannot be supported by this court. After the collision, under the danger situation at that time, the captain of “Tongtianshun” adopted to ground that is necessary to safe the ship, cargoes and the crew. In this case, no evidences prove that the crew of “Tongtianshun” had enough time to block the pipe system on the oil cabin before leaving the ship. It is unimpeachable that the crew had not time to block the pipes while “Tongtianshun” sunk during beaching, which directly endanger the safety of the crew’s lives. The beach, ground and oil leaking are a serious events following up the collision caused by the fault only on sailing of both parties, belonging to this collision accident. The pollution damage caused by oil leaking from “Tongtianshun” is the property loss caused by ship collision. Based on the second paragraph of Article 169 of Maritime Code of the People’s Republic of China, the ships in fault causing the damage of the property of a third party shall not exceed the proportion it shall bear. The Civil Judgment (2001 GMF No. 109) and the Civil Judgment (2001 GMF No. 163) which have taken effect have determined “TianShen” should bear the fault liability of 40% and “Tongtianshun” 60% in this collision accident. As the possessor of “Tongtianshun”, Tianshun Co. should bear compensation liability to the fault of “Tongtianshun” based on law. While the collision happened, Yuyang Co. chaptered “TianShen” as a bareboat, controlling allocation and management, thus, Yuyang Co. should bear fault liability of the collision of its crew. Based on Article 6 of Ship Registration Rule of the People’s Republic of China, the fact of this bareboat charter cannot oppose the third party; therefore, Kobe Co. should bear relevant compensation liability to the third party, the plaintiff, on the reason that the bareboat charpter did not register to the ship registration office. Based on the fault percentage of the collision, Tianshun Co. should compensate the plaintiff 60% of the oil pollution loss, that is, the direct economical loss of nature aquatic products RMB1,984,380, plus interest, and the pollution survey fee RMB256,560. Kobe. Co. and Yuyang Co. should compensate the plaintiff 40% of the oil pollution loss jointly and severally, that is, the direct economical loss of nature aquatic products RMB1,322,920, plus interest, and the pollution survey fee RMB171,040. Based on the first paragraph of Article 97 of Special Procedure Law of Maritime of the People's Republic of China, an aggrieved party may claim for oil pollution damage caused by a ship either directly against the insurer who is answerable for the liabilities of the owner of the ship causing oil pollution damage, or against the person who provides financial security therefore. The oil pollution insurer of the possessor of the ship has legal liability to compensate the victim of the oil pollution directly by request of the victim. On the reason that “TianShen” is one of the ships caused the oil pollution damage in this case, the possessor of “TianShen”, Kobe Co., should bear the oil pollution damage liability, further, China Shipowners’ P&I Association is the insurer of the pollution damage liability of Kobe Co. Article 97 of Special Procedure Law of Maritime of the People's Republic of China does not qualify the liability subject in oil pollution damage “the insurer who is answerable for the liabilities of the owner of the ship causing oil pollution damage” as “the insurer who is answerable for the liabilities of the owner of the ship leaking oil” thus, it has no legal basis to be tenable that the plea of not bearing compensation liability submitted by China Shipowners’ P&I Association on the reason that it is not the insurer of the oil pollution liability of the possessor of “Tongtianshun” that leaked oil. The oil pollution compensation liability of Kobe Co. is within the limit of the compensation liability of USD1 billion born by China Shipowners’ P&I Association, thus the Association should bear the joint and several liability of the oil pollution compensation liability born by Kobe Co. in accordance with the law. In sum, based on the second paragraph of Article 117 and Article 124 of General Principles of the Civil Law of the People’s Republic of China, the second paragraph of Article 169 of Maritime Law of the People's Republic of China and the first paragraph of Article 97 of Special Procedure Law of Maritime of the People's Republic of China, this court judges as follows: 1. The defendant Tianshun Co. compensates the plaintiff Guangdong Provincial Oceanic and Fishery Administration the direct economical loss of nature aquatic products RMB1,984,380, plus interest(calculated from June 21, 2001 to the actual pay day determined in this judgment on the interest rate loan of circulating fund of People’s Bank of China in the corresponding period), and the pollution survey fee RMB256,560, within which the direct economical loss of nature aquatic products, plus interest, would be handed in to the exchequer after the plaintiff being repaid; 2. The defendant Kobe Co., Yuyang Co. and China Shipowners’ P&I Association compensate the plaintiff Guangdong Provincial Oceanic and Fishery Administration jointly and severally the direct economical loss of nature aquatic product RMB1,322,920 plus interests (calculated from June 21, 2001 to the actual pay day determined in this judgment on the interest rate loan of circulating fund of People’s Bank of China in the corresponding period) and the pollution survey fee RMB171,040, within which the direct economical loss of nature aquatic products, plus interest, would be handed in to the exchequer after the plaintiff being repaid. The case acceptance fee is RMB88,304, which the plaintiff should pay RMB64,154, the defendant Tianshun Co. should pay RMB14,490 and the defendant Kobe Co., Yuyang Co. and China Shipowners’ P&I Association should pay RMB9,660 jointly and severally. The applying fee of attachment is RMB53,971 and the charges for enforcement is RMB30,000, which the defendant Tianshun Co. should pay RMB50,383 and the defendant Kobe Co., Yuyang Co. and China Shipowners’ P&I Association should pay RMB33,588 jointly and severally. The fee for investigating and collecting evidences is RMB3,000 and the fee for entrusting the Judicial Expertise is RMB28,000, which the plaintiff should pay RMB22,522, the defendant Tianshun Co. should pay RMB5,087and the defendant Kobe Co., Yuyang Co. and China Shipowners’ P&I Association should pay RMB3,391jointly and severally. The case acceptance fee, the applying fee of attachment and the charges for enforcement have been paid by the plaintiff in advantage. The defendant Tianshun Co. has paid the fee for investigating and collecting evidences RMB3,000 in advantage and the fee for entrusting the Judicial Expertise RMB28,000 has been paid by the plaintiff and the four defendants RMB5,600 each in advantage. The litigation fees mentioned above is total RMB203,275, which the plaintiff should pay RMB86,676, the defendant Tianshun Co. should pay RMB69,960 and the defendant Kobe Co., Yuyang Co. and China Shipowners’ P&I Association should pay RMB46,639 jointly and severally. The litigation fees paid by each party in advantage would not be returned and after setting off, thus, the defendant Tianshun Co. should pay the plaintiff RMB61,360 and the defendant Kobe Co., Yuyang Co. and China Shipowners’ P&I Association should pay the plaintiff RMB29,839 jointly and severally. The payment obligation should be fulfilled in 10 days since the judgment taken effect. If any party takes exception to the judgment, an appeal paper can be submitted to this court within 15 days after the service day of the Judgment, appealing to Guangdong Supreme People’s Court, in addition, any party submits the appeal paper shall provide the copies according to the number of the other party. Presiding Judge: Zhan Simin Judge: Xu Yuanping Judge: Cheng Shengxiang November 11, 2003 Assistant: Yu Xiaohan Clerk: Zhu Mingfang

Plaintiff: Fujian Tingyi Food Co., Ltd Domicile: No. 14, Kuaian Extended Area, Hi-tech Zone, Fuzhou, Fujian Province Legal Representative: Zhao Huijing, Board Chairman Agent ad Litem: Zheng Decheng, Jiang Guangsheng, lawyers of Fujian Chuang Ye Law Firm Defendant: COSCO Container Lines Co., Ltd Domicile: No. 378, Daming Road, Shanghai Legal Representative: Wei Jiafu, Board Chairman Agent ad Litem: Huang Yaquan, Chen Longjie, lawyers of Guangdong Heng Yun Law Firm Defendant: Guangzhou Container Terminal Co., Ltd Domicial: No. 1, Xingang Road, Huangpu District, Hi-tech Zone, Guangzhou, Guangdong Province Legal Representative: Huang Guosheng, Board Chairman Agent ad Litem: Song Xiaodong, lawyer of Guangdong Everwin Law Office The Plaintiff Fujian Tingyi Food Co., Ltd complained to this court, on a dispute over compensation for goods damage of contract for carriage of goods by sea, versusing the Defendant COSCO Container Lines Co., Ltd (hereinafter referred to as COSCO Co.) and the Defendant Guangzhou Container Terminal Co., Ltd (hereinafter referred to as GCT Co.). This court set up a collegiate bench after accepting the cases on March 13, 2003 and called together the parties to exchange evidences in the court and tried the case openly on May 28. Now the case has been finalized. The litigation representative Zheng Decheng and Jiang Guangsheng of the Plaintiff, the litigation representative Huang Yaquan and Chen Longjie of the Defendant COSCO Co. and the litigation representative Song Xiaodong of the Defendant GCT Co. presented in court. Now the case has been finalized. The Plaintiff Fujian Tingyi Food Co., Ltd states: on September 11, 2001, BVI Co. signed a Contract of Sale with Italia SIPA Co. (hereinafter referred to as SIPA Co.), agreeing that SIPA Co. sole 11 1-step bottle machines (Model: ECS FX20／80HF) and relevant equipments. On October 16, SIPA Co. signed a Contract of Sale with the Plaintiff, agreeing that BVI Co. sole one 1-setp bottle machine and relevant equipment to the Plaintiff. On March 23, 2002, SIPA Co. transferred one 1-setp bottle machine to “M/V EMPRESS HEAVEN” of COSCO Co. to transport by sea and COSCO Co. issued a B/L (No. COSU92423790) named the Plaintiff as Consignee. During the discharge, the container of No. CBHU920242/6 fell from the portal crane of GCT Co.. By checking through, the goods were seriously destroyed and the fixing fee exceeded the price of this equipment. The Plaintiff holds that the two defendants should pay full compensation for goods damage for the goods destroyed in the period of responsibility of the two Dependants. Thus, the Plaintiff asks this court to order the Defendant COSCO Co. and the Defendant GCT Co. to jointly compensate the Plaintiff the loss of goods USD 1,218,400. During the period of adducing evidences, the Plaintiff provided the following evidences: (1). Copy of the Contract of Sale signed by BVI Co. and SIPA Co.; (2). Copy of the Contract of Sale signed by thePlaintiff and BVI Co.; (3). The Contract of Sale (No. FY-2002006A) signed by the Plaintiff and BVI Co.; (4). Commercial invoices; (5). Invoices of BVI Co.; (6). Barer B/L (No. COSU92423790) and exhibits; (7). 12 pieces of container load plan; (8). Customs declaration; (9). Bs/L; (10). Freight Records made by the business section of business development department of GCT Co.; (11). Copy of Damage Report of New Equipment of Fuzhou made by Dick Sun; (12). Copy of Written Opinion sent to the staffs of the Plaintiff by the Sales Manager Robert Cucciol and the Project Manager Massimo Budoia of SIPA Co.; (13). Forty photos shot by SIPA Co. and the Plaintiff together; (14). Declaration Correspondence sent by the Plaintiff to COSCO Co.; (15). Claim Paper of the Plaintiff; (16). Copy of Apply Letter of COSCO Co.; (17). Copy of Apply Letter of Guangdong Heng Yun Law Firm; (18). Official Reply on Approving Equipments-importing by Fujian Tingyi Food Co., Ltd made by Economical Development Bureau of Fuzhou Hi-tech Zone; (19). Copy of Exemption Certificate for Import and Export; (20). Two correspondences of changing the port of destination. The Defendant COSCO Co. states: (1). The Plaintiff is not the proper subject in the litigation for it is not the possessor of the goods; (2). The goods damage claimed by the Plaintiff does not exist, on the reason that the goods in this case have not been destroyed when consigned to the consignee at Huangpu Port, Guangzhou; (3). The Plaintiff has no evidence to proof that the quality of the goods was good and had no damage while shipping, for the No. COSU92423790 bearer B/L only records: “the carrier loads and checks the number by himself”; (4). Even thought the goods in this case have been damaged, the Plaintiff did not suffer any loss; (5). COSCO Co. should not bear any liability on the damage of the goods, for it was nor intentional neither had fault on the damage; (6). Suppose COSCO Co. should bear compensational liability on the damaged goods, it should enjoy the limitation of liability of units in accordance with law and the limitation of compensation should not exceed special right for drawing (SDR) 46,000. During the period of adducing evidences, the Defendant COSCO Co. provided a Survey Report on Damage issued by China National Import & Export Commodities Inspection (Guangdong) Corporation. The Defendant GCT Co. states: (1). Based on the B/L, the Plaintiff can only sue the carrier, since the goods damage happened in the liability period of the carrier; (2). As an employee of COSCO Co. in this case, GCT Co. arranged parking, loading, unloading and other relevant works, thus no contractual relationship exists between the Plaintiff and GCT Co. and the Plaintiff has no right to sue GCT Co. in respect of this case; (3). Based on the Contract of Sale between the Plaintiff and BVI Co., the Plaintiff should pay after installation and checked in according to the checking document and bear no liability on the goods damage not happened during the shipping. Thus, as the buyer, the Plaintiff should not bear liability for the goods damage was not happened during the shipping. Further, the Plaintiff has no right to sue GCR Co., on the reason that the Plaintiff has no property right on the goods in this case without any payment paid; (4). The accident in this case is caused by bad packing, short of label and dim label, which means GCT Co. can be exemption; (5). Suppose GCT has to bear compensation liability, Article 56 on limitation of liability of compensation of Maritime Code of the People’s Republic of China would be invoked. During the period of adducing evidences, the Defendant GCT Co. provided evidences as follows: (1). Loading & Unloading Agreement of Foreign Trade M/V; (2). The back clause of the No. COSU92423790 bearer B/L and exhibits; (3). Survey Report of Cranes. By cross-examination in the court, the facts are found as follows: 1. The Fact of Selling Goods On September 11, 2001, BVI Co. signed a Contract of Sale with SIPA Co., agreeing that SIPA Co. sole 11 1-step bottle machines (Model: ECS FX20／80HF) and relevant equipments. On October 16, 2001, SIPA Co. signed a Contract of Sale with the Plaintiff, agreeing that BVI Co. sole one 1-setp bottle machine and relevant equipment to the Plaintiff at the price USD 2,373,906 that includes CIF of China open port and fees for installation and test-drive. The method of payment is telegraphic money order in 100% after installation and checking according with checking document. The liability of the buyer includes: “Unload the machines and hardwares at the installation site. Any damage caused during the hoisting is the liability of the buyer, unless the damage can be proved to happen during the shipping.” On April 1, 2002, the Plaintiff and BVI Co. signed another Contract of Sale (No. FY-2002006A), agreeing that BVI Co. sole one 1-setp bottle machine and relevant equipment to the Plaintiff at price USD 2,373,906, CIF Huangpu Port. 2. The Fact of Contract of Transportation On March 23, 2002, SIPA Co. transferred one 1-setp bottle machine to COSCO Co. to carry and COSCO Co. issued the No. COSU92423790 B/L, recording that the carrier is SIPA Co., the consignee is the Plaintiff and the notifier is Guangzhou Tingyi Food Co., Ltd.; the goods are No. 11 ECS FX20／80HF 1-setp bottle machines in seven containers of 40 feet and two containers of 20 feet with 127,021kg weight; the carrying ship is “M/V EMPRESS HEAVEN”; the port of loading is Genoa, Italy and the port of destination is Singapore, from container yard to container yard. The law applying clause of the B/L records that this B/L applies to the law of the People’s Republic of China. The list exhibiting after the B/L records the number of the containers and pieces and weight of the goods carried, within which No. CBHU920242/6 container contained one piece of goods weights 23,000kg. In according to the container load plan issued by SIPA Co., the goods in No. CBHU920242/6 container is blow pressing machine. After issuing the B/L, SIPA Co. sent a correspondence to COSCO Co. changing the port of destination to Huangpu, Guangzhou. 3. The Fact of the falling of No. CBHU920242/6 container The foregoing goods arrived Huangpu, Guangzhou, on April 16, 2002. Being entrusted by COSCO Co., GCT Co. arranged the parking, loading and unloading and other relevant works. In the same day, during the unloading, one side of No. CBHU920242/6 container broke off abruptly; a pole on the other side of the contained and a mudsill were broken, falling on a 40 feet container which was reclining on No. 2 shelf of land side of the portal crane. The Shipping Record issued by GCT Co. records the process of falling and expresses the opinion that the main reason causing the accident and the goods damage were in surveying. After picking up the goods, the Plaintiff transported the damaged container and the whole set bottle machine to Fuzhou. Now the damaged equipment is in the factory of the Plaintiff. 4. The Fact of Damage Survey The Damage Report of New Equipment of Fuzhou by Dick Sun, provided by the Plaintiff, records, on April 23, 2002, jointly with representatives from Guangzhou Tingyi Food Co., COSCO Co. and notarization party concerned, Dick Sun opened and checked the damaged container at Huangpu, Guangzhou. The conclusion is: all girders over beams of maintaining platform at the blowing part are broken and lean; most air pipes and oil pipes are seriously distorted; and gas valve has been damaged in different degree. Marks on the B-side of driving device of conveying belt shows that it has been bumped hardly, while A-side has been slightly damaged. No pattern has been fix at the B-side and nearly half stretching rods are not at their normal position which can be seen. The pattern at the A-side is in closing, however damage cannot be seen. The gap on the rear conjoint of the bottom of the direct fixed outside the pattern is big, which can deduce that the whole bottle equipment has been over-turned. Moreover, the opening-closing machine has disturbed landscape orientation. The fax sent by Robert Cucciol, Sales Manager of SIPA Co., to the staffs of the Plaintiff, provided by the Plaintiff, records: the budget of the blowing part is USD 1,081,500, with respect to the new blowing part and adjusting the injection equipments that has not been damaged, expenses should be paid separately at USD 92,400. Moreover, packing fees is USD 6,500 and shipping fee of the new equipment to China harbor is USD 38,000. The forgoing fees are totally USD 1,218,400. The fax sent by Massimo Budoia, Project Manager of SIPA Co., to the staff of the plaintiff, provided by the plaintiff, records: the blowing part cannot be used any longer and the costs for taking down the machine and checking the working effect of the undamaged part would exceed the price of this set of equipment. COSCO Co. and GCT Co. hold: SIPA Co. is nether a legal organization nor an authorized organization of appraisal, further, being the seller in this case, SIPA Co. is an interest party; thereof, the above-mentioned opinions and conclusions made by SIPA Co. cannot be the evidences confirmed the goods damage and the loss in this case. Based on the application of COSCO Co., China National Import & Export Commodities Inspection (Guangdong) Corporation made further appraisal report on damaged status of the blowing part of the 1-stept bottle machine on August 26, 2002 at the Plaintiff’s factory. In the report, recording that the damaged equipment is the blowing part within the whole product line, the appraisal conclusion of the outside damages is as follows: (1). The girders and straight beams over the crossbeams of the maintaining platform at the blowing part have been snapped, sloping to an angle around 23º~25º; (2). Three crossbeams over the top of the maintaining platform have been miscued; (3). The air pipe and high-pressure oil pipe fixed at the B-side of the blowing part have been knocked flatly, departure from the fixing position, with connectors on part of pipes losing off; moreover, the valve connecting the high-pressure oil pipe is leaning and out of shape, departure from the fixing position; (4). The flywheel in the driving device of conveying belt fixed at the B-side has marks showing serious bump, the flanges on the both top sides of the flywheel have been damaged by bumping, shoveling a notch which is 5mm deep at the most; (5). Portrait straight beams at the B-side out-coming part of the maintaining platform have been ripped, with connected bolts on the green holed splint cutting off, which cause the splint loosing and sloping; (6). The cable trunkings are twist and bumped to concave; (7). No patterns have been seen on two closing seats at both A and B sides. The appraisal conclusion is: the price of the blowing part cannot be determined on the reason that COSCO Co. and the Plaintiff have not provided the sales contract, invoices and relevant customs declaration for importing with respect to buying this set of bottle machine and changing new equipment after the blowing part damaged; however, by synthetically considering the structure and function of the blowing part in the whole set bottle machine, the price of this part accounts 25-35% of the whole set machine. In according to the appearance damage of the blowing part at the scene, the connection and the running quality of each part in the blowing part have been greatly damaged and the connection between the blowing part and the whole product line is out of work, while by considering the possibility of reclaiming the parts on the machine, for example, the direct of the pattern, the opening-closing part and part of valves and pumps on the hydraulic pressure system, the rate of scrap value of the blowing part is estimated as around 20%. 5. Others In each day of June 17, 2002 and November 12, the Plaintiff sent correspondence to COSCO Co., stating that SIPA Co. had already made an analysis report on the loss degree of the damage machine, in which the damage machine had been cognized that seriously damaged and had no need to repair, and asking COSCO Co. to compensate USD 1,218,400. COSCO Co. or the agent p.p. sent correspondence to the Plaintiff in each August 12, October 25 and November 13 in the same year, asking for the analysis report and the contract of sale of SIPA Co. in order that COSCO Co. can entrust China National Import & Export Commodities Inspection (Guangdong) Corporation to inspect and examine. In addition, during the litigation, the Plaintiff, COSCO Co. and GCT Co. all choose to apply laws of the People’s Republic of China to settle the dispute in this case. Further, it is found out that on June 18 2003, International Monetary Fund published the conversion rate of SDRs to USD as 1 SDRs changing USD 1.419040. Members of collegiate bench consistently hold that this case is a dispute over contract for carriage of goods by sea on the reason that the Plaintiff brought up the complain on the B/L for carriage of goods by sea. Based on the Article 269 of Maritime Code of the People’s Republic of China, the parties to a contract may choose the law applicable to such contract. In this case, the Plaintiff and the Defendant COSCO Co. and GCT Co. all choose to apply laws of the People’s Republic of China to settle the dispute, thereby, the case should be applied laws of the People’s Republic of China. Based on Article 78, Paragraph 1, of Maritime Code of the People’s Republic of China, the relationship between the carrier and the holder of the bill of lading with respect to their rights and obligations shall be defined by the clauses of the bill of loading. By signing Contract of Sale with BVI Co., the Plaintiff obtained No. COSU92423790 straight bill and was the named holder of the said bill. Thus, the Plaintiff has right to claim compensation to the carrier on the goods loss caused in goods shipping in according with the said bill. The Contract of Sale between the Plaintiff and BVI Co. does not impact the rights and litigations of the Plaintiff being the holder of the bill; thus, the claim of COSCO Co. that the Plaintiff is not the proprietor of the cargos and has no right of claim on the cargo loss in this case, has no legal basis. No. CBHU920242/6 container fell during the hoisting unloading at Huangpu Harbor on April 16, 2002. Both the Appraisal Report on Damage by China National Import & Export Commodities Inspection (Guangdong) Corporation, provided by COSCO Co. and the Damage Report of New Equipment of Fuzhou by Dick Sun of SIPA Co., provided by the Plaintiff record that the goods in the No. CBHU920242/6 container had been damaged, which the damage statuses of the goods in both reports are not contradicted. The appraisal time China National Import & Export Commodities Inspection (Guangdong) Corporation took is August 26, 2002 and the appraisal site is at Fuzhou. Although objectively existing the possibility that other reasons may cause the damage during April 16, 2002 and August 26, 2002, under the situation that COSCO Co. did not provide counterevidence, the goods damage of No. CBHU920242/6 container caused by the falling of the container shall be confirmed. On the amount of indemnity for the loss of the goods, based on Article 55, Paragraph 1,of Maritime Code of the People’s Republic of China, the amount of indemnity for the damage to the goods shall be calculated on the basis of the difference between the values of the goods before and after the damage, or on the basis of the expenses for the repair, and the actual value shall be the value of the goods at the time of shipment plus insurance and freight. The two written opinions by Robert Cucciol, Sales Manager of SIPA Co. and Massimo Budoia, Project Manager of SIPA Co. on the amount indemnity for the loss of the goods should not be adopted as the basis to decide the fact, on the reason that SIPA Co. is not legal organization for goods damage survey in our country and, being the goods seller and the shipper of the B/L, SIPA Co. has interest relationship with the goods in this case; moreover, the Plaintiff did not provide the original copy of the two written opinions that the opposing party denied, which means, no other evidences can verify the opinion on the amount of the goods loss. The Plaintiff’s claim on USD 1,218,400, the amount of indemnity for the loss of the goods, calculated on the two written opinions, shall not be supported. The real price of the damaged blowing part before the damage happened cannot be determined on the reason that the Plaintiff did not provide evidences to proof the price of buying the part or the same kind of cargo. The Plaintiff did not sell off the damaged blowing part, thus the real price of the damaged blowing part after the damage happened cannot be determined. Moreover, without repairing, the repairing fee cannot be determined. Thereby, the specific amount of loss of the damaged blowing part cannot be determined. Under this situation, the appraisal conclusion made by China National Import & Export Commodities Inspection (Guangdong) Corporation, the legal appraisal organization in our country, which is based on the structure of the blowing part in the whole set bottle machine, the function, the value rate of the damage status in the whole set of machine and the rate of scrap value, can be the basis of determining the loss of the damaged blowing part in this case, due to not enough counterevidence been provided by the Plaintiff to reverse the appraisal conclusion. Based on the appraisal conclusion by China National Import & Export Commodities Inspection (Guangdong) Corporation, the value of the damaged blowing part accounts for 25-35% of the value of the whole machine, the rate of scrap value accounts for 20%. This court calculates the amount of indemnity for the loss of the goods is USD 664,693.68, which is 35% the price of the damaged blowing part in the value of the whole machine. Article 46, Paragraph 1, of Maritime Code of the People’s Republic of China stipulates: the responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in change 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. The goods damage happened before the delivery by the Defendant COSCO Co., which is during the responsibility period of carrying goods, and the goods were damaged by falling during the hoisting unloading, which does not belong to the grounds for exemption of the carrier stipulated in the Paragraph 1, Article 51 of Maritime Code of the People’s Republic of China. Thereby, COSCO Co. shall bear the compensation liability of the goods damage in this case. By accepting the entrustment of COSCO Co. to unload the goods in this case, GCT Co. should not bear liabilities of the carriage contract, on the reason that thought it made goods loss during the unloading, it is not the party in this contract for carriage of goods by sea. The tort action that the Plaintiff versusing GCT Co. and the action the Plaintiff versusing COSCO Co. on the same goods loss do not belong to the colitigation stipulated on Article 53, Paragraph 1, of Civil Procedure Law of the People’s Republic of China. Under the situation that the Plaintiff brought up the action, versusing COSCO Co., based on the contract for carriage of goods by sea, the dispute between the Plaintiff and GCT Co. cannot be consolidated trail, which can be solved separately. The goods loss in this case is not caused by the intention of COSCO Co. or blindly to do or not to do so by know perfectly well on the loss; thus COSCO Co. has right to compensate the amount of indemnity stipulated in Article 56 of Maritime Code of the People’s Republic of China. Based on Article 56, Paragraph 1, of Maritime Code of the People’s Republic of China, the carrier’s liability for the loss of or damage to the goods shall be limited to an amount equivalent to 666.67 Units of Account per package or other shipping unit, or 2 Units of Account per kilogram of the gross weight of the goods lost or damaged, whichever is the higher. The B/L in this case records the piece of the damaged No. CBHU920242/6 container is one, weighing 23,000 kilograms, and no price of the container goods is recorded. Thus, the limit of the indemnity for the damaged goods in the container should be calculated on 46,000 Units of Account per gross weight, which is 666.67 Units of Account per package. The Units of Account stated in Maritime Code of the People’s Republic of China means the special drawing rights stipulated by the International Monetary Fund. Based on the calculation rate of SDR to USD published by the International Monetary Fund on June 18, 2003, the limit of the indemnity for the goods in the container is USD 65,275.84. The claim of the Plaintiff exceeding the limit shall not be supported. Based on Article 46, Paragraph 1, and Article 56, Paragraph 1, of Maritime Code of the People’s Republic of China, this court now judges as follows: 1. Order the Defendant COSCO Co. compensate the Plaintiff Fujian Tingyi Food Co. the loss of the goods USD 65,275.84; 2. Dismiss the claim of the Plaintiff Fujian Tingyi Food Co. to the Defendant GCT Co.; 3. Dismiss the other claim of the Plaintiff Fujian Tingyi Food Co.. The accepting fee of this case is RMB 60,574 plus other fees RMB 100, which the Plaintiff pays RMB 57,423 and the Defendant COSCO Co. pays RMB 3,251. All the said fees have been paid by the Plaintiff in advance, thus the Defendant shall directly repaid the Plaintiff and this court would not check and return the fee separately. The paying responsibility mentioned above shall be fulfilled completely within ten days after this Judgment takes effect. Suppose any party takes exception to the judgment, an appeal paper can be submitted to this court within 15 days after the service day of the Judgment, appealing to Guangdong Supreme People’s Court, in addition, any party submits the appeal paper shall provide the copies according to the number of the other party. Presiding Judge: Xu Yuanping Judge: Zhan Weiquan Judge: Deng Yufeng June 18, 2003 Assistant: Han Haibing Clerk: Zhang Haiying

HIGHER PEOPLE’S COURT OF TIANJIN PEOPLE’S REPUBLIC OF CHINA CIVIL JUDGMENT No.GJZ.275(2001) Appellant (Defendant in first instance trial): YICHENG CONTAINER LINES Domicile : 126 Tonyklasewalls Street, 2500 New South Wales, Australia Legal Representative: Zhou Yaqing Agent ad litem : Yuan Xiaoguang, lawyer of Jiade Law Firm Appellant (Defendant in first instance trial):YICHENG INTERNATIONAL TRADE COMPANY(Tianjin) Domicile : Vanke Gental Garden, Qixiangtai Road, Heping District, Tianjin Legal Representative : Zhou Yaqing, Director Agent ad litem : Luo Rongli, lawyer of Fazheng Niujin Law Firm Agent ad litem : Zhang Jie, lawyer of Fazheng Niujin Law Firm Respondent (Plaintiff in first instance trial):HEBEI HUAYE IMPORT AND EXPORT CO LTD Address : 152 Xingkai Road, Shijiazhuang, Hebei, China Legal Representative : Guan Chenzhong, President Agent ad litem : Fang Guoqing, lawyer of Jiade Law Firm Being dissatisfied with Civil Judgment No.JHSCZ484(2000) rendered by Tianjin Maritime Court (“judgment of first instance) for the cases of disputes over the contract of carriage of goods by sea , the Appellants Yicheng Container Lines and Yicheng International Trade Co.(Tianjin) instituted an appeal to this Court. A collegial bench was formed in accordance with law after this Court accepted the case. Now the hearing for the present case has been concluded. The court of first instance ascertained that, on Nov. 7th 1999, HEBEI HUAYE IMPORT AND EXPORT CO., LTD. signed a contract with the buyer N.A.C.deC.V from Honduras，that HEBEI HUAYE IMPORT AND EXPORT CO., LTD. was to export to the buyer 1700 cases of white pear halves in syrup, with a unit price of US $20 per case, and 3000 cases of peach halves in syrup，with a unit price of US $12 per case in Cortes ,Honduras, the port of lading was Xingang port, Tianjin, the destination port was Cortes, Honduras port，way of payment was T/T. In early Dec 1999, HEBEI HUAYE IMPORT AND EXPORT CO., LTD. asked YICHENG INTERNATIONAL TRADE COMPANY(Tianjin), the agent of YICHENG CONTAINER LINES in Tianjin to ship two ten 20 TEU containerized cargo, including 850 cases of white pear halves in syrup，valued US $17000,and 15000 cases of peach halves in syrup, valued US $18000, adding up to US $35000, from Xingang port, Tianjin to Cortes of Honduras。HEBEI HUAYE IMPORT AND EXPORT CO., LTD. and YICHENG INTERNATIONAL TRADE COMPANY reached an agreement on the main terms of the shipping contract by fax. After HEBEI HUAYE IMPORT AND EXPORT CO., LTD. sent the goods to YICHENG INTERNATIONAL TRADE COMPANY, the goods were loaded on board as scheduled. YICHENG INTERNATIONAL TRADE COMPANY presented the shipped B/L No.yctj90212-073 issued by YICHENG CONTAINER LINES to HEBEI HUAYE IMPORT AND EXPORT CO., LTD. The B/L seated that the shipper was HEBEI HUAYE IMPORT AND EXPORT CO. LTD., the carrying ship was TIANSHUN V179, the port of loding was Xingang port, Tianjin, the port of discharge was Cortes, Honduras, and freight was prepaid. YICHENG CONTAINER LINES, which was the issuer of the B/L, had the same legal representative with YICHENG INTERNATIONAL TRADE COMPANY. On Jan.13th ,2000, HEBEI HUAYE IMPORT AND EXPORT CO.,LTD. Knew that YICHENG INTERNATIONAL TRADE COMPANY had shipped the cargo to San lorenzo port, instead of the port appointed in the B/L. HEBEI HUAYE IMPORT AND EXPORT CO., LTD. negotiated many times with Wang Xuelan, the director of YICHENG INTERNATIONAL TRADE COMPANY which was the agent of YICHENG CONTAINER LINES in Tianjin, to ship the cargo to the appointed port, but YICHENG INTERNATIONAL TRADE COMPANY and YICHENG CONTAINER LINES could not do so all along. In the end, the buyer told HEBEI HUAYE IMPORT AND EXPORT CO. LTD. that because the goods arrived so late as to have exceeded the date fixed in the contract for the next buyer, so the goods couldn’t be accepted. It was also ascertained that, YICHENG CONTAINER LINES was a company registered in Australia whose legal representative was Zhou Yaqing，and it did not establish branch offices in Tianjin, China . on Nov.15th, 2000, YICHENG INTERNATIONAL TRADE COMPANY applied to the court of first instance to order NYK to be an additional defendant in this case. In the application, YICHENG INTERNATIONAL TRADE COMPANY stated that it was the contracting carrier of the shipment. But in the first hearing of the first instance Court, YICHENG INTERNATIONAL TRADE COMPANY and YICHENG CONTAINER LINES denied the statement in the application to the court of first instance, stating that they did not take part in the shipment in question, and the contracting carrier in the application was a mis-statement by YICHENG INTERNATIONAL TRADE COMPANY. In order to find out the truth, the court of first instance examined the relevant evidence to clear up the self-contradictory statement of Yicheng International Trade Company, and found out that YICHENG INTERNATIONAL TRADE COMPANY did not have the Certificate Of International Freight Agency Company, PRC (hereinafter referred to as Certificate). Part of the payment bills in the bank account of YICHENG INTERNATIONAL TRADE COMPANY as investigated on the basis of the freight invoices provided by HEBEI HUAYE IMPORT AND EXPORT CO., LTD. and the relevant evidence showing that BEIJING YONGZHOU COMPANY lent its bank account to YICHENG INTERNATIONAL TRADE COMPANY, could prove that the account 099243020093535 was opened in the name of BEIJING YONGZHOU COMPANY, but was controlled by YICHENG INTERNATIONAL TRADE COMPANY. YICHENG INTERNATIONAL TRADE COMPANY had operated beyond its business scope and illegally run the international shipping agency business, while in this case it actually acted as the agent of YICHENG CONTAINER LINES in Tianjin . The court of first instance considered that the evidence such as shipping order, bill of picking up containers , confirmation letter of bill of lading and the bill of lading proved that there existed a contract of shipment relationship between HEBEI HUAYE IMPORT AND EXPORT CO., LTD. and YICHENG CONTAINER LINES. YICHENG CONTAINER LINES was a foreign company that did not legally establish branch offices in china. Although there was an agency contract with BEIJING YONGZHOU COMPANY , but in actual business operations BEIJING YONGZHOU COMPANY could only collect freight on behalf of YICHENG CONTAINER LINES and provide freight invoices to shippers , but did not take part in other agency business. The evidence under this case showed that YICHENG INTERNATIONAL TRADE COMPANY actually handled the relevant traffic business in the port of loading ( Xingang , Tianjin); actually it was the cargo agent of YICHENG CONTAINER LINES at the loading port (Xingang ,Tianjin ). YICHENG INTERNATIONAL TRADE COMPANY undertook international cargo agency business without the 《Certificate》 issued by the Foreign Trade and Economic Cooperation Ministry, which should be regarded as in breach of the relevant laws and regulations because its business operations were against article 12 of the detailed Regulations for implementation of Stipulations on International Cargo Agency Of the PRC (trial implementation) ( hereinafter called Operation Details). Therefore the contract of carriage of goods by sea signed between YICHENG CONTAINER LINES and HEBEI HUAYE IMPORT AND EXPORT CO., LTD. should be invalid , and YICHENG CONTAINER LINES was entirely liable for what happened , and should compensate for the loss of HEBEI HUAYE IMPORT AND EXPORT CO., LTD. for it neither shipped the cargo to the assigned port , nor was it possible for it to return the cargo to HEBEI HUAYE IMPORT AND EXPORT CO., LTD. According to the provisions of Article 67 of the General Principles of the Civil law of the PRC ,YICHENG INTERNATIONAL TRADE COMPANY ,as the agent of YICHENG CONTAINER LINES at Xingang Port, Tianjin, should be jointly and severally liable to HEBEI HUAYE IMPORT AND EXPORT CO., LTD. for its intentional law-breaking business operation. HEBEI HUAYE IMPORT AND EXPORT CO., LTD. had no right to claim for compensation because it only produced two original Bs/L, but YICHENG CONTAINER LINES said it signed three Bs/L. The court of first instance held that the only effective grounds for pleading by YICHENG CONTAINER LINES and YICHENG INTERNATIONAL TRADE COMPANY was that they gave the cargo stated in the B/L to the receiver and returned the original B/L, otherwise the grounds for pleading would be ineffective. About the issue of time limitation, the court held that because YICHENG CONTAINER LINES and YICHENG INTERNATIONAL TRADE COMPANY had not delivered the goods till this time, therefor HEBEI HUAYE IMPORT AND EXPORT CO., LTD.’s request to add YICHENG CONTAINER LINES as respondent was not time-barred. According to paragraph 2 of Article 64, of the Civil Procedure Law of the PRC; the provisions of Article 67 of the General principles of the Civil law of the PRC; the provisions of Article 2, Article 52 Paragraph 5, and Article 58 of the Contract Law of the PRC; the provisions of Article 41, and Paragraph 1 of Article 42 of the Maritime Code of the PRC, the judgment is rendered as follows: 1. YICHENG CONTAINER LINES compensates USD 35,000 to HEBEI HUAYE IMPORT AND EXPORT CO., LTD. for its loss in value of cargo; 2. YICHENG INTERNATIONAL TRADE COMPANY and YICHENG CONTAINER LINES should be jointly and severally liable for the loss of HEBEI HUAYE IMPORT AND EXPORT CO., LTD. Because YICHENG INTERNATIONAL TRADE COMPANY was in breach of the relevant laws and regulations in its business operations concerning agency work. 3. The above sum should be paid off in 10 days after this judgment comes into force, otherwise the provisions of Article 232 of the Civil Procedure Law of the PRC, shall be enforced. 4. Other litigation requests of HEBEI HUAYE IMPORT AND EXPORT CO., LTD. shall not be supported. The litigation fee of RMB6,964 Yuan, security fee of RMB3,720 Yuan, totaling RMB10,684 Yuan, of which HEBEI HUAYE IMPORT AND EXPORT CO., LTD. shall pay RMB97 Yuan, YICHENG CONTAINER LINES and YICHENG INTERNATIONAL TRADE COMPANY shall jointly and severally be responsible to pay RMB10,587 Yuan. YICHENG INTERNATIONAL TRADE COMPANY and YICHENG CONTAINER LINES were not satisfied with the judgment of first instance and filed an appeal. The appeal requests of YICHENG INTERNATIONAL TRADE COMPANY were: 1,To dismiss the civil judgment of Tianjin maritime court No.484 (2000), or to change that judgment or hold a retrial of the case. 2, HEBEI HUAYE IMPORT AND EXPORT CO., LTD. should pay all the litigation cost. The basic facts and reasons were: HEBEI HUAYE IMPORT AND EXPORT CO., LTD. had already lost its litigious right; YICHENG INTERNATIONAL TRADE COMPANY should not be a party to this case. The contract between YICHENG CONTAINER LINES and HEBEI HUAYE IMPORT AND EXPORT CO., LTD. was true and effective. It was wrong for the court of first instance to decide that the contract of carriage between YICHENG CONTAINER LINES and HEBEI HUAYE IMPORT AND EXPORT CO.,LTD. was null and void; YICHENG INTERNATIONAL TRADE COMPANY should not be liable for compensation for the loss of value of the cargo jointly and severally with YICHENG CONTAINER LINES . YICHENG CONTAINER LINES appealed to request to rectify the judgment, to dismiss in the absence of ascertainment of all the facts, and with the wrong application of law .HEBEI HUAYE IMPORT AND EXPORT CO. LTD.’s litigation request ,and order it to pay the litigation fee. The main facts and reasons were: 1, It was in breach of the provisions of the civil procedure law of the PRC that YICHENG CONTAINER LINES was treated as the defendant in the first instance trial. This case was heard for the first time on December 15,2000,and the procedures for cross-examination and argument completed on the same day. However, on April 30 of 2001, four months after the first hearing, HEBEI HUAYE IMPORT AND EXPORT CO., LTD. requested the court of first instance to summon the second appellant to the court to participate in this action as an additional defendant. This request of HEBEI HUAYE IMPORT AND EXPORT CO., LTD. was obviously not in compliance with the law under which the party in a lawsuit can make a new litigation request before the hearing is closed. As a result, this request should be dismissed. 2,The judgment of first instance misunderstood the relevant on legal provisions, thus leading to its wrong judgment. According to the provisions of Article 257 of the Maritime Code of the PRC, the limitation period for claims against the carrier with regard to the carriage of goods by sea is one year, counting from the day on which the goods were delivered or should have been delivered by the carrier. The fact of this case should comply with the expression “should have been delivered ”, but not “actually delivered” as mentioned in the Judgment. And since the receiver refused to take delivery of the cargo in March, 2000(please see HEBEI HUAYE IMPORT AND EXPORT CO., LTD.’s submission of evidence No.7 to first instance court), so HEBEI HUAYE IMPORT AND EXPORT CO., LTD. claimed their rights on April 30,2001. which was already time-barred. as provided by law. Therefore this claim should be dismissed. 3, HEBEI HUAYE IMPORT AND EXPORT CO., LTD. did not have the ownership of the goods and had no right to claim damage from YICHENG CONTAINER LINES. Since YICHENG CONTAINER LINES issued three original Bs/L, but HEBEI HUAYE IMPORT AND EXPORT CO., LTD. produced only two of them to the Court of first instance, while the third copy was endorsed, which meant HEBEI HUAYE IMPORT AND EXPORT CO., LTD. had transferred its ownership to the buyer, and no longer had such right in substance. The judgment in first instance in deciding that HEBEI HUAYE IMPORT AND EXPORT CO., LTD. still had the right to claim was wrong. 4,In this case, the goods being discharged at SAN LORENZO should not be deemed as a discharge at a wrong place. According to the overleaf clauses of the B/L of YICHENG CONTAINER LINES and shipping practice,YICHENG CONTAINER LINES had the right to transfer the goods to another ship or to transport same on land. Discharge of cargo at SAN LORENZO within the valid period was not in violation of any requirements of the contract, nor any agreement between the parties. The point was that the consignee was not willing to perform the contract by finding a pretext to refuse taking delivery of the cargo and imputing to commercial risks. There were many mistakes in the ascertainment of facts and application of laws by the first instance court which should be rectified by this Court. HEBEI HUAYE IMPORT AND EXPORT CO., LTD. replied by suggesting that the two appellants’ appeal should be rejected and the judgment of first instance court maintained. Besides that, the appellants should also undertake the legal cost. The main reasons were: first, the grounds for YICHENG CONTAINER LINES’s appeal was completely wrong and should be rejected accordingly. The loading port stipulated in the B/L issued by YICHENG CONTAINER LINES was Xingang,Tianjin, and the port of discharge was Cortes of HONDURAS. The principal and primary responsibility of a carrier was to transport the cargo to the designated discharging port. YICHENG CONTAINER LINES, in this case, was in violation of its basic obligation, and should undertake all liabilities for compensation. All other reasons for YICHENG CONTAINER LINES’s appeal were not to be established either. 1, With regard to the time of increasing the defendant, YICHENG CONTAINER LINES’s assertion misinterpreted the relevant provisions of the law of China. The hearing of this case was held on Dec. 15, 2000, then the hearing was discontinued owing to court recession, after that the second hearing was held on Sept, 25,2001.The application for increasing the defendant was made on Apr., 25,2001,which complied with the law of this country. 2, The so-called expiration of limitation period had no legal basis. YICHENG CONTAINER LINES never transported the goods to the designated discharging port, so there was no way for it to deliver the goods at all. Even up to this time, the time limitation for the defendant to bring a suit was not expired yet. 3, It was baseless for YICHENG CONTAINER LINES to say that 3 original Bs/L were issued and one of which endorsed for transfer. The Bs/L issued never showed how many original Bs/L were issued by YICHENG CONTAINER LINES,so the only valid defense of YICHENG CONTAINER LINES was that they collected one original Bs/L and delivered the cargo. Otherwise, YICHENG CONTAINER LINES had to undertake the obligation for compensation. 4, The discharging port in this case was Cortes .The provisions in the overleaf clauses of the B/L only stated that transshipment could be allowed, but YICHENG CONTAINER LINES was not exempt from its obligation to transport the cargo to the discharging port designated in the B/L. Second, YICHENG INTERNATIONAL TRADE COMPANY shall be jointly and severally liable under this case. Although not qualified for freight forwarding, yet it actually controlled the account of BEIJING YONGZHOU COMPANY, disbursing relevant fees for maritime transport. Such facts indicated that it was operating illegal forwarding business. Although YICHENG INTERNATIONAL TRADE COMPANY denied that they had anything to do with this case, but they indicated as contractual carrier for this shipment in writing and their director was involved in forwarding business such as cargo booking, warehousing and handling the remaining problems, so their defense should be overruled. According to Article 67 of the General Principles of the Civil Law of the People’s Republic of China, YICHENG INTERNATIONAL TRADE COMPANY continued its forwarding business notwithstanding their awareness of the illegality of such operation. Therefore it should be jointly and severally liable with YICHENG CONTAINER LINES. Third, YICHENG INTERNATIONAL TRADE COMPANY and YICHENG CONTAINER LINES’s fraudulent operations shall be severely punished according to law. The above mentioned two companies were actually staffed with one and the same group of personnel. While cargo booking, warehousing the cargo and other business operations were carried out in the name of YICHENG CONTAINER LINES as a contracting party, actually it was YICHENG INTERNATIONAL TRADE COMPANY that was doing the day to day work, because YICHENG CONTAINER LINES had no branches in this country. Whenever dispute arose from business and the clients wanted to get hold of YICHENG INTERNATIONAL TRADE COMPANY, YICHENG INTERNATIONAL TRADE COMPANY would just shrug off its obligations under the pretext that the documents and papers were issued by YICHENG CONTAINER LINES, not itself. But YICHENG CONTAINER LINES was merely a paper company far away in Australia, with neither property nor ship. Under such situation, the unfortunate clients had no ways and means of demanding any recourse. The two appellants were, in fact, doing something fishy to avoid the laws and regulations . YICHENG CONTAINER LINES presented the following evidence: 1. The notes of the first instance Court hearing on Dec. 15, 2000 showing the procedures for court hearing were complete except for announcing the judgment; 2. The notice of first instance Court for adding YICHENG CONTAINER LINES to the list of defendant on Apr., 30, 2001; 3. The trade contract indicating there was no agreement on shipping period between the appellant and the buyer and the payment term was T/T; 4. The letter for rejecting the goods by the buyer on Mar., 30,2000; 5.Letters from the agent at port of discharge，proving that the buyer rejected the cargo and the cargo should undergo Customs clearance according to the law of the country in which the port of discharge was located;. 6.The overleaf clauses of the bill of lading of YICHENG CONTAINER LINES，proving that the carrier had the right to transfer the goods to another vessel or to transport on land. YICHENG INTERNATIONAL TRADE COMPANY raised no objection to the above evidence. HEBEI HUAYE IMPORT AND EXPORT CO., LTD. did not challenge the truthfulness of the above evidence, and held that evidence No.4 and evidence No.5 further proved the reason of the consignees, rejection of the cargo was because it was discharged at a wrong port. Evidence No.6 could not prove YICHENG CONTAINER LINES was not in default, as there was difference between transshipment by another vessel and discharge the cargo; the cargo must be carried to the destination port, whatever the ways and means of such carriage. YICHENG INTERNATIONAL TRADE COMPANY provided evidence as follows: 1. The declaration of abandoning the title to the goods provided by HEBEI HUAYE IMPORT AND EXPORT CO., LTD. to the court of first instance, thereupon, HEBEI HUAYE IMPORT AND EXPORT CO.,LTD. could no more enjoy the other rights under the B/L; 2. Tentative Specifications on the Administrative Regulations approved by the State Council issued on April 21, 1987, proving that the DETAILED REGULATIONS cited by the court of first instance were regulations issued by governmental department instead of an administration law, so it could not serve as the basis for invalidating a contract. In addition, a series of evidential documents were provided by HEBEI HUAYE IMPORT AND EXPORT CO.,LTD. to the court of first instance, to prove that HEBEI HUAYE IMPORT AND EXPORT CO. LTD. had business relationship with HEBEI INTERNATIONAL FREIGHT AGENCY., LTD., and HEBEI INTERNATIONAL FREIGHT AGENCY.,LTD. had direct business relationship with BEIJING YONGZHOU COMPANY represented by Wang Xuelan, while YICHENG INTERNATIONAL TRADE COMPANY wasn’t involved in this case. YICHENG CONTAINER LINES raised no objection to the above evidence. HEBEI HUAYE IMPORT AND EXPORT CO., LTD. did not challenge the fact of the above evidence but believed that they could not prove what YICHENG INTERNATIONAL TRADE COMPANY intended to prove. HEBEI HUAYE IMPORT AND EXPORT CO., LTD. provided the evidential documents as follows: 1.Shipping order, to prove that they contacted YICHENG INTERNATIONAL TRADE COMPANY to ship the goods to Cortes, Honduras; 2. Bill of Picking up containers, to prove that YICHENG INTERNATIONAL TRADE COMPANY received the instruction and provided two 20 feet containers; 3. Confirmation letter of Bill of Lading, to prove that YICHENG INTERNATIONAL TRADE COMPANY accepted the contract and agreed to ship the cargo to Cortes, Honduras; 4.Confirmation letter of YICHENG INTERNATIONAL TRADE COMPANY, to prove that YICHENG INTERNATIONAL TRADE COMPANY accepted all the conditions of the shipment contract, and the contract was established; 5. The Bill of Lading, to prove that YICHENG INTERNATIONAL TRADE COMPANY issued the B/L of YICHENG CONTAINER LINES in order to perform the contract; 6-9.Faxes sent by YICHENG INTERNATIONAL TRADE COMPANY to HEBEI HUAYE IMPORT AND EXPORT CO., LTD.; 10-11. Letters sent by the agent of HEBEI HUAYE IMPORT AND EXPORT CO., LTD. to YICHENG INTERNATIONAL TRADE COMPANY; 12.Letters sent by YICHENG INTERNATIONAL TRADE COMPANY to HEBEI HUAYE IMPORT AND EXPORT CO., LTD. All the above proved that YICHENG INTERNATIONAL TRADE COMPANY was handling the shipping business under this case all the time; 13. Extracts from the files of the Industrial Commercial Bureau, to prove that the Director of the Board of YICHENG INTERNATIONAL TRADE COMPANY was Wang Xuelan, HEBEI HUAYE IMPORT AND EXPORT CO LTD had been contacting with Wang Xuelan for the shipping business, and YICHENG INTERNATIONAL TRADE COMPANY was the contractual carrier under this case; 14.Fax of the consignee, to prove that the consignee refused to accept the goods because the goods were not shipped to the destination port; 15.Evidence of payment by HEBEI HUAYE IMPORT AND EXPORT CO., LTD., to prove that they had paid the freight in US doilars; 16Evidence of payment by HEBEI HUAYE IMPORT AND EXPORT CO .,LTD., to prove that they had paid the port charges in RMB to the agent of HEBEI HUAYE IMPORT AND EXPORT CO., LTD.; 17-18. Evidence of payment by the agent of HEBEI HUAYE IMPORT AND EXPORT CO., LTD.; to prove that they had paid the above said freight to BEIJING YONGZHOU CO., LTD. appointed by YICHENG INTERNATIONAL TRADE COMPANY; 19-20.Contract with the buyer to prove the price of the goods; 21. The invoice of the goods to prove the value of the goods; 22.Declaration of HEIBEI HUAYE IMPORTAND EXPORT CO., LTD. for abandonment of ownership of the goods; 23. A copy of B/L to prove all the Bs/L explicitly stated the number of B/L issued. YICHENG CONTAINER LINES raised objection to item 23.insisting that three original Bs/L had been issued, but no objection to others. YICHENG INTERNATIONAL TRADE COMPANY did not object the evidence per se, but wondered what the evidence was to prove. He considered that the above evidence exactly proved that HEBEI HUAYE IMPORT AND EXPORT CO., LTD. had a direct business relationship with HEBEI INTERNATIONAL FREIGHT AGENCY .,LTD., and HEBEI INTERNATIONA FREIGHT AGENCY., LTD. had a direct business relationship with BEIJING YONGZHOU CO., LTD., represented by Wang xuelan. This court confirmed the evidential effect of the above evidence. In conclusion, the facts ascertained by this court were not different from those ascertained by the court of first instance. This court held that there existed a contractual relationship between HEBEI HUAYE IMPORT AND EXPORT CO., LTD. and YICHENG CONTAINER LINES on the carriage of goods by sea. YICHENG CONTAINER LINES did not legally establish branch offices in Tianjin, China, the agency agreement signed between YICHENG CONTAINER LINES and BEIJING YONGZHOU CO., LTD. which was not involved in this case only covered the arrangement for collection of freight from carriage of goods by sea. In fact , it was YICHENG INTERNATIONAL TRADE COMPANY that negotiated with HEBEI HUAYE IMPORT AND EXPORT CO .,LTD. on behalf of YICHENG CONTAINER LINES on the clauses of the contract of the carriage and to be engaged in such work as related to the shipment of goods at the port of loading involved in this case. That is to say that YICHENG INTERNATIONAL TRADE COMPANY actually was engaged in the business operations provided for in Article 8 of the International Vessel Agency Administration Regulations,viz.the business operations of international shipping agency. In accordance with the provisions of Articles 6 and 7 of International shipping Agency Administration Regulations, a written application should be sent to the local transport administrative authorities before establishing a shipping agency company. Such application shall be sent to the competent authorities in charge of transport at the place of the company seat or the relevant province (municipality directly under the central government or autonomous region)for examination. Then the applications shall be sent to the Ministry of Communications for approval, and after being approved, the applicant shall bring the document of approval to the Bureau of Administration of Industry and Commerce for registration and business license. It is only after the license has been granted that business operation can start. In this case, YICHENG INTERNATIONAL TRADE COMPANY did not undergo the procedures for approval to be entitled to operate the relevant business. Actually the international shipping agency operation they were engaged in should be held as illegal. As the legal representative of YICHENG CONTAINER LINES was the same legal representative of YICHENG INTERNATIONAL TRADE COMPANY, so it should be held that YICHENG CONTAINER LINES knew YICHENG INTERNATIONAL TRADE COMPANY was not qualified for international shipping agency business. Because YICHENG CONTAINER LINES did not transport the cargo to the destination port, and it was impossible to ship it back, therefore , in accordance with the provisions of Article 6 ,the General Principles of the of the Civil Law of the People’s Republic of China, there was nothing wrong in the judgment of the court of first instance in deciding that YICHENG CONTAINER LINES and YICHENG INTERNATIONAL TRADE COMPANY should be jointly and severally liable for the losses of HEBEI HUAYE IMPORT AND EXPORT CO., LTD., and the said judgment should be maintained. One of the arguments of YICHENG CONTAINER LINES for its appeal was that the court of first instance was in breach of the provisions of the CIVIL PROCEDURE LAW of China to regard YICHENG CONTAINER LINES as a defendant. This court considered that, although the court of first instance added YICHENG CONTAINER LINES as a defendant in this case after the debate in court, yet when the court resumed its hearing, it did not deprive YICHENG CONTAINER LINES of the right to litigation. Therefore, YICHENG CONTAINER LINES’ claim in alleging that the court of first instance violated the legal procedure should not sustain. YICHENG CONTAINER LINES’ second argument for the appeal was that HEBEI HUAYE IMPORT AND EXPORT CO., LTD.’s litigation had exceeded one-year time limitation, so the litigation should not be supported. For this point, this court held that after the cargo involved was transported to SAN LORENZO by YICHENG CONTAINER LINES, HEBEI HUAYE IMPORT AND EXPORT CO., LTD. through Wang Xuelan, had been asking YICHENG CONTAINER LINES all along to perform the contract of carriage to ship the goods to its destination port Cortes, and YICHENG CONTAINER LINES did not refuse clearly. HEBEI HUAYE IMPORT AND EXPORT CO., LTD. continued to ask for the performance of contract of carriage until august, 2000. Before the order Bill of Lading was legally transferred, the indication of anyone other than the person named in the B/L was irrelevant to the shipment under the contract of carriage in this case, still less for it to serve as the starting point for calculating time limitation. During the litigation in the court of first instance, HEBEI HUAYE IMPORT AND EXPORT CO., LTD. declared to abandon their title to the goods and exercise the right to claim. This was the time of the total loss of the goods. Therefore, the allegation of YICHENG CONTAINER LINES that the time the consignee expressed its refusal of taking delivery of the goods to HEBEI HUAYE IMPORT AND EXPORT CO., LTD. after the goods had been shipped to SAN LORENZO was the starting point for calculating the time limitation for HEBEI HUAYE IMPORT AND EXPORT CO., LTD. to claim for the total loss of the goods and to allege that BEIJING HUAYE IMPORT AND EXPORT CO., LTD. ’s litigation was time-barred was not well-founded and shall not sustain. The third argument for the appeal by YICHENG CONTAINER LINES was that one of the original bills of lading had been endorsed for transfer and HEBEI HUAYE IMPORT AND EXPORT CO., LTD. had no right to claim by presenting only two original Bills of Lading. This court held that YICHENG CONTAINER LINES had not provided evidence to prove that it had issued three original Bills of Lading and delivered the goods under the Bs/L to the consignee against the original Bs/L, so YICHENG CONTAINER LINES’ grounds for pleading could not sustain. The fourth argument for YICHENG CONTAINER LINES to appeal was that it was not wrong to discharge the goods at SAN LORENZO. This court held that although YICHENG CONTAINER LINES indicated in the overleaf clauses of the Bill of Lading that they had the right to transfer the goods to another vessel or to transport it on land, but the content of this clause did not relieve them from the obligation to transport the goods to the port of discharge stipulated in the Bill of Lading. The fact that the goods weren’t carried to Cortes was a breach of the contract of carriage. YICHENG CONTAINER LINES should be liable for compensation therefor. In the first instance trail, YICHENG CONTAINER LINES admitted that it was the contractual carrier of this shipment, Wang Xuelan, the director of the Company admitted that she negotiated the matters concerning this shipment with HEBEI HUAYE IMPORT AND EXPORT CO., LTD. on behalf of YICHENG INTERNATIONAL TRADE COMPANY. The evidence in this case proved that the company that actually attended to matters relating to the agency business of the shipment under this case at the port of loadng, viz. Tianjin was YICHENG INTERNATIONAL TRADE COMPANY. Therefore the allegation that YICHENG INTERNATIONAL TRADE COMPANY was not involved in the shipment business under this case and should not be jointly and severally liable was not well founded and shall not sustain. To sum up the above, the appeal of YICHENG CONTAINER LINES and YICHENG INTERNATIONAL TRADE COMPANY was lacking in facts and legal basis, so this court does not support the appeal. The judgment of first instance was clear in ascertaining facts, sufficient in evidence, correct in application of law, and it should be maintained. In accordance with the provisions of Article 153, Paragraph 1, (1) of the Civil Procedure Law of PRC, the judgment is handed down as follows: The appeal of YICHENG CONTAINER LINES and YICHENG INTERNATIONAL TRADE COMPANY is dismissed and the judgment of first instance is maintained. The court fees for the second instance totaling RMB6,964,of which YICHENG CONTAINER LINES and YICHENG INTERNATIONAL TRADE COMPANY shall each bear RMB 3,482. This judgment is final. Presiding Judge: Xie Lipeng Acting Judge: Li Xuechun Acting Judge: Zhang Rongli (Stamp of the Higher people’s Court of Tianjin) Date : 25 April 2002 (Certified true copy) Clerk : Li tong

HIGHER PEOPLE'S COURT OF HUBEI PROVINCE PEOPLE’S REPUBLIC OF China CIVIL JUDGMENT NO. E-Jing-Zhong-179,2001 Appellant (Plaintiff in the first instance trial): Shunlong Special Pipe Fittings Company of Wuxi(hereinafter referred to as Wuxi Shunlong company). Domicile: Xiaoxing, Qianqiao Town, Xishan City, Jiangsu Province Legal Representative: Li Zhongxue, Board Chairman of Shunlong Company of Wuxi Agent ad litem: Zhou Jianming, lawyer of Jinkui Law Office of Wuxi, Jiangsu Province Agent ad litem: Qian Weiqing, lawyer of Deheng Law Office of Beijing Appellee (Defendant in the first instance trial): Chuyun Economy & Trade Company of Port of Yingkou(hereinafter referred to as Yingkou Chuyun Company). Domicile: Huochangli, Zhanqian District, Yingkou City, Liaoning Province Legal Representative: Li Fuyi, manager of Yingkou Chuyun Company Agent ad litem: Wang Peisheng, legal adviser of Harbor Authority of Yingkou Refusing to accept the Civil Case Judgment of Wuhan Maritime Court filed NO. WU-HAI-FA-TONG-SHANG-26,2000 over the dispute about the contract for waterway cargo transportation as final, the appellant Wuxi Shunlong Company instituted an appeal to this court. This court duly formed a collegial panel and held an open hearing of this case. The agent ad litem Zhou Jianming of the appellant Wuxi Shunlong Company, the legal representative Li Fuyi and the agent ad litem Wang Peisheng of the appellee Yingkou Chuyun Company appeared in court for action. This cases has been concluded now. The first instance trial found out that Wuxi Shunlong Company and Yingkou Chuyun Company signed a Maritime Transport Agreement on April 9,2000, which stipulated as follows: 1.Wuxi Shunlong Company entrusted Yingkou Chuyun Company to transport by sea and then transship 1,700 tons of roll bendings, a kind of new product of hot-rolling of Benxi Steel Company (hereinafter referred to as Ben Steel)where the port of shipment was Bayuquan of Yingkou and the port of arrival was Wuxi and the receiver was Wuxi Shunlong Company. 2.The fees shall be collected according to the weight stated in the railroad bill and the quality assurance certificate of the steel factory. From Yingkou to Wuxi Port via Shanghai(as transshipment port) the cost including shipping charges, port charges and service charges was RMB113 per ton, from Yingkou to Jiangyin Port was RMB83 per ton. 3. After Yingkou Chuyun Company delivered the goods to the port of arrival appointed by Wuxi Shunlong Company,if no disagreement, the account shall be settled with Wuxi Shunlong Company at a lumpsum amount without installment. Wuxi Shunlong Company shall remit the money to the account of Yingkou Chuyun Company promptly. 4.After the goods were delivered to the port, Yingkou Chuyun Company shall checked and accept the goods according to the quantity declared in railroad bill. It should check with the steel factory promptly if there was any inconsistency. According to the regulations issued by the Communications Ministry and Railway Ministry, the liability for shortage of and damage to the goods judged from commercial record should be undertaken by the person responsible therefor. On January 15,2000, Yingkou Chuyun Company (charterer under the C/P) and Haizhou Maritime Company of Linhai City, Zhejiang Province (shipowner under the C/P) signed a Voyage Charter Party, which stipulated that the charterer should transport 7000 tons of roll bendings and tin plates by the ship Jinpeng where the port of shipment was Bayuquan of Yingkou and the ports of arrival were NanJing and Jiangyin. The freight was RMB52-53 per ton to Nanjing and RMB47-48 per ton to Jiangyin. From January 24 to 27 of 2000, sixty-one pieces/ 690.88 tons of T4A hot-rolling roll bendings consigned by Wuxi Shunlong Company were loaded on board and were delivered to Jiangyin Port on February 1,2000. On the same day, Wuxi Shunlong Company signed a contract of port operation with the Port Management Office of Jiangyin,under which the Port Management Office of Jiangyin was entrusted to load and unload and transport the goods. The Port Management Office as the port operator of Jiangyin didn't make any remark on the delivery receipt of this batch of goods. The goods were arranged by the Port Management Office of Jiangyin to be transshipped to Wuxi Port by lighter and handed over to the receiver Wuxi Shunlong Company. After receiving and warehousing the goods, Wuxi Shunlong Company sent a mail on February 20,2000 to ask Yingkou Chuyun Company to dispatch someone to deal with the problem of damage to the roll bending (being soaked and getting rusted). On February 29,2000, Wuxi Shunlong Company entrusted the Product Quality Supervision and Examination Station of Xishan City, Jiangsu Province to inspect the hot-rolling roll bending. The result showed that the surface was badly eroded by rust and the product was unqualified. On March 22,2000, the Commercial Department of the Port Management Office of Jiangyin issued a confirmation statement that the ship Jinpeng arrived at Jiangyin Port towards the end of January , 2000, on which there were sixty-one pieces/ 690.88 tons of roll bendings of Shunlong Special Pipe Fittings Company, Wuxi. During the course of unloading, the surface was found to have been immersed in water and soaked. Besides, it was found out that on April 7,2000, Yingkou Chuyun Company sent a mail to Yingkou Branch of the Economic and Technological Development Zone of Chinese People's Insurance Company stating that when the roll bendings and tin plates that were transported by the ship Jinpeng from Bayuquan towards the end of January, 2000 were unloaded at Jiangyin and Nanjing Port, they were found to have been immersed in water and eroded by rust, which led to an enormous loss. Yingkou Chuyun Company requested the insurance company to compensate for the loss, and at the same time, it provided relevant material and receiver's letter of claim. On April 1, 2000, the insurance company made a response to Yingkou Chuyun Company as follows: after analysis, the insurance company held that the risks involved in this case happened over two months ago, the cause and development of the accident could not be effectively inspected and ascertained any more; the material provided by Yingkou Chuyun Company could not prove that the cargo damage was within the scope of insurance coverage for risks accured when the goods were shipped from the Port Yingkou to the Port Jiangyin and the Port Nanjing. In addition, it was found out that Wuxi Shunlong Company sent a mail to ask Yingkou Chuyun Company to send someone to deal with this matter, and Yingkou Chuyun Company sent someone to Wuxi to inspect the goods in March ,2000. But the two parties failed to achieve any positive result. Then Wuxi Shunlong Company sent lots of mails to ask Yingkou Chuyun Company to deal with it, but none of them worked.On June 30,2000, 663.88 tons of hot-rolling roll bendings of Wuxi Shunlong Company were sold at a low price to the Metal Recyling Company of Xishan City. In prescribed time for adducing evidence, Wuxi Shunlong Company failed to provide evidence for the damage, the extent of the damage and shortage of hot-rolling roll bendings that were shipped by the ship Jinpeng. Yingkou Chuyun Company provided the civil judgment of Dalian Maritime Court NO. DA-HAI-FA-SHANG-CHU-372, 2000 in which it was adjudicated and found out that there wasn't undesirable remarks about the goods when the ship Jinpeng received and delivered the goods of Wuxi Shunlong Company at the port of shipment and port of arrival. Dalian Maritime Court held that Yingkou Chuyun Company claimed an indemnity from the ship Jinpeng without evidence to prove that the damage happened during the course of transportation by the ship Jinpeng , Hence the court dismissed the claim of Yingkou Chuyun Company. In court trial, Yingkou Chuyun Company stated that the Company didn't have waterway cargo transportation license. Wuxi Shunlong Company changed its litigious request in the first instance trial by renouncing the claim for a loss of profit of RMB94,650.56 and requesting Yingkou Chuyun Company to compensate for RMB1,101,869.44 and the corresponding bank interest from February 2,2000 to the day of Judgment. The first instance trial held that the Maritime Transport Agreement signed by Wuxi Shunlong Company and Yingkou Chuyun Company was a true declaration of the intentions of both parties, hence it had binding force upon the two parties to the Agreement. However, as Yingkou Chuyun Company had no waterway transportation license, it violated State Council's Regulations on the Administration of Water Transport and wasn't qualified for waterway cargo transportation, Hence the Agreement was invalid. After being entrusted by Wuxi Shunlong Company, Yingkou Chuyun Company chartered the ship Jinpeng to transport this batch of goods. It was equally his duty to transport the goods to the destination in safety and entirety. The delivery receipt of waterway cargo transportation was the basic evidential document for delivery/ taking delivery of the goods between the carrier and the receiver (consignor). In this case, there wasn't record about damage to the goods when the ship Jinpeng received and delivered the hot-rolling roll bendings of Wuxi Shunlong Company at the port of shipment and the port of arrival. Besides, this batch of goods was transshipped by lighter to the berth of Wuxi Shunlong Company, and not until Wuxi Shunlong Company received and warehoused the goods did it claim for indemnity for damage to the goods and send the samples for inspection, so it couldn't be proved whether there was damage to the goods as well as the extent of damage. Furthermore, none of the letters, invoices, inspection reports and photos presented by Wuxi Shunlong Company could prove that the damage happened during the period of carrier's responsibility, nor could they prove the extent and the result of the damage. The two parties never confirmed the damaged goods, the extent of damage or the cause of damage. Hence the claim of Wuxi Shunlong Company in requesting Yingkou Chuyun Company to compensate for the damage to the goods and loss of interest was not supported due to insufficient evidence. In accordance with Article 310 of the Contract Law of the People's Republic of China, Article 128 of the Civil Procedure Law of the People's Republic of China, as well as Articles 9, 11 and 13 of the Regulations of the Administration of Water Transport, the court of first instance rendered it`s judgment as follows: Dismiss the appellate petition of Wuxi Shunlong Company in requesting Yingkou Chuyun Company to compensate RMB1,101,869.44 for the loss of the goods and the corresponding bank interest from February 2, 2000 to the day of Judgment. The court acceptance fee was RMB15,993，other legal fee was RMB4,798, and the total sum was RMB20,791, which shall be paid by Wuxi Shunlong Company. Refusing to accept the Judgment as final, Wuxi Shunlong Company instituted an appeal to this court, claiming as follows: 1.Although there wasn't record about the damage and extent of damage to the goods in the delivery receipt of waterway cargo transportation, yet the relevant evidence submitted by this Company and the facts concerning this case were strong enough to prove that this Company suffered a loss. Article 310 of the Contracts Law reads: if there isn't stipulation or definite stipulation about the time limit for inspection of goods, the goods should be inspected within a reasonable time limit. The court of first instance trial deprived our Company of its legitimate rights and interest. 2.The Maritime Agreement signed between our Company and Yingkou Chuyun Company didn't stipulate or clearly stipulate the time limit for inspection of goods. Since our Company raised an objection in this respect, the goods delivered by Yingkou Chuyun Company couldn't be taken as conforming with the relevant stipulations. 3.Our Company sent many faxes to urge Yingkou Chuyun Company to deal with the damage to the goods, while Yingkou Chuyun Company evaded as much!. It was lawful and well-founded that our Company dealt with the damaged goods in accordance with laws. Yingkou Chuyun Company made an oral argument that the evidence presented by Wuxi Shunlong Company wasn't sufficient to show that the damage suffered by Wuxi Shunlong Company happened in the period of waterway transportation:1.It was on February 15,2000 that Wuxi Shunlong Company paid the freight, which showed that Wuxi Shunlong Company didn't object to the performance of the transportation service of ours; the other party didn't provide evidence about the extent of damage of this batch of goods, and their way of handling the goods weren't impartial; Yingkou Chuyun Company didn't hold that the damage to the goods happened in the period of transportation by the ship Jinpeng. In the second instance trial, the appellant Wuxi Shunlong Company presented the following evidence to this court: Evidence 1:The fax sent by Wuxi Shunlong Company to Yingkou Chuyun Company on February 20, 2000, which reads: the 61 pieces of hot-rollings of Ben Steel destined for Jiangyin Port were found to have been soaked with seawater and eroded by rust when they were put to use . Please dispatch someone to deal with this matter soon after you receive the fax. Evidence 2:Documentary evidence of customers' responses:hot-rollings of Ben Steel were purchased from Wuxi Shunlong Company,and Shunte Steel Tube Group of Wuxi on January 31, February 14 and February 16 of 2000, and requests for compensation for loss or for return of goods were made by letters of February 29 and March 4 of 2000. Evidence 3: A group of photos of the damage to the goods. Evidence 4: The inspection report of the Product Quality Supervision and Examination Station of Xishan City which stated：Name of Product: hot-rolling roll bending; Client: Wuxi Shunlong Company; Date of Inspection: February 29,2000; Quantity of Sample(s): 1; Result of Inspection: 1. The surface was seriously eroded by rust; 2. The standard value of thickness after removing the oxidized surface was greater than or equal to 2.10mm, and the factual surveyed value was 2.09mm; Conclusion: This batch of goods was below the standard. Evidence 5:On March 2, 2000, Wuxi Shunlong Company sent a mail to Yingkou Chuyun Company stating that the direct pecuniary loss was RMB1,196,520, indirect pecuniary loss was RMB119,652, other losses RMB5,000, the total sum was RMB1,321,172. Evidence 6:The sales contract between Wuxi Shunlong Company and Jinhui Metal Recycling Company Ltd. of February 28,2000, which provided that the sale of 690.88 tons of seawater-immersed hot-rollings at RMB1,400 per ton, and the total value was RMB967,232. This evidence showed the way in which the goods were disposed of after the damage. Evidence 7: Shipping order of Materials and Equipment Branch of Shunte Steel Tube Group, Wuxi of June 30, 2000, which proved the goods were ready to be shipped. Evidence 8:Industrial and commercial invoice of Shunte Steel Tube Group of Wuxi of December 25, 2000, showing the total payment for the goods were RMB929,432.It proved this batch of goods was sold as well as the amount paid. Evidence 9:Contract between Wuxi Shunte Steel Tube Group and Metal Recycling Co. Head Office of Xishan City for leasing warehouse, showing the rent of warehouse will be compensated for by the payment for the hot-rollings. In court trial, both parties cross-examined the above evidence. Yingkou Chuyun Company claimed that evidence 1 to evidence 5 presented by Wuxi Shunlong Company were not sufficient to prove that the damage to the goods happened in the period of transportation by the ship Jinpeng. The corroborative evidence was as follows: (1) Yingkou Chuyun Company reported all the proofs provided by Wuxi Shunlong Company about the damage to the goods to the insurance company, and the insurance company informed by mail that the material evidence couldn't prove that a maritime accident within the scope of liability insured against did happen during the voyage from Yingkou to the port of Jiangyin. (2) Regarding the damage to the goods, Yingkou Chuyun Company brought an action to Dalian Maritime Court against the shipowner Maritime Company of Haizhou, Linhai City, Zhejiang Province. Dalian Maritime Court held that there wasn't evidence to prove the damage to the goods happened in the course of transportation by the ship Jinpeng, hence the claim of Yingkou Chuyun Company for an indemnity was dismissed. As for evidence 6 to evidence 9 presented by Wuxi Shunlong Company, Yingkou Chuyun Company didn't agree to such evidence and held that Wuxi Shunlong Company didn't present the evidence within the time prescribed by the court of first instance, but submitted afterwards; the damage to the goods weren't ascertained; Wuxi Shunlong Company evaded legal procedures to deal with goods without authorization. The appellee Yingkou Chuyun Company presented the following new evidence in the second instance trial: Bank acknowledgement of payment by Wuxi Shunlong Company to Yingkou Chuyun Company for the freight of RMB57,343.04 on February 15, 2000, which showed Wuxi Shunlong Company had paid off the freight for this batch of goods, and they didn't hold disagreements about the delivery of this batch of goods at Jiangyin Port. Wuxi Shunlong Company didn't object to the above evidence presented by Yingkou Chuyun Company. The second instance trial also found out that the first instance trial erroneously determined the date of signing the Maritime Agreement as April 9,2000. In fact, the time when Wuxi Shunlong Company and Yingkou Chuyun Company signed the Maritime Agreement should be January 9, 2000. Based on the appellate petitions and opinions in the pleadings of both parties and in combination with proof and cross-examination, the dispute between the two parties in this case focused on whether the damage to the goods happened within the period of responsibility of carriage by the ship Jinpeng. This court held that in this case, the basic facts regarding unloading happened in the course of delivering the goods at the port of arrival, Jiangyin Port. The agent ad litem of Wuxi Shunlong Company,viz. the Port Management Office of Jiangyin didn't make any remarks in the statement of delivery of the goods showed the carrier's handing over the goods at the port of arrival complied with the stipulations of the contract. Articles 88 and 90 of the regulations on Waterway Cargo Transportation provided: if such accidents as pollution, damage etc. happened in the course of transportation and operation of goods, shipping record should be duly established for those involving the liability of the carrier or the port operator. When claiming an indemnity for shipping accidents, such shipping record should be attached. So shipping record was the original evidence to prove shipping accidents. Jiangyin Port didn't make record about the shipping accident of this batch of goods, and Wuxi Shunlong Company couldn't provide original evidence to prove the damage to the goods happened during the transportation from Yingkou to Jiangyin. Evidence 1 to evidence 5 presented by Wuxi Shunlong Company couldn't prove the damage happened within the responsibility period of the transportation from Yingkou to Jiangyin by the ship Jinpeng. Besides, evidence 1 and evidence 2 showed that the damage to the goods were found after they were sold and used, which obviously exceeded the reasonable time limit for inspection of goods. In evidence 2, the time when one of his customers purchased the hot-rollings of Ben Steel was January 31, 2000, but in this case, the time when the ship Jinpeng arrived at Jiangyin Port was February 1 of the same year, and it was much later when the goods arrived at the port of arrival, Wuxi, so it was obvious that the damage to the goods for which the receiver claimed for an indemnity didn't happen during the waterway transportation under this case. What's more, when Wuxi Shunlong Company paid off Yingkou Chuyun Company the freight for this batch of goods on February 15, 2000, the problem about the damage to the goods weren’t raised, which should be held as Yingkou Chuyun Company had shipped the goods to the port of arrival in accordance with the stipulations and the goods were safe and sound when unloaded. Afterwards Wuxi Shunlong Company gave a notice about the damage to the goods and claimed that there wasn't stipulations about the time limit to cargo inspection. The grounds for the appeal put forwarded by him the appellant that as long as the receiver raised objection, the goods delivered by Yingkou Chuyun Company couldn't be regarded as complied with the stipulations couldn't be accepted by this court, since there wasn't factual or legislative basis. Since the civil judgment of Dalian Maritime Court filed DA-HAI-FA-SHANG-CHU-372,2000 had taken effect, it could be used as a proof to determine the facts of this case in accordance with law. Hence it couldn't be determined that the damage to the goods claimed by Wuxi Shunlong Company happened during the period of responsibility of Yingkou Chuyun Company's chartered vessel Jinpeng in her voyage from Yingkou to Jiangyin. It was proper that the court of first instance trial dismissed the appellate petitions of Wuxi Shunlong Company. In conclusion, this court doesn't support the appellate petitions of Wuxi Shunlong Company as there wasn’t sufficient proof to support. Except the time when both parties signed the Maritime Agreement, other facts were determined expressly by the first instance trial. The proof was sufficient and the laws were applied correctly. In accordance with Article 153.1.1 of Civil Procedure Law of the People's Republic of China, it is decided by this court as follows: Dismiss the appeal and affirm the first instance judgment rendered by the court of first instance. The court acceptance fee for the second instance trial was RMB15,993, which shall be paid by the appellant Shunlong Special Pipe Fittings Company of Wuxi. This judgment is final. Presiding Judge: Du Hansheng Judge : Qian Jinfen Acting Judge: Wang Hongping September 17, 2001 Certified true copy Clerk: Wang Ying

NINGBO MARITIME COURT PEOPLE’S COURT OF CHINA CIVIL JUDGMENT Plaintiff: The People’s Insurance Company of China, Hebei Provincial Branch. Domicile: 499 Yuhua Road, West, Shijiazhuang, Hebei Province, People’s Republic of China. Legal Representative: Su Jian-guo, General Manager. Agent ad litem (Specially Authorised): Liu Yan, lawyer from Hai Xiang Law Office, Shanghai, People’s Republic of China. Agent ad litem (Specially Authorised): Cai Cun-qiang, lawyer from Hai Xiang law Office, Shanghai, People’s Republic of China. Defendant: Vysanthi Shipping Co. Ltd. of Cyprus . Domicile: 1,C.Pantclides Avenue, PO BO2313,Nicosia,Cyprus. Agent ad litem(Specially Authorised): Xu Jie, lawyer from Duan&Duan Law Office, Shanghai, People’s Republic of China. The action centering around the dispute between the plaintiff, The People’s Insurance Company of China, Hebei Provincial Branch (hereinafter referred to as “PICC Hebei”), and the defendant, Vysanthi Shipping CO.Ltd.of Cyprus (hereinafter referred to as “Vysanthi Co.”) concerning the apportionment and recovery of salvage charges arising from a maritime accident was brought to this court by China Animal Feed Import & Export Corporation on 24 October 1996.This court agreed to hear the cases on 28th of the same month and set up a collegial panel in line with statutory requircments.When submitting their defence. Vysanthi Co. contested the jurisdiction of this court. This court issued a ruling on 23 January 1998 to reject the objection. Vysanthi Co. appealed against the said ruling to Zhejiang Provincial Higher People’s Court, which ruled on 21 May, 1998 to reject the appeal and affirm the original ruling. On 19 May, 1998, China Animal Feed Import & Export Corporation and PICC Hebei jointly applied to change the plaintiff from China Animal Feed Import & Export Corporation to PICC Hebei, on the grounds that the insurer, PICC Hebei, had paid insurance benefits to the insured, China Animal Feed Import & Export Corporation，thereby obtained rights of subrogation. On 1 February，2000，this court allowed PICC Hebei to act as the plaintiff in the litigation, and notified China animal feed Import & Export Corporation to whithdraw from the proccedings. This court heard the case in open court sessions on 18 January ,1999,28April, 2000,25 July, 2000, and 8 August,2001, respectively. Liu Yan and Cai Cun-qiang, the agents ad litem for the plaintiff PICC Hebei, and Xu Jie, the agent ad litem for the defendant Vysanthi CO. , witnesses Turner and Domingo Cancello were called to the open court session on 25 July, 2002 to give evidence. The hearing of this case is now concluded. The plaintiff PICC Hebei stated that in June, 1996, The defendant’s ship M/V “Joanna V” loaded 29,900 tons of dregs of bean, imported by China animal Feed Import & Export Corporation on C&F term, at the Nidera Berth of the Port ot San Lorenzo, Argentina. The vessel ran aground after leaving the berth. The defendant then asked a salvage company to carry out salvage operationas for the vessel. The salvage company requested a sum of 1.75 million US dollars as salvage remuneration, with a salvage security of 1.1 million US dollars of the aforesaid sum to be provided by the bill of lading holder, China Animal Feed Import & Export Corporation. Following the salvage operations, a London arbitration ruled that China Animal Feed Import & Export Corporation was to pay the salvage expenses plus interest, and for part of the salvage company’s legal fees and arbitration fees, the toal amount being 912,388.93 US dollars and 44,250.02 pounds sterling. The reason for the vessel’s running aground was that the cargo was inproperly stowed, and that the master of the vessel made an obvious mistake in determining the draft. The defendant, as the carrier, failed to perform its fundamental duties to ensure the vessel’s seaworthiness, causing the vessel to run aground at the very beginning of the voyage, and leading to the sharing of salvage and other costs by China Animal Feed Import & Export Corporation. The plaintiff, having obtained the right of subrogation, was entitled to bring an action for recovery against the carrier. For this case, the applicable law should be lex fori,viz. the law of the country of the court hearing the case. Therefore the plaintiff requested that this court order the defendant to pay damages to cover the plaintiff’s losses as follows:(1)Salvage expenses paid to the salvage company:880,464.21 US dollars plus interest (of which 567,514.79 US dollalrs would accrue interest from 8 September, 1997 to the day of judgment at an annual rate of 5%, 312,949.42 US dollars would accrue interest from 8 January, 1998 to the day of judgment at an annual rate of 5%), and 10,572.32 pounds sterling plus interest(of which 4,827.62 pounds sterling would accrue interest from 8 September, 1997 to the day of judgment at an annual rate of 6.5%, 5,744.77 pounds sterling would accrue interest from 8 January, 1998 to the day of judgment at an annual rate of 6.5%);(2)Sharing the salvage company’s legal fees:31,924.72 pounds sterling plus interest (accruing from 14 April, 1998 to the day of judgment at an annual rate of 6.5%);(3)Salvage security and insurance premiums: 5,637.50 US dollars plus interest (accruing from 24 February, 1997 to the day of judgment at an annual rate of 5%);(4)Overseas legal fees:33,677.70 pounds sterling plus interest (accruing from 15 April, 1998 to the day of judgment at an annual rate of 6.5%),461 US dollars plus interest (accruing from 7 December, 1998 to the day of judgment at an annual rate of 5%),and 298.15 US dollars plus interest (accruing from 5 February, 1999 to the day of judgment at an annual rate of 5%);(5)Domestic legal fees: RMB 105,887.20 Yuan plus an interest of 28,410.17 Yuan; (6)Property preservation fee: RMB 20,000 Yuan plus and interest of 5,734.50Yuan. To back up its pleadings, the plaintiff submitted the following evidence to this court: (1)An insurance policy of number SZ34/02196003D; (2)Two bills of lading signed by Master Turner (3)Certificate of Subrogation issued by China Animal Feed Import & Export Corporation to PICC Hebei; (4)Arbitration award issued by Lloyds of London regarding the salvage expenses; (5)Payment receipts for salvage expenses plus interest and for fees for arbitrators and Lloyds of London paid by the plaintiff following two rounds of arbitration, altogether seven pieces; (6)Two payment receipts for the cargo owner’s share of the salvage company’s legal fees, paid by the plaintiff; (7)Three invoices and payment receipts for the salvage security and insurance premiums paid by the plaintiff; (8)Six invoices and payment reccipts for its overseas legal fees paid by the plaintiff; (9)Legal fees for domestic litigation: RMB 134,293.37 Yuan as agreed in the memorandum; (10)Payment receipt for property preservation fee; (11) logbook of m/v “Joanna V” and the sea protest signed by Master Turner; (12)Factual record made by port agent of “Joanna V” at the Port of San Lorenzo; (13)Survey report following a survey commissioned by the defendant and carried out by Clancy, Sons and Stacey from 2nd to 4th July, 1996; (14) A statement from the master of the salvor ship dated 2 June, 1997; (15)Survey report issued by Master R.Lopec Mesa on behalf of the Shipowner’s P&L Association: (16) 《Guide to Entering Port》 and Lloyds of London Weekly; (17) Judgment on Case No.160 (1996) by Qing dao Maritime Court, and judgment on case No.289 (1997) by Shandong Provincial Higher People’s Court:Both were similar cases in which the courts ruled that the vessels’ running aground was caused by overloading and as such the owners of the vessels were held liable; (18) An outline of the general average adjustment. The plaintiff further clarified the aforementioned evidence as follows: the logbook, photo-copied from the vessel, recorded the vessel’s draft when leaving the port. The sea protest, the factual record by the agent at port of loading, and an outline of the general average adjustment were served by the adjuster appointed by the defendant to the agent appointed by China Animal Feed Import & Export Corporation to participate in the London arbitration for the apportionment of salvage expenses. The statement of the master of the salvor ship was an excerpt, the original of which had been sent to the court for verification. The record of the vessel`s draft made on July10th by the surveyor appointed by the Shipowner’s P&I Association, was copied from the arbitration file. Guide to Entering Port was an excerpt of the standard copy used worldwide. The Lloyds of London report was taken from its weekly journal published on 20 December, 1996. The defendant, Vysanthi Co., pleaded that Vysanthi Co. Was at no fault whatsoever for the grounding. Before and at the beginning of the voyage , the vessel had, in accordance with the applicable statutory requirements, exercised due diligence to ensure its seaworthiness. The problems occurred after the beginning of the voyage were due to navigation errors, for which the owner of the vessel should not be held liable, the insurer should. The plaintiff did not provide evidence to prove that the vessel’s actual draft was greater than 9.10 metres, i.c. the plaintiff did not provide any evidence to prove that the vessel was not seaworthy at the beginning of the voyage, nor was it able to demonstrate grounding resulted from the unseaworthiness of the vessel. When the vessel was reversing, it was the stern section, rather than the middle section, that ran aground. Therefore, to say that the mid-section draft exceeded the maxiumum limit had no bearing on the vessel’s grounding. Should the plaintiff take the view that the dispute in this case was non-contractual in nature, then this lawsuit had no cause of action.The plaintill brought this action neither on the basis of dispute on contract nor based on tort. The action brought by the plaintiff had no legal basis whatsoever. It was therefore requested that PICC Hebei’s pleadings be rejected . To back up its pleadings, that defendant submitted the following evidence to this court: (1)Master’s sea protest, recounting the vessel’s situation and the navigational details of the vessel when it entered and left the port where the accidents occurred; (2)The chief mate’s statement, explaining the process through which the vessel’s cargo stowage plan was made, and the situations under which the vessel entered and left the port; (3)Witness statement made by Domingo Cancello, an Argentine national, explaining the state of the channel when the accidents occurred; (4) Affidavit of an Argentine lawyer Lesmi and the attached Exhibits A,B,C,D,E,F,G,H,and I, explaining the authority for navigation under Argentine law; navigational rules applicable to the channel where the accidents occurred , and rules regarding draft, under keel clearance, etc.; (5)The letter setting out the allowable draft for the vessel in question, issued by the coast guard on the day of the accident, which proved that the draft at the beginning of the voyage was allowed by the appropriate local authorities; (6)Vessel’s Customs clearance document, which proved that the vesscl had all the necessary paperwork when the voyage started, and in particular that the vessel’s draft met the requirements set by the authorities; (7)The vessel’s certificate of registry issued in Cyprus ; (8)International Load Line Certificate, which proved that the vessel was not overloaded when the voyage began ; (9)Certificate of survey, International Tonnage Certificate, cargo ship construction certificate, cargo ship safety equipment registration certificate, cargo ship safety equipment certificate, cargo ship safety radiotelegraphy certificate, cargo ship safety radio-telephone certificate, International Oil Pollution Prevention Certificate, supplementary oil pollution certificate issued by United States Maritime Administration; water pollution economic liability certificate, and full manning certificate; (10)Letter from the United States Maritime Administration to the operator of M/V “Joanna V”, authorising the vessel to ship grain; (11)Ship engine room classification certificate, certificate of class (engine room), ship hull classification certificate , certificaite of class (hull); (12)Crew list: (13)A follow-up statement dated 12 May, 2000 from the master of the salvor shipt; (14)Ship Register, indicating M/V “Joanna V”’had a full load dead-weight tonnage of 50,550 tons, with a maximum draft of 12.52 meters; (15)The response filed by China Animal Feed Import & Export Corporation for the London arbitration , indicating that the plaintiff had participated in the said arbitration; (16)Witness statement made by Master Turner in open court session, confirming that it was the first time that M/V “Joanna V”’called at the Port of San Lorenzo, and the grounding was due to insufficient water depth. The Master had read a lot of publications on navigation , but none of them had any record about the top water level of this channel. The 《Guide to Entering Port》was not an official publicatoin, and was not indicative of the real situation in 1996, The depth sounder onboard the vessel would not work when the under keel clearance was some 10 centimeters. The draft data that the vessel sound have used to plan the loading was prepared by the coast guard and obtained through the port agent. However, this document was issued after the accident; the Master did not receive it in the course of loading. The Master did not attempt to assess water depth situation from other sources, rather, he proceeded with the loading with reference to the draft situation on a day-to-day basis. The coast guard advised the vessel of the changes in water depth on a daily basis. The starting of the voyage of the vessel was approved by the local coast guard, who inspected the draft situatoin and duly signed for it. (17) The witness statement made by an Argentine national Domingo Cancello in open court session, confirming that the Nidera Berth was a private property located at the upper end of the Parana River, and that the coast guard was the local authority in charge of navigational matters. When leaving the port, the vessel must have a departure permit issued by the coast guard. The coast guard would come onboard to verify the paperwork as well as the draft situation. Should a vessel’s draft exceed its maxiumum limit, they would not allow it to leave the port. To depart from this berth, the under keel clearance should be at least 0.3 meter (1 foot).《Guide to Entering Port》was not official. The data contained therein could serve as general information only; they were outdated and were not indicative of the situation of the port. It was the data contained in official publicatoins that all sea-going vessels use. The second table in Exhibit F of Evidence No. 4 filed by Vysanthi Co. Was formally published by the authorities.It was signed by the head of the maritime administration. The signature on Evidence No.3 and its exhibits was the true signature and proper handwriting of the head of maritime administration himself; (18) The award presented by Donald Davies, the arbitrator proving that the vessel had exercised due diligence to ensure that the vessel was seaworthy prior to and at the beginning of the voyage and was not at fault for running aground; (19)The water depth survey report for the LOC channel, commissioned by the plaintiff’s lawyer, which confirmed that the vessel was not at fault. During the cross-examination in court, the defendant expressed the following views after examining the plaintiff’s evidence: No objection to the insurance policy, the bills of lading, the Certificate of Subrogation, and the payment receipt for litigation fees. On the face of it, no objection to the payment receipts for the salvage expenses plus interest, and the fees for the arbitrator and Lloyds of London. However, the fees for arbitration should be based on the original arbitration award.With regard to the award that was filed, the defendant indicated that they were unable to determine the authenticity of the signature.The defendant had no objection to payment receipts Per Se for part of the salvage company’s legal fees, the salvage security and premiums, and the overseas legal fees incurred by China Animal Feed Import & Export Corporation for the London arbitratoin, but took the view that the reason for such payments was not strong enough. The defendant had no comment with regard to the memorandum. Items of Evidence No. 11 through 18 were photocopies; they were not good enough in a court of law and should not be accepted as valid . On the face of it, no objection to Evidence No.13. The plaintiff expressed the following views after examining the defendant’s evidence: Master Turner and the chief mate were employed by and working for the vessel, and as such their statements should not serve as evidence. Whether Domingo Cancello, the Argentine witness, was an expert in matters concerning the channels remained to be verified. He claimed that he worked for a commercial company and his court appearance was of a commercial nature, therefore his statement should not be accepted. The authenticity of Evidence No.4 could not be determined. Evidence No.5 was not issued by the coast guard as claimed by the defendant, but a certificate from its port agent. Evidence No.6 was incomprehensible. Evidences items7-12 were all certificates, and as such should be checked against the originals. The master of the salvor ship was not a Singaporean national, yet his statement was notarised and authenticated in Singapore, In additoin, the original of the statement made by the master of the salvor ship dated 2 June, 1997, had already been sent to our side, and the two statements contradicted with each other, therefore it was impossible to determine the truthfulness of Evidence No.13. The loading capacity of M/V “Joanna V” as recorded in the ship register was irrelevant to this case. The response statement was not for the arbitration on the salvage operations. The arbitratoin on salvage operations had already concluded and as such this document was not relevant to this case. The content of Evidence NO.18, was true, but in view of the problem of the conflict of jurisdiction, it should not be used as evidence in this case, not to mention the large number of errors involved. The defendant’s quotation of Evidence NO. 19 was out of context. Based on the aforementioned cross-examination, this court made rulings about the admissibility of the evidence as follows; (1) With regard to the plaintiff’s evidence : as the defendant had no objection to the documentation of the insurance policy ,the bills of lading, the Certificate of Subrogatoin, the memorandum and the salvage security ,these were accepted as evidence. With regard to the payment receipts for the salvage expenses plus interest, the fees for the arbitrator and Lloyds of London, and the salvage company’s legal fees following the London arbitration, the defendant suggested that the original award be submitted, and held that the authenticity of the arbitrator’s signature on the award filed by the plaintiff could not be determined, and on such grounds doubted whether these payments were to cover the expenses for the arbitration determined by the arbitration award. The defendant, being a participant in the arbitration and a party in the apportionment of the salvage charges, should have a copy of the arbitration award, as the plaintiff did. In light that the defendant did not submit its own copy of the award to contest that filed by the plaintiff, this court held the view that the arbitration award filed by the plaintiff and the corresponding payment receipts could serve as evidence for the plaintiff’s losses. The logbook was consistent with that taken from m/v “Joanna V” in an earlier case heard by this court, namelyNingbo Maritime Commercial First Trial No.182, (1996); the sea protest and the factual record made by the port agent of m/v “Joanna V” were confirmed to be true by Master Turner, the master of the vessel in question, in open court session. The defendant did not deny that it commissioned a professional firm to conduct survey, but disputed the format of the survey report issued by the surveyor. After the plaintiff submitted the original report, the defendant was not able to come up with contradicting evidence to refute it. The same was true with the statement from the master of the salvor ship. Therefore, these four items were accepted as evidence. Although the plaintiff did not submit the original draft record from the defendant’s P&I association, the defendant did not dispute that the plaintiff copied it from the arbitration file. Therefore the draft record was also ruled as admissible. Master Turner confirmed that he read the Guide to Entering Port prior to the accident. Although it was alleged that the publication was outdated and there was an updated version, neither Master Turner nor the defendant could come up with the current version or explain why m/v “Joanna V” was still keeping and consulting this copy. Therefore, it could be established that this publication did exist and it could be used as a basis for determining the maximum draft. (2) with regard to the defendant’s evidence: Master Turner and the chief mate being both employed to work onboard the vessel in question, having experienced the entire course of the event, their description of the accident as it occurred and unfolded was the first-hand account. Except for their conclusion about the cause of and liability for the grounding, the statements of the said shipmaster and chief mate submitted by the defendant, and the factual account of the accident in Master Turner’s witness statement made in open court session, could be accepted as a basis for establishing the fact of the accident. Based on the notarised document filed by the defendant after the open court session, Witness Domingo Cancello was a qualified maritime surveyor registered with the coast guard. His statement made in the open court session was admissible as evidence. Nevertheless, when compared with other evidence about the draft, this evidence failed to demonstrate that the vessel’s draft at the beginning of the voyage was adequate. Evidence No.4: As the identity of the witness was unclear, its authenticity could not be determined; Evidence No.5 was not issued by the coast guard as the defendant claimed, but was a certificate from the vessel’s port agent. Therefore Evidence No.4 and Evidence No.5 were ruled as inadmissible. As the authenticity of Evidence items Nos.6-12 could not be determined, these items were not accepted. Evidence No.13 contradicted with the corresponding evidence submitted by the plaintiff. The plaintiff’s evidence was based on the actual measurements taken by the master of the salvor ship, and as such should be used as the basis for consideration. Evidence No.14 and Evidence No.15 were irrelevant to the facts contested in this case and were ruled as inadmissible. The purpose for the defendant to submit Evidence No.18 and Evidence No.19 were to quote the conclusions contained therein that the vessel should not be held liable, and not to substantiate the facts related to the case. The quoted conclusions were not binding on this court in determining the liability for the accidents, and therefore should not be used as evidence. Based on aforementioned items of evidence and witness statements, the facts of this case were established as follows: m/v “Joanna V” was a bulk cargo ship, with a total dead-weight tonnage of 50,550 tons (summer) and a maximum allowable draft of 12.55 metres for the summer. The vessel’s port of registry was the Port of Limassol in Cyprus. The owner of the vessel was the defendant in this case. The vessel kept the latest navigation manual for the Parana River and a 《Guide to Entering Port》. In June，1996, China Animal Feed Import & Export Corporation was to import a batch of dregs of bean, to be carried by m/v “Joanna V”. At 1040 on June 25th, the vessel began to load the dregs of bean in bulk at the Nidera Berth, Port of San Lorenzo, upon the Parana River in Argentina. The Loading was completed at 1520 on the 28th. On the same day, two bills of lading were issued, duly signed by Master Turner. The bills of lading spelt out that: the cargo was Argentine dregs of bean in bulk, the amount was 29,900 tons, and the consignee was to order. These two bills of lading were transferred to, and subsequently legitimately held by, China Animal Feed Import & Export Corporation. At 1835 on June 28th, the vessel began her voyage. At 1850, when the vessel was approximately 200 metres away from the dock, the vessel’s starboard ran aground. The GPS position was φ32。41.9’S, λ60。43.3’W. The vessel was 0.7 nautical mile from the southernmost buoy of the main berth, the direction being 325。At 2115,the vessel, having been secured to the dock by cable, started the engines in an attempt to free itself from the grounding, but to no avail. On July 2nd, the defendant signed a salvage contract with the owner of towboat “Albatros III”. At 1542 on that day, the towboat “Albatros III” towed m/v “Joanna V” to free itself from the grounding and began to reverse in the downstream direction. However, at 1722, the vessel’s port side ran aground at about 300 metres away from, and in alignment with, the tip of the dock. This time the position was approximately 200 metres from the earlier grounding place. At this time the vessel’s draft was 9.05 metres (29 Teet and 8 inches). The master signed a salvage contract with a salvage company named Satecna Costa Afuera S.A./Wijsmuller on behalf of the owners of vessel and cargo, under which the said salvage company was to carry out salvage operation.The logbook showed that on july 9th,the vessel was tilting 2 degrees to starboard,and at 1600 was tilting 0.80 degree to port side. ON July 10th, the vessel moored at the Nidera Dock. To reduce the loa,d 5,500 tons of cargo were unloaded onto a barge. The unloading was completed at 1615 on July 11th, at which time the vessel’s draft was 7.82 metres (25 feet and 8 inches) At 1734 on July 11th, with the help of the towboat, the vessel began to reverse in the downstream direction along the Nidera Channel, during which it touched the river bed several times and slightly ran aground twice. After the vessel reached the designated downstream anchorage, it began to reload the cargo from the barge. At 1215 on July 12th, the reloading was completed. These operations gave rise to a huge sum of salvage expenses. When signing the salvage contract, the salvage company asked for a salvage remuneration of 1.75 million US dollars, and required the salved party to provide salvage security. China Animal Feed Import & Export Corporation therefore provided a salvage security for 1.10 million US dollars to the salvage company. Afterwards, disputes in salvage expenses arose between the salvor and the salved party. The salvage company applied for arbitration in London. After two rounds of arbitration by Lloyds of London, it was ruled that the salved party should pay a total of 1.15 million US dollars as salvage remunation plus an interest of 122,580.55 US dollars, and 15,461.25 pounds sterling as arbitration fees. Of these sums the cargo owner was to pay 880,464.21 US dollars as its share of salvage expenses and interest, 10,572.39 pounds sterling as its share of arbitration fees, 31,924.72 pounds sterling as its share of the salvage company’s legal fees,5,637.50 US dollars as the salvage security and premiums, and 33,677.70 pounds sterling as its legal fees in London. China Animal Feed Import & Export Corporation insured this batch of dregs of bean for all risks with the plaintiff. On 9 July, 1996, the plaintiff issued an insurance policy numbered SZ34/02196003D. The policy indicated that the insured cargo was a batch of 29,900 tons of Argentine dregs of bean, to be shipped from the Port of San Lorenzo to Ningbo or Shekou, the insured amount was 9,620,325 US dollars. Based on an application made by China Animal Feed Import & Export Corporation, on 25 September, 1996, this court granted a lien on m/v “Joanna V” and held the vessel at the Port of Ningbo. After the owner of the vessel provided the security, on 29th of the same month this court lifted the lien, with the plaintiff paying RMB 20,000 Yuan as property preservation fee. In line with the arbitration award, the plaintiff made payments between 8 September, 1997 and 24 April, 1998,in respect of the cargo owner’s shares of the salvage expenses, the arbitration fees and other relevant expenses, and paid legal fees to its Chinese lawyers as agreed. On 18 April, 1998, China Animal Feed Import & Export Corporation issued a Certificate of Right of Subrogation to the plaintiff. The plaintiff thereby subrogated the rights of the consignee, and asked the defendant to pay the cargo owner’s share of the salvage expenses and to be liable for other relevant losses. It was also established that, between October ,1995 and January ,1996, a total of five vessels ran aground in the channel at the beginning of the voyage from the Nidera Berth, the drafts of these vessels were between 7.75 meters (25 feet and 5 inches) and 8.38 metres (27 feet and 6 inches), while the 《Guide to Entering Port》 expressly indicated that the maximum allowable draft for the channel was 8.23 metres (27 feet). This court held that there was a contractual relationship with respect to carriage of goods by sea between the consignee, China Animal feed Import & Export Corporation, and the defendant .The bills of lading in question did not have any Paramount Clause, nor should matters regarding arbitration clause as agreed upon by the parties and clause regarding applicable law apply to this case. Based on the ‘Most Closely Connected’principle, the consignee could legitimately bring an action to a Chinese court with a view to recovering the salvage charges from the carrier, and the Maritime Code of the People’s Republic of China should apply .The plaintiff being the insurer of the consignee, China Animal Feed Import & Export Corporation, and having paid for the consignee’s expenses arising from the salvage operation in accordance with the insurance contract and thereby obtained the subrogation was entitled to try to recover costs from the liable carrier. The focal points in dispute between the two parties are whether m/v “Joanna V” was overloaded, leading to un-seaworthiness at setting sail, which caused grounding, and whether the vessel had exercised due diligence to ensure that the vessel would be seaworthy. First, with respect to seaworthiness, whether the vessel was overloaded should not be based entirely upon the vessel’s registered dead-weight tonnage. Rather, the basis for judgment should include whether the vessel was safely afloat and could smoothly sail in the waters in question. m/v “Joanna V” ran aground immediately after setting sail. After Unloading 5,500 tons of cargo during the salvage, its minimum draft was still 7.42 metres (24 feet and 4 inches ) , After resumed sailing ,the vessel touched the river bed again. It was obvious that, given the vessel’s draft situation at the beginning of the voyage, grounding was certain or virtually inevitable. This was consistent with the facts. Therefore it could be established that the vessel was not seaworthy at the beginning of the voyage. Second, the water area in which the accidents occurred was a rather special one, characterized by its treacherous channels. A careful master ought to consider all available data and do his utmost to work out the actual water depths in the channel. Several vessels had run aground in the area, and the drafts of those vessels were between 7.75 metres and 8.38 metres. In addition there were some other masters advising that the maximum draft for the channel, based on the 《Guide to Entering Port》and other sources, was 8.23 metres. The master of m/v “Joanna V”, being clearly aware of or ought to be aware of these facts, relied exclusively on data supplied by the local agent in determining the allowable draft, without ever questioning or verifying the data. Further, the master had no knowledge whatsoever that there was a special maritime directive (NO.2/82) issued by Argentina specifically for this channel, which specified that the maximum allowable draft for a vessel was 7.32 metres (24 feet). What the master had done as mentioned above clearly testified to the fact that he was far from having exercised due diligence as he ought to have. The negligence was glaring .The depth sounding data taken after the accident confirmed that the data contained in the 《Guide to Entering Port》were correct after all. Judging from the depth measurement taken after the accident, had the vessel strictly abided by the maritime directives and manuals and taken into account the draft data of the vessels grounded earlier and the data contained in the 《Guide to Entering Port》, and rigorously set a limitation to its cargo load, it would not have run aground. Although the defendant stressed time and again that “the local coast guard, as the local authority in charge of navigational matters, was in a position to provide the most authoritative data on the treacherous situation in the channel, and claimed that the vessel determined its draft on the basis of the maximum allowable draft issued by the local coast guard, it had so far failed to provide evidence to support these assertions. The defendant, as the carrier, failed in its duty to exercise due diligence to ensure that the vessel was seaworthy before and at the beginning of the voyage, and should therefore be held liable for cargo owner’s losses which arose from un-seaworthiness. The un-seaworthiness of m/v “Joanna V” at the beginning of the voyage led to the salvage operations, causing the cargo owner to bear a huge sum of salvage expenses. The cargo owner was entitled to recover the money from the defendant. Documents filed by the plaintiff indicated that it had indeed paid the salvage expenses, the salvor’s legal fees, the salvage security and premiums, overseas legal fees, domestic legal fees and property preservation fee. The defendant should be liable for these expenses. The plaintiff’s pleadings were legitimate and should be supported. In accordance with Article 47 and Article 197 of the Maritime Code of the People’s Republic of China， Article 237 and Section 1 of Article 64 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered by this court as follows： The defendant, Vysanthi Shipping Co. Ltd. of Cyprus , shall pay the plaintiff, the People’s Insurance Company of China, Hebei Provincial Branch ,the following expenses: share of the salvage expenses:880,464.21 US dollars plus interest (of which 567,514.79 US dollars accruing interest from 8 September，1997 to 28 September， 2001 at an annual rate of 5%,and 312,949.42 US dollars accruing interest from 8 January，1998 to 28 September，2001 at an annual rate of 5%)；10,572.32 pounds sterling plus interest (of which 4,827.62 pounds sterling accruing interest from 8 September，1997 to 28 September，2001 at an annual rate of 6.5%, and 5744,77 pounds sterling accruing interest from 8 January，1998 to 28 September，2001 at an annual rate of 6.5%);share of salvage company`s legal fee s for London arbitration :31,924.72 pounds sterling plus interest (accruing interest from 14 April,1998 to 28 September,2001 at an annual rate of 6.5%); salvage security and premiums :5,637.50 US dollars plus interest (accruing interest from 24 February,1997 to 28 September ,2001 at an annual rate of 5%);Overseas legal fees for the London arbitration:33,677.70 pounds sterling plus interest (accruing interest from 15 April, 1998 to 28 September, 2001 at an annual rate of 6.5%);domestic legal fees for this case :RMB 105,887.20 Yuan plus an interest of 28,410.17 Yuan ;property preservation fee of RMB20,000 Yuan plus an interest of 5,734.50 Yuan . The aforementioned sums shall be paid in full within ten days of the coming into force of the judgment. The court fees for hearing this case, which amount to RMB135,000 Yuan, shall be borne by the defendant, Vysanthi Shipping Co. Ltd. of Cyprus. If not satisfied with the judgment, the plaintiff may within 15 days upon service of this judgment, and the defendant may within 30 days upon service of this judgment, submit an appeal petition and a copy of same to this court. The appeal case will be heard by Zhejiang Provincial Higher People’s Court (within seven days of filing the appeal, a fee in the amount of RMB 135,000 Yuan for the appeal should be paid in advance .The remittance should be made to: The Agricultural Bank of China, West Lake, Branch, Hangzhou A/C No.:398011029886000402). Presiding Judge: Wang Beibao Judge: HU Jianxin Associate Judge: Xu Yangyong (sealed by): Ningbo Maritime Court 28 September, 2001 Certified true copy Clerk: Yin Xiaoming

HIGHER PEOPLE’S COURT OF GUANGDONG PROVINCE PEOPLE’S COURT OF CHINA CIVIL JUDGMENT No YFJERZZ.303 (2000) Appellant (Plaintiff in First Instance Trial): Pearl River Container Transportation Co.,Ltd. Domicile: No.185 Chang Ti Avenue, Guangzhou, China Legal Representative: Li Ming, General Manager Agents ad litem: Fang Ruifeng，Zhao Dengfeng, Lawyers of Guangzhou Jinma Law Office Appellant (Defendant in First Instance Trial): P & O Nedlloyd B. V. Domicile: 3011 XB Rotterdam, Boompjes 40, the Netherlands Legal Representative: R.P.M. van Slobbe, Managing Director Agents ad litem: Wang Jing, Chen Xiangyong, Lawyers of Wang Jing Maritime Law Office, Canton With respect to the cases of dispute between the Appellant - Pearl River Container Transportation Co.,Ltd. (hereinafter referred to as “Pearl River”) and the Appellant – P & O Nedlloyd B. V. (hereinafter referred to as “Nedlloyd B. V.”) over the release of cargo without presentation of the original bill of lading, both Appellants refused to accept the No. GHFSZ 61(1998) Civil Judgment entered by Guangzhou maritime Court and filed appeals before this court. After having entertained the case by this court, a collegial bench was duly formed to hold hearings in open sessions. Now the trial of this case has been concluded. It was established after examination that: On 9, 12 and 15 February, 1996, Pearl River issued the Through Bs/L No.PRBT-96008, No.PRBT-96009 and No.PRBT-96012 from Sanbu, PRC to Shixin Garment Factory who processed the garments as entrusted by the holder of Through Bs/L - D.K. REMINGTON INTERNATIONAL. It was stated in Bs/L No.PRBT-96008 and PRBT-96009 that the shipper was Shixin Garment Factory, the consignee was to order, the carrying vessel was M/V “OOCL FAIR”, the loading port was Sanbu, PRC and the port of discharge was Puerto Quetzal, Guatemala. The cargo under the foregoing two Bs/L were carried in containers No.GSTU5609103 and No.KNLU3071375, which contained 225 cartons of manufactured garments. The aforesaid bills of lading were endorsed by Shixin Garment Factory and the International Commercial Bank of China. The cargo loaded in the said two containers was shipped to Hong Kong under the arrangement of Pearl River and was then transshipped to the destination port. On February 5, NEDLLOYD (H.K.) LTD., as the agent of Nedlloyd B.V., accepted the offer made by Pearl River for booking of shipping space and issued the Booking Notes No.HKGVA207 and No.HKGVA208, in which it was expressly indicated that Pearl River was the shipper. On February 10, the cargo carried in the aforementioned two containers was loaded onto m/v “OOCL FAIR” at Hong Kong. NEDLLOYD (H.K.) LTD., as the agent of Nedlloyd B.V., issued the on-carriage Bs/L No. HKGVA207 and No. HKGVA208 at Hong Kong, in which it was specified that the shipper was Pearl River, the consignee was the holder of the original Bs/L No.PRBT-96008 and No.PRBT-96009, the loading port was Hong Kong and the port of discharge was Puerto Quetzal, Guatemala. It was stated in B/L No.PRBT-96012 that the shipper was Shixin Garment Factory, the consignee was to order, the carrying vessel was m/v “NED DEJIMA”, the loading port was Sanbu, PRC and the port of discharge was Puerto Quetzal, Guatemala. The cargo under the foregoing two Bs/L was carried in container No.TPXU6932857, which contained 225 cartons of manufactured garments. The aforesaid bills of lading were endorsed by Shixin Garment Factory. The cargo loaded in the said two containers was shipped to Hong Kong under the arrangement of Pearl River and was then transshipped to the destination port. On February 9, NEDLLOYD (H.K.) LTD., as the agent of Nedlloyd B. V., accepted the booking of shipping space offered by Pearl River and issued the Booking Note No.HKGYT620, in which it was expressly indicated that Pearl River was the shipper. On 16 February, the cargo carried in the aforementioned two containers was loaded onto M/V “NED DEJIMA” at Hong Kong. NEDLLOYD (H.K.) LTD., as the agent of Nedlloyd B.V., issued the on-carriage B/L No. HKGYT620, in which it was specified that the shipper was Shixin Garment Factory, the consignee was to order, the loading port was Hong Kong and the port of discharge was Puerto Quetzal, Guatemala. Article 25(1) of the aforesaid three sets of Bs/L specified that “All actions under the contract of carriage evidenced by this Bill of Lading shall be brought before the Court at Rotterdam and no other court shall have jurisdiction with regard to any such action”. The container No.TPXU6932857 under B/L No.PRBT-96012 was discharged at Puerto Quetzal, Guatemala at 2400 hours on 23 March, 1996, while the containers No.GSTU5609103 and No.KNLU3071375 under Bs/L No.PRBT-96008 and No. PRBT-96009 were discharged at Puerto Quetzal, Guatemala at 0105 hours on 24 March, 1996. On 19 December, NEDLLOYD (H.K.) LTD. sent a fax to Pearl River, stating that the foregoing cargo had been delivered to the consignee by the Customs of Guatemala according to the agent of NEDLLOYD (H.K.) LTD. at Guatemala. It was also said in the fax that “The cargo was placed under the custody of the local Customs upon completion of discharge at Guatemala port. The carrier had nothing to do with the delivery of cargo, and it was the Customs of Guatemala who was the sole organization entitled to dispose of the cargo. Therefore, it was the local Customs rather than the carrier that should be legally responsible. The legal liability assumed by the carrier was terminated once the cargo had been delivered to the local Customs. Pearl River should file the claim directly against the Customs of Guatemala for the loss of cargo”. Nedlloyd B.V. had not provided to the Court of First Instance the cargo manifest or the relevant statutory provisions of Guatemala pertaining to the care for the goods carried by sea. At the court hearing in the first instance, Nedlloyd B.V. showed the three sets of original on-carriage bills of lading which it collected from Pearl River and which had been endorsed by Peal River . Meanwhile, Pearl River also submitted another set of on-carriage bills of lading without overleaf clauses issued by Nedlloyd B. V. On 3 February, 1997, D.K.REMINGTON INTERNATIONAL commenced the proceedings before the Court of First Instance with the original Bs/L No.PRBT-96008, No.PRBT-96009 and No.PRBT-96012 it possessed on the grounds of the loss resulting from the delivery of cargo without presentation of original bills of lading by Pearl River Container Transportation Co., Ltd. Hong Kong Branch, viz. Pearl River in this case. On 17 February, 1997, the Court of First Instance served the Notice to Reaction, Copy Plaint and the Writ of Summons upon Pearl River . On 6 October, 1998, the Court of First Instance delivered the Civil Judgment No. GHFSZ 13 (1997), ruling that: I. Pearl River shall make compensation for the loss of cargo amounting to US$70,200 and its corresponding interest (accruing from 1 March, 1996 to the day on which the judgment comes into force at the loan interest rate of the circulating fund issued by the People’s Bank of China) to D.K.REMINGTON INTERNATIONAL; II. The litigation request filed by D.K.REMINGTON INTERNATIONAL against Pearl River in this case shall be rejected. Pearl River shall pay the legal fee of US$ 2,560. On the same day, the Court of First Instance handed down the Civil Judgment No. GHFSZ 14(1997), ruling that I. Pearl River shall make compensation for the loss of cargo amounting to US$140,400 and its corresponding interest (accruing from 1 March, 1996 to the day on which the judgment comes into force at the loan interest rate of the circulating fund issued by the People’s Bank of China) to D.K.REMINGTON INTERNA-TIONAL; II. The litigation request filed by D.K.REMINGTON INTERNATIONAL against Pearl River shall be rejected. Pearl River shall pay the legal fee of US$ 4,200. Pearl River refused the aforesaid two judgments delivered by the Court of First Instance and instituted an appeal to the Higher People’s Court of Guangdong Province, which handed down the Civil Judgments No. YFJERSZ 436 (1998) and No.YFJERSZ 437 (1998) as the final judgments, ordering that the appeal be dismissed. On 3 March, 1997, Pearl River brought an action against P & O Nedlloyd B.V. Hong Kong Branch before the Court of First Instance on the grounds of release of cargo without presentation of original bill of lading. On 19 September, 1997, Pearl River made an application to the court for joining Nedlloyd B.V. in the proceedings as the co-defendant. The application was approved by the court, which gave a notice to Nedlloyd B.V. for the attendance at the proceedings. Nedlloyd B.V. raised the dissension of jurisdiction within the period of defence. On December 19, 1997, the Court of First Instance rendered a ruling rejecting the dissension of jurisdiction raised by Nedlloyd B.V. This court issued a ruling on 30 March, 1998, revoking the ruling made by the Court of First Instance on the dissension of jurisdiction and rejecting the claim filed by Peal River. On 5 June, 1998, Pearl River submitted an application to the Court of First Instance for the arrest of m/v “NEDLLOYD LOUTMAN” owned by Nedlloyd B.V. On 6 July, 1998, the Court of First Instance ruled that the application filed by Pearl River for property preservation prior to the proceedings be approved, and arrested M/V “NEDLLOYD LOUTMAN” of Nedlloyd B. V. at Shekou, Shenzhen on the same day. Pearl River paid to the Court of First Instance the ship arrest application fee of RMB 5,000 and provided the Court of First Instance with a security of RMB 800,000. On 8 July, Nedlloyd B.V. submitted to the Court of First Instance the Letter of Undertaking issued by PICC Guangdong in the amount of US$ 400,000. On the same day, the Court of First Instance lifted the order of arrest of M/V “NEDLLOYD LOUTMAN” and Nedlloyd B. V. paid the property preservation execution fee of US$3,000. It was held by the Court of First Instance: This case was about the claim of recovery of loss filed by Pearl River against the carrier in respect of the second-leg voyage, namely, Nedlloyd B.V. under the circumstance where D.K.REMINGTON INTERNATIONAL, the holder of the through bills of lading, had brought a lawsuit against the carrier in respect of the entire voyage, namely, Pearl River, before the Court of First Instance on the grounds of dispute over release of cargo without the original bills of lading. It was the contract of carriage of goods evidenced by the through bill of lading that determined the rights and obligations between the holder thereof and the carrier in respect of the entire voyage. The carrier in respect of the second-leg voyage, being in charge of sectorial transport of the shipment, was the actual carrier. Hence, the responsibilities assumed by the actual carrier shall be based on the statutory stipulations rather than the contract of affreightment covering the entire voyage. The through bill of lading was not an evidence of the contract of carriage of goods between the carrier in respect of the entire voyage and the carrier in respect of the second-leg voyage. Under the on-carriage bills of lading in question, where Nedlloyd B.V. accepted the offer made by Pearl River for booking the shipping space, Pearl River was the shipper and Nedlloyd B.V. was the carrier in respect of shipment on the second-leg voyage, and the on-carriage bills of lading were the documents evidencing the contract of carriage of goods between Pearl River and Nedlloyd B.V. Therefore, it was the booking notes and the contract of carriage of goods evidenced by the on-carriage bills of lading that determined the relationship between Pearl River and Nedlloyd B.V. in respect of their rights and obligations. Although Nedlloyd B.V. expressly provided in the Bs/L that the law of the country of domicile of Nedlloyd B.V. should be applicable in settling the dispute, Pearl River never accepted such provision. Pearl River and Nedlloyd B.V. did not reach a consensus on the law governing the settlement of dispute in this case, under which Hong Kong was the place where the contract of carriage was concluded as well as the place of shipment, while the Netherlands was the place where Nedlloyd B. V. had its domicile, and Guatemala was the place of destination. All the foregoing places had actual connections with the subject dispute. Since neither party to this action had furnished any law of the aforementioned places nor any legal advice presented by the relevant legal experts therefrom, the law of the PRC shall be applicable to this case in the light of Article 193 of the Opinions of Supreme People’s Court on Several Issues Concerning the Implementation and Enforcement of the General Principles of the Civil Law of the PRC, Nedlloyd B. V. was under the obligation of delivering the cargo to the consignee stated in the on-carriage bills of lading at the destination port. It was stated in the On-Carriage Bs/L No.HKGVA207 and No.HKGVA208 that the consignee was the holder of the original Bs/L No.PRBT-96008 and No.PRBT-96009. Albeit Nedlloyd B.V. had collected the original on-carriage bills of lading, it was still bound to deliver the cargo against presentation of the Through Bs/L as agreed upon. As the aforesaid Through Bs/L were in the possession of D.K.REMINGTON INTERNATIONAL, Nedlloyd B. V. should be liable for breach of contract inasmuch as it failed to fulfill the afore mentioned obligation. Nedlloyd B. V. did not provide the documents in support of its allegation that the said cargo had been placed under the custody of the Customs of Guatemala, thus Nedlloyd B. V. could not be exonerated from the liability for compensation for the loss sustained by Pearl River due to the release of cargo without the original bills of lading. In accordance with the final judgment No. YFJERZ 437 (1998) handed down by the Higher People’s Court of Guangdong Province, the loss suffered by Pearl River including the loss of cargo amounted to US$ 140,400, plus its corresponding interest (accruing from 1 March,1996 to the date on which the judgment comes into force at the loan interest rate of the circulating fund of the People’s Bank of China). The legal cost of US$ 4,200 incurred in the first instance trial should be paid by Nedlloyd B. V. as well. It was specified in the On-carriage B/L No.HKGYT620 that the consignee was to order. It was not stated in this bill of lading that Nedlloyd B.V. should deliver the cargo against surrendering the original through bill of lading at the destination port. Therefore, Nedlloyd B.V., who had collected the original On-carriage B/L No.HKGYT620, should be regarded as having fulfilled its obligation of delivery of cargo as agreed upon. Article 257(1) of the Maritime Code of PRC stipulates: “The limitation period for claims against the carrier with regard to the carriage of goods by sea is one year, counting from the day on which the goods were delivered or should have been delivered by the carrier. Within the limitation period or after the expiration thereof, if the person allegedly liable has brought up a claim of recourse against a third person, that claim is time-barred at the expiration of 90 days, counting from the day on which the person claiming for the recourse settled the claim, or was served with a copy of the process by the court handling the claim against him”. Basing on the foregoing stipulations, Pearl River was entitled to choose to bring up a claim of recourse against Nedlloyd B. V. in this case within 90 days counting either from the day on which it settled the claim filed by D.K.REMINGTON INTERNATIONAL, or the day on which D.K.REMINGTON INTERNATIONAL brought the lawsuit against Pearl River. The wording “settled the claim” can be interpreted as voluntary resolution of the claim by the parties through negotiations or settling the dispute through litigation or arbitration. Such interpretation better accords with the principle of justice. The holder of the Through Bs/L D.K.REMINGTON INTERNATIONAL and Pearl River in this case resorted to legal action to settle the claim between them. Pearl River initiated the action against Nedlloyd B. V. after 90 days counting from the day on which it received the Copy Plaint served by the Court of First Instance upon the holder of the Through Bs/L - D.K. REMINGTON INTERNATIONAL. Apparently, Pearl River chose the day on which the original claim was settled as the starting time for counting the time limitation in respect of the recovery of claim. It was on 22 July, 1999 that the Higher People’s Court of Guangdong Province handed down a final judgment on the case of dispute between D.K.REMINGTON INTERNATIONAL and Pearl River over the release of cargo without original bills of lading. Thus that date should be ascertained as the day on which the party liable settled the claim. The day on which Pearl River brought the lawsuit against Nedlloyd B. V. was still within the 90-day time limitation Period for the recovery of the loss. The proposition made by Nedlloyd B. V. that the action brought by Pearl River had been time-barred was legally groundless and shall be dismissed by the Court of First Instance. In summary, the Court of First Instance handed down a judgment pursuant to the provisions of Article 71 and Article 257(1) of the Maritime Code of the PRC and Article 106 of the General Principles of the Civil Law of the PRC, as follows: P & O Nedlloyd B. V. shall indemnify for the cargo loss of US$ 140,400 and its corresponding interest (accruing from 1 March, 1996 to the day on which the judgment comes into force at the loan interest rate of the circulating fund of the People’s Bank of China) as well as the loss of the legal fee of US$ 4,200 sustained by Pearl River Container Transportation Ltd.. The legal fee for this case amounted to US$ 7,130, of which US$ 3,640 shall be paid by Pearl River and US$ 3,490 shall be borne by Nedlloyd B.V., who shall also pay the application fee of RMB 5,000 and the execution fee of US$ 3,000 in respect of property preservation. In filing an appeal, Pearl River pleaded: The Court of First Instance merely awarded that Nedlloyd B. V. pay US$140,400 to Pearl River as indemnity for the loss of goods, while dismissed another litigation request for the cargo loss of US$70,200 filed by Pearl River Ltd.. Pearl River was thus of the view that part of the findings of facts under the bill of lading in question made by the Court of First Instance was wrong. It was held by the Court of First Instance thus “It was specified in the On-carriage B/L No.HKGYT620 that the consignee was to order. It was not stated in this bill of lading that the defendant should deliver the cargo against surrendering the original through bill of lading at the destination port. Therefore, the Defendant, who had collected the original On-carriage B/L No.HKGYT620, should be regarded as having fulfilled its obligation of delivery of cargo as agreed upon.” Such finding was absolutely incorrect in that: 1. The alleged On-carriage B/L No.HKGYT620 issued by Nedlloyd B.V. was not collected by Nedlloyd B.V. at the time of delivery of goods at the destination port on 23 March, 1996, but was endorsed and collected by Pearl River on 16 February, 1996 after Pearl River had shipped the cargo under the B/L to Hong Kong and delivered the same to Nedlloyd B.V.. The said on-carriage bill of lading was merely used as a record of takeover of the transshipped goods, and the goods should be released against surrendering the original through bill of lading at the destination port. 2. It was specified in the On-carriage B/L No.HKGYT620 that the shipper was “Shixin Garments Factory” and the consignee was “to order”, and the B/L was endorsed by Pearl River Ltd.. Such bill of lading was extremely irregular. Pearl River wondered under whose instruction Nedlloyd B.V. delivered the cargo: was it Shixin Garments Factory or Pearl River? In accordance with the provisions of Article 79 of the Maritime Code of the PRC and international shipping practice in respect of delivery of goods against the bill of lading, the bill of lading in which it was indicated that the consignee was to order, just like those in which it was indicated that the shipper was to order, must be endorsed by the shipper before it could be assigned to the consignee. 3. It was stated by Nedlloyd B. V. in its fax to Pearl River. Dated 19 February, 1996 that: “the cargo was placed under the custody of the local Customs upon completion of discharge at Guatemala port. The carrier had nothing to do with the delivery of cargo, and it was the Customs of Guatemala who was the sole organization entitled to dispose of the cargo. Therefore, it was the local Customs rather than the carrier that should be legally responsible. The legal liability assumed by the carrier was terminated once the cargo had been delivered to the local Customs. Pearl River should file the claim directly against the Customs of Guatemala for the loss of cargo”. This fax served as an indication that Nedlloyd B.V. itself professed that it had delivered the cargo to the Customs of Guatemala instead of Pearl River Ltd. or other consignee. In addition, Nedlloyd B.V. never furnished any list of goods handed over to the Customs or other consignee, and it was therefore reasonable for Pearl River to suspect that Nedlloyd B.V. had encroached on the goods. In the meantime, it also showed that substantially the withdrawl of the alleged bill of lading by Nedlloyd B. V. and the delivery of goods were two different matters. In other words, it was not because the cargo had been delivered to the actual consignee that the bill of lading was withdrawn from the actual consignee. In summary, the Court of First Instance found that: “the Defendant, who had withdrawn the original On-carriage B/L No.HKGYT620, should be regarded as having fulfilled its obligation of delivery of cargo as agreed upon”. This was the contradiction between the failure of Nedlloyd B.V. in delivering the goods to the consignee, as proclaimed by Nedlloyd B.V., and the alleged circulation of the on-carriage bill of lading. Failure of Nedlloyd B. V. to deliver the goods to the destination port was the substance, while the circulation process of the on-carriage bill of lading was the form. As substance is absolute and negates the form, the finding of facts in relation to the on-carriage bill of lading in question made by the Court of First Instance was incorrect. Basing on the foregoing facts, Pearl River asked the Court of First Instance to order the Respondent to make compensation for the loss of goods in the amount of US$210,600, the interest accrued therefrom (counting from 1 March, 1996 to the day of actual payment at the Loan Interest Rate of Circulating Fund of the People’s Bank of China) as well as the loss of legal fee amounting to US$6760. The legal fees with respect to the court of first instance and court of appeal shall be borne by Nedlloyd B.V. Nedlloyd B. V. contended that : I. It consented to and accepted the aforementioned findings made in the Civil Judgment No. GHFSZ 61 (1998) delivered by the Court of First Instance. As shown by the merits ascertained by the Court of First Instance, it was specified in the B/L No.HKGYT620 that the consignee was “to order”. The said B/L contained complete and valid overleaf clauses. Hence, as established by the Court of First Instance, the relationship between the parties to the B/L with respect to their rights and obligations should be defined by the said on-carriage bill of lading. In the present case, Nedlloyd B. V. had delivered the cargo to the destination port - PUERTO QUETZAI, Guatemala safe and sound as agreed on in the aforesaid on-carriage bill of lading, and had withdrawn the whole set of the original on-carriage bill of lading. Thus it was entirely correct for the Court of First Instance to hold that “the Defendant (Nedlloyd B. V.), who had withdrawn the original On-carriage B/L No.HKGYT620, should be regarded as having fulfilled its obligation of delivery of cargo as agreed upon”, which conformed to the statutory stipulations and coincided with the facts of this case. Thus such findings should be buttressed by the court of appeal. II. Pearl River, who was not a party to the B/L No.HKGYT620, was disentitled to bring any action against Nedlloyd B. V. in reliance of the said B/L. Article 42(3) of the Maritime Code provides: “‘Shipper’ means: a) The person by whom or in whose name or on whose behalf a contract of carriage of goods by sea has been concluded with a carrier; b) The person by whom or in whose name or on whose behalf the goods have been delivered to the carrier involved in the contract of carriage of goods by sea”. It was evident from the foregoing definition that the shipper included the person who concluded the contract of carriage of goods by sea and the person who delivered the goods to the carrier. The essential condition was the conclusion of the contract or delivery of the goods, among which delivery of goods embraced various circumstances, such as: 1. Delivering the cargo directly to the carrier. 2. Entrusting others to deliver the cargo to the carrier in his own name. Under such circumstances, the actual consignee was different from the shipper named in the contract of carriage. 3. Entrusting others to deliver the cargo on his behalf. Under such circumstances, the principal himself was the shipper, while the person who actually delivered the cargo was the one entrusted to deliver the cargo. It could be ascertained from the foregoing ways and means of delivery of cargo that the person who directly delivered the cargo (who may be called “the actual shipper”) was not necessarily the owner of the cargo so delivered. Furthermore, difference existed between the legal relationship of the aforesaid two kinds of shippers and carriers, thus the legal status of the aforesaid two kinds of shippers was distinct. The first kind of shipper may sue the carrier in reliance of the bill of lading regardless of whether the shipper’s name was specified therein. As far as the second kind of shipper was concerned, there was a pure relation of contract (bill of lading) between such shipper and the carrier, all rights and obligations shall be subject to the bill of lading. Hence, in case the second kind of shipper was not named in the box of shipper in the bill of lading, he would be deprived of the status of the party thereto. Since he was not a party to the contract, he was therefore disentitled to enjoy the rights thereunder and was deprived of the title to sue under the bill of lading. In the present case, Pearl River should be conceived as the shipper under the latter circumstance inasmuch as he was entrusted by the contractual shipper - Shixin Garments Factory to hand the cargo over to the carrier. But as by mistake, he had never put down his name in the box of shipper in the bill of lading, he had been deprived of the title to sue under the bill of lading and was disentitled to bring an action against Nedlloyd B.V. in reliance of the same. After negating that Pearl River had the title to sue as the shipper, Nedlloyd B.V. went to deal with the question concerning the burden of proof to be borne by Pearl River in case he attempted to assert the right in the name of the holder of the bill of lading. In this case, if Pearl River wished to assert the rights against Nedlloyd B.V. in the name of the holder of the bill of lading, Pearl River must first adduce evidence to prove that the B/L held thereby was lawful, which signified: 1. The bill of lading must be valid; 2. The holder of the bill of lading lawfully held the bill of lading, i.e., the holder must obtain the bill of lading and the rights thereunder in a lawful manner. Pearl River had never accomplished the aforementioned burden of proof. In the first place, Pearl River was not in possession of any set of original bill of lading, which had already been collected by Nedlloyd B.V. Secondly, even if it was assumed that Pearl River was holding the said bill of lading, the bill of lading must be effectually endorsed by the shipper specified therein when Pearl River asserted the title to the cargo thereunder in reliance of the said B/L which was an order bill of lading. The situation of the present case was that the B/L had been endorsed by the shipper named therein, namely, Shixin Garment Factory, so that, Pearl River had never acquired the rights thereunder. In view of this, Pearl River had no right to assert the rights under the bill of lading in the name of the holder thereof on the basis of the same. The foregoing views of Nedlloyd B.V. gained support from the Ruling No. JHFSCC 41(1993) . Since Pearl River was neither a party expressly indicated in the order bill of lading under consideration (the parties thereto included the shipper - Shixin Garments Factory, the carrier - Nedlloyd B.V. and the consignee - to order), nor the holder of the bill of lading, it ,therefore, did not enjoy the substantive rights to propose delivery of cargo or assert the title thereto against Nedlloyd B. V. In other words, as far as the alleged loss of goods under the bill of lading was concerned, Pearl River was not entitled to sue Nedlloyd B.V.. III. The action brought by Pearl River against Nedlloyd B.V. had been time-barred, and his litigation requests should not be supported by the court and should be dismissed in accordance with law. Time Limitation for Action means that “the obligee will be deprived of his right of applying to the court for compelling the obligor to fulfill the obligations according to the litigation procedures, if the obligee does not exercise his right within the limitation period prescribed by law. The limitation period prescribed by law as mentioned herein is called the limitation period for action, that is, the effective time period when the obligee can apply to the people’s court for protecting his rights according to the litigation procedures. At the expiration of the limitation period for action, the obligee will lose the right of applying to the court to compel the obligor to fulfill the obligations according to the litigation procedures. Therefore, the time limitation for action falls within extinctive prescription.” Time limitation for action has three characteristics, as follows: 1) time limitation for action falls within extinctive prescription; 2) completion of time limitation for action does not extinguish the substantive rights; 3) time limitation for action is a compulsory prescription, that is, the time limitation for action and its specific content must be prescribed by the law of the state, and the whole of the civil subjects is required to conform to it. Any agreements reached by the parties concerned relating to shortening or extending the limitation period for action, or abandoning the benefit of time limitation in advance, shall be invalid. In this case, pursuant to Paragraph 2 of Article 1 of the Hague/Visby Rules to which the two parties involved in the case agreed to apply, i.e. “the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered.” and the definition on time limitation for action mentioned above, any claim against the carrier under the three bills of lading involved in this case shall be brought “within one year of delivery of the goods or of the date when they should have been delivered by the carrier”, counting from March 23 and 24, 1996 on which the goods were discharged from the ship, and in this case, the time limitation for any claims against the carrier should have expired on March 23 and 24, 1997. Besides, in respect of the limitation period for claiming for recourse, it was provided in Paragraph 3 of Article 1 of the Hague/Visby Rules that: “An action for indemnity against a third person may be brought even after the expiration of the year provided for in the preceding paragraph if brought within the time allowed by the law of the Court seized of the case. However, the time allowed shall be not less than three months commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself.” We can see from the above provision, that after the expiration of the year provided for in Paragraph 3 of Article 1 of Hague-Visby Rules, the time limitation for claiming for recourse against the third party is decided by the limitation period prescribed by the law of the court seized of the case. However, the time allowed should be no less than three months commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself. According to such a provision, in this case, the limitation period within which the carrier for the entire voyage claimed against the actual carrier was three months, counting from the day on which the Plaintiff was served with the copy of the Statement of Appeal submitted by the B/L holder D.K. REMINGTON INTERNATIOAL on February 3, 1997 and the Notice to Reaction by Guangzhou Maritime Court, that is, the time limitation shall expire on or after May 3, 1997, a period of time counting from the day of the service by the court. In this case, as the fact established by the court of first instance indicated, the Statement of Complaint of Pearl River was dated July 21, 1998, and the court entertained the case on July 24, 1998. The claim was filed far more than one year after the above-mentioned goods arrived at the destination port and far more than three months after Pearl River was served with the copy of the Statement of Complaint of the through B/L holder and the Notice to Reaction of the court. Therefore, the claim filed by Pearl River against Nedlloyd B.V. exceeded the time limitation prescribed by law, thus it shall not be protected by this court. Although on June 5, 1998, Pearl River made an application to Guangzhou Maritime Court for arresting m/v “Nedlloyd Houtman” owned by Nedlloyd B.V., the act of property preservation prior to proceedings occurred after the expiration of the above-mentioned time limitation. For this reason interruption of time limitation had not been constituted. Therefore, no matter viewing the case from whatever angle, Pearl River had lost the protection of law in respect of the time limitation for action and had been deprived of the right to win the lawsuit in this case. Therefore, his litigation requests against Nedlloyd B.V. shall be dismissed according to law. On second thoughts, even the matter of time limitation should be applied by the relevant provisions of the Maritime Code of the PRC, as it was held by the court of first instance that pursuant to Article 257, Paragraph 1 of the Maritime Code of the PRC, the limitation period of 90 days for recourse is counted “from the day on which the person claiming for the recourse settled the claim, or was served with a copy of the process by the court handling the claim against him”. Under this provision, the alternative conjunction “or” has been clearly adopted, which definitely means that one is to be alternatively chosen out of the two. However, the court of first instance held that the wording “settled the claim” should be interpreted as voluntary resolution of the claim by the parties through negotiations or settling the dispute by means of litigation or arbitration. If this be the case, wouldn’t it be senseless in Article 257 of the Maritime Code to say “or was served with a copy of the process by the court handling the claim against him”? So, the parts before and after the word “or” in Article 257 of the Maritime Code would be self-contradictory. How could the settlement by means of litigation either choose effective judgment (perhaps several years after the day the copy of the process was served) or filing the claim for recovery on or after the day when the copy of the Plaint was served? If the legislation was so short of definability, stability and operability, the parties concerned would be at a loss as to what to choose. Such a law will be impossible at all to achieve the essential purpose of legislation for protecting the legitimate rights and interests of the parties concerned. Prof. Zhu Zengjie, Deputy Director of the Drafting Committee of the Maritime Code, presented his views in the column of Zhu Zengjie’s Mail Box in Admiralty Adjudication Vol.2, 1995 that: it is clearly indicated in the above prescription that: “1. The limitation period for a claim of recourse is 90 days; 2. Either within the limitation period (that is, within the limitation period of one year with respect to carriage of goods by sea) or at the expiration of the time limitation (one year), the limitation period for a claim of recourse shall be 90 days; 3. The day from which the time limitation of 90 days for a claim of recourse is counted shall be settled by two ways: (1) counting from the day on which the person claiming for the recourse settled the claim; (2) or was served with a copy of the process by the court handling the claim against him.” According to his understanding, “the first case is such that the two parties have settled the claim, while the second case is with regard to the procedures through which a claim is brought according to law. In the first case, the person claiming for the recourse has settled the claim; in the second case, the person claiming for recourse was only served with a copy Plaint, but he was not ruled to make compensation, still less the compensation has been made and the case has been finalized. According to the above analysis, the first case indicates that as the person claiming for recourse has made compensation to the victim, he is entitled to claim for recourse, therefore it is undoubtedly logical that the time limitation is counted from the day on which the claim was settled; in the second case, a claim has been brought against the person claiming for the recourse, and the court hearing, judgment and enforcement are pending. In case the time limitation for a claim of recourse is counted after the case has been finalized, it will be a waste of time and detrimental to the timely conclusion of the case of recovery.” According to the above analysis and enunciation of Prof. Zhu Zengjie, , it is obvious that in this case the position of Pearl River falls within the second category of the above said cases. That is, the time limitation of 90 days shall be counted from the day on which Pearl River was served with a copy Plaint of D.K. REMINGTON INTERNATIOAL by the court, and it was not necessary and should not at all be counted after the final settlement of the dispute between Pearl River and D.K. REMINGTON INTERNATIOAL. Therefore, it was entirely wrong for Pearl River to allege that according to Article 257 of the Maritime Code of the PRC, that in this case, Pearl River was still allowed 90 days for the claim even after the compensation was made to D.K. REMINGTON INTERNATIOAL. In the 《Science of International Maritime Law》published by Beijing University Publishing House with Mr. Chen An working as the editor in chief, as regards the claim against the third party, they hold the view that ‘settling a claim’, according to the systematic interpretation principle of “the expression of one thing is the exclusion of another”, is different from “bringing a lawsuit” and falls within the method of settling the dispute outside litigation. It mainly means that the parties concerned held consultations of their own accord and reached an agreement”. Given the foregoing analysis, the action initiated by Pearl River against Nedlloyd B. V. had been time-barred, thus it should not be supported by this court and should be rejected pursuant to law. Nedlloyd B. V. filed an appeal as follows: The court of first instance failed to seize on the key issues of the case during the trial and committed serious deviations in the determination of the limitation of time for claims and the interpretation of the sphere of application of the time limitation for recourse at the expiration of 90 days as prescribed in Article 257 of the Maritime Code of the PRC, so that the conclusion of this case was wrong. I. The court of first instance was wrong in giving holding on the law applicable to this case. 1. The court of first instance was wrong in determining the law and application clause in the overleaf clause of the on-carriage bill of lading involved in the case. The court of first instance held that although it was expressly provided in the Bs/L that the law of the country of domicile of Nedlloyd B. V. should be applicable to the settlement of the dispute, Pearl River had never accepted such provision. Pearl River and Nedlloyd B. V. did not reach a consensus on the law governing the settlement of dispute in this case”, but Nedlloyd B. V. could not agree to the above view of the court of first instance. In as much as the court of first instance held that it was the booking note and the contract of carriage of goods evidenced by the on-carriage bills of lading that determined the relationship between Pearl River and Nedlloyd B. V. in relation to the rights and obligations, obviously no reason could be found to deny the applicable law expressly provided in the overleaf clauses of the above-mentioned on-carriage bill of lading. Furthermore, it was even groundless for the court of first instance to hold that Pearl River and Nedlloyd B.V. did not reach a consensus on the law governing the settlement of dispute in this case. Firstly, although the on-carriage bill of lading determining the relationship between Pearl River and Nedlloyd B.V. in relation to the rights and obligations was a format contract produced by Nedlloyd B.V., yet the contents of which had been made available to the public, so that any party concerned could freely obtain it from Nedlloyd B.V. and study it before concluding a contract. As one of the largest container liner shipping companies in the world after the amalgamation, Nedlloyd B.V. had a wide range and a huge volume of business, and such information as its liner sailing schedule was regularly published in the world’s major shipping publications. Therefore, any of its business partners could have abundant opportunities finding out Nedlloyd B.V.’s sailing schedule as well as the format and the overleaf clauses of the bill of lading used by Nedlloyd B.V. In this case, as a specialized shipping company with fairly good strength, Pearl River could be comprehensively acquainted with the provisions contained in the liner bill of lading produced by Nedlloyd B.V. in the course of booking the shipping space with Nedlloyd B. V. Furthermore, even in common sense, Pearl River, who was the shipper under the on-carriage bill of lading and arranged for transshipment of the cargo at Hong Kong for the cargo interests, should also know about the overleaf clauses of the bill of lading involved in this case. Secondly, Pearl River had consigned cargoes to Nedlloyd B.V. for shipment for many times before this consignment, and each time the bill of lading issued to Pearl River by Nedlloyd B.V. was in the same format. Therefore, Pearl River should not and could not deny the fact of knowing of the existence of the “Law of Application Clause” in such bill of lading. Thirdly, in case the law of application clause in the bill of lading was inferred in the logic of the court of first instance, any law of application clause of bills of lading printed in format will no longer bear any significance of existence at all, in that they were not legally binding as they fell within the realm of “lack of consensus of the two parties concerned” as viewed by the court of first instance. Obviously, the standard of “consensus” as concerned by the court of first instance was neither objective nor in conformity with the actual situation. In view of this, Nedlloyd B. V. held that the issue of “Law of Application” contained in the overleaf clauses of the on-carriage bill of lading in this case was the conclusion of the true intention mutually expressed by both parties concerned, which constituted the consensus of the two parties to this case. However, the court of first instance entirely ignored such a consensus reached by the two parties which was revealed from the facts and the internal logic of this case, but wrongly held that Nedlloyd B.V. and Pearl River did not reach a consensus on the law governing the dispute involved in this case. In this regard, Nedlloyd B.V. was of the opinion that this should be corrected by your esteemed court. 2. The court of first instance did not have any holding of the fact that the on-carriage bill of lading had the stipulation in its overleaf clauses that Hague-Visby Rules shall be applied. It was especially worth mentioning that the first Article of the above-mentioned on-carriage bill of lading expressly provided that Hague/Visby Rules were compulsorily applicable to this bill of lading. As to such an explicit stipulation between Nedlloyd B.V. and Pearl River in relation to the law of application, the court of first instance did not have any holding. According to the common understanding of the present international shipping and judicial practices and the provisions of Hague-Visby Rules, the Convention shall be applicable to the bill of lading if: (a) the bill of lading was issued in a contracting State, or (b) the carriage was from a port in a contracting State, or (c) the bill of lading itself provided that the rules of this Convention or legislation of any State giving effect to them were to govern the contract whatever the nationalities of the ship, the carrier, the shipper, the consignee, or any other interested person may be. Pursuant to the above provisions, as in this case, it had been expressly provided in Article 1 of the overleaf clauses of the Bill of Lading that Hague/Visby Rules shall apply, Hague/Visby Rules, as the applicable law in this case, shall be binding upon the two contracting parties to the Bill of Lading with respect to their rights and obligations. In addition, as Hague-Visby Rules itself was not a law of any State, but an international Convention well known in the field of ocean shipping and maritime justice over the world, there was no need of any evidence as to its contents. Pursuant to Article 75, sub-paragraph (2) of Opinions of the Supreme People’s Court on Certain Issues respecting Implementation of the Civil Procedure Law of the PRC that “the party concerned is not bound to present evidence for the facts, natural law and theories known to all”, the party concerned was not bound to present evidence for the contents of Hague-Visby Rules mentioned above. Moreover, even if the court of first instance should require such evidence presentation, Nedlloyd B.V. had already completed the process of evidence presentation in respect of the relevant contents of the Rules in the documents such as the Submissions to the court of first instance. However, being entirely regardless of the consensus reached between Nedlloyd B.V. and Pearl River on the application of law, the court of first instance did not make any holding on the application of Hague-Visby Rules in this case, but subjectively held that the law of PRC shall be applied in Nedlloyd B. V.’s opinion. The above-mentioned view of the court of first instance was wrong as it was obviously in lack of factual and legal basis. 3. The above said view of the court of first instance did not comply with the judicial principle established by the judicial precedents of the Supreme People’s Court. According to retried case concerning dispute over release, taking delivery of and agency release of goods carried by sea without presentation of bill of lading arising between Yue Hai Company, Cang Ma Company and Te Fa Company, and the Case No. JTZ 1(1997) tried by the same court, which were published in the Public Notice of the Supreme People’s Court of PRC, Vol. 1, 1997 by the Supreme People’s Court, a dispute over release of goods without presentation of original bill of lading should be “a dispute over contract of carriage of goods by sea”. On this basis, the Supreme People’s Court admitted the legal force of the law of application clause contained in the Bill of Lading in both of the two cases mentioned above, by holding that Hague Rules and Hague-Visby Rules should be respectively applicable to the two cases, and further holding that the carrier should bring the action for indemnity within one year as provided for in the above-mentioned Rules. Although China is not a case-law country, yet the precedents announced in the public notices of the Supreme People’s Court and the judicial principles established by these precedents are assuredly of fairly good value of reference and certain binding force to the courts at a lower level. In this case, the act of the court of first instance as derogating from the above-mentioned precedents and the judicial principles of the Supreme People’s Court in the trial was obviously improper and shall be rectified according to law. II. The court of first instance was wrong in giving holding on the time limitation for action in this case. Article 1, Paragraph 2 of Hague-Visby Rules which the two parties involved in the case agreed to apply provided: “the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered.” According to this provision and the definition on time limitation for action mentioned above, any claims against the carrier under the three bills of lading involved in this case shall be brought “within one year of delivery of the goods or of the date when they should have been delivered by the carrier”, counting from March 23 and 24, 1996 on which the goods were discharged from the ship, and in this case, the time limitation for any claims against the carrier shall expire on March 23 and 24, 1997. Besides, in respect of the limitation period of claiming for recourse, it was provided in Article 1, Paragraph 3 of Hague-Visby Rules that “An action for indemnity against a third person may be brought even after the expiration of the year provided for in the preceding paragraph if brought within the time allowed by the law of the Court seized of the case. However, the time allowed shall be not less than three months commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself.” From the above provision, we can see that after the expiration of the year provided for in Article 1, Paragraph 3 of Hague-Visby Rules, the time limitation for claiming for recourse against the third party is decided by the limitation period prescribed in the law of the court seized of the case. However, the time allowed shall not be less than three months counting from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself. According to such a provision, in this case, the limitation period within which the carrier for the entire voyage entitling to claim against the actual carrier was three months, counting from the day on which Pearl River was served with the copy of the Statement of Appeal submitted by the B/L holder D.K. REMINGTON INTERNATIOAL on February 3, 1997 and the Notice to Reaction served by Guangzhou Maritime Court, that is, the time limitation shall expire on or after May 3, 1997, a period of time counting from the day of the service of the court. In this case, as the fact having been held by the court of first instance indicated, the Statement of Appeal of Nedlloyd B.V. was dated as July 21, 1998, and the court seized of the case on July 24, 1998. The claim was filed far more than one year after the above-mentioned goods had arrived at the destination port and far more than three months after Nedlloyd B.V. had been served with the copy of the Statement of Appeal of the through B/L holder and the Notice to Reaction by this court. Therefore, the claim filed by Nedlloyd B.V. against Pearl River exceeded the time limitation prescribed by law, thus it shall not be protected by this court. Although Pearl River did apply to Guangzhou Maritime Court on June 5, 1998 to arrest m/v “Nedlloyd Houtman” owned by Nedlloyd B.V., yet the act of property preservation prior to proceedings occurred after the expiration of the above-mentioned time limitation, for this reason interruption of time limitation had not been constituted. Therefore, viewing the case from whatever angle, Nedlloyd B. V. had lost the protection of the law in respect of the time limitation for action and had been deprived of the right to win the lawsuit in this case. Therefore, its litigation requests against Pearl River shall be dismissed according to law. On second thoughts, even the matter of time limitation should be applied by the relevant provisions of the Maritime Code of the PRC as it was held by the court of first instance (the grounds for which were the same as in the foregoing Pleadings of Pearl River), the court of first instance had serious mistakes in interpreting and holding the meaning of Article 257 of the Maritime Code, therefore it should be rectified according to law. III. Part of the facts of this case was not ascertained by the court of first instance or the ascertainment was not clear: 1. The court of first instance did not give holding on such an important fact that Nedlloyd B.V. was not the actual carrier of the goods under Bs/L No. HKGVA207 and No.HKGVA208 involved in this case. As revealed by the facts established by the court of first instance, the goods under Bs/L No.207 and No.208 were loaded on m/v “OOCL FAIR” at Hong Kong on February 10, 1996, and were actually shipped to Guatemala per the same vessel. Nedlloyd B.V. was not the shipowner of m/v “OOCL FAIR”. According to the registration of ships in Lloyd’s Register 1995-96, the shipowner of the vessel was Orient Overseas Container Line Ltd. (hereinafter referred to as “OOCL”). For this reason, as regards the two consignments of goods mentioned above, Nedlloyd B. V. was not the actual carrier, but the contract carrier same as Pearl River. The contract carrier, as it was held by the court of first instance, shall not undertake any liabilities for the delivery at the port of destination. In addition, in the court hearing of the first instance, Nedlloyd B.V. merely alleged that the goods were discharged and under the custody of the Customs, but not that the goods were delivered to any receiver, and Pearl River had never presented any evidence that Pearl River delivered the goods to anybody. In fact, basing on the facts mentioned above, the responsibility for delivery of the goods at the port of destination actually should not be undertaken by Nedlloyd B.V. Without even holding on such an important fact that the actual carrier for the consignment of goods was “OOCL”, the court of first instance was obviously groundless in adjudicating that Nedlloyd B.V. undertook the liability for the release of goods at the port of discharge. Nedlloyd B.V. Hereby once again emphatically pointed out that Nedlloyd B.V. was neither the carrier for the entire voyage, nor the actual carrier for the goods involved in this case. Its identity was only the contract carrier under the on-carriage bill of lading involved in this case. In this case, Nedlloyd B.V. had taken back the full set of original on-carriage bill of lading in respect of the two consignments and accomplished his obligation as contract carrier under the on-carriage bill of lading. Therefore, Nedlloyd B.V. shall not be held liable for the losses alleged by Pearl River. 2. Nedlloyd B.V. held that the court of first instance was not clear in holding the following facts in the judgment of the first instance: Did Pearl River exercise due diligence as the carrier for the entire voyage? Did the agent at the loading port fulfill the obligation of delivery as per the through bill of lading? As indicated by the facts established by the court of first instance, Pearl River, as the carrier for the entire voyage, was entrusted by the shipper to ship the goods in question from Sanbu, PRC to Puerto Quetzal, Guatemala, and issued through bills of lading No.PRBT-96008, No.PRBT-96009 and No.PRBT-96012 correspondingly. Pursuant to Article 46 of the Maritime Code of the PRC , the responsibilities of Pearl River, as the carrier of the goods in question for the entire voyage, covered the entire period from the time the carrier took over the goods at Sanbu, PRC, until the goods were delivered at Puerto Quetzal, Guatemala. As regards the normal process of transportation, the actual consignee shall exchange for the on-carriage bill of lading with Pearl River’s agent at the discharging port by surrendering the through bill of lading, which was obtained after payment of the equivalent price, and then exchange for the delivery order by surrendering the on-carriage bill of lading before the goods could be taken. The second-leg carrier’s obligation was fulfilled, as long as he had withdrawn the on-carriage bill of lading issued by him at the port of discharge. In this case, after Nedlloyd B. V. had fulfilled the obligation of presenting evidence by presenting the full set of original on-carriage bill of lading to the court and given proof that Nedlloyd B.V. had properly performed the obligation of the second-leg carrier, the court of first instance had never conducted any investigation to find out whether the carrier for the entire voyage had fulfilled his due obligations. Instead, obviously without any factual basis, the court held that Nedlloyd B. V. should fulfill the obligation of delivery of the goods at the port of discharge, under the circumstances of entirely not knowing whether the carrier should designate the agent at the port of discharge, who was the agent at the port of discharge and whether he had fulfilled the obligation of properly delivering the goods which should have been performed by the carrier for the entire voyage. 3. Nedlloyd B. V. could not agree to the holding of the court that as Nedlloyd B. V. had not provided with the court the list of the articles handed over to the Customs, it was unable to hold that the carrier had fulfilled his obligation of delivery of the goods. After the goods arrived at the port of destination, Nedlloyd B.V. had withdrawn all the three sets of original on-carriage bills of lading which were issued by itself, and delivered the goods to the Customs for supervision according to the regulations of the port of destination. Therefore, as the second-leg carrier, Nedlloyd B.V. had properly fulfilled all the obligations that it should fulfill according to the provisions of the on-carriage bill of lading, and completed the carriage he was in charge of. As mentioned above, the obligation of release of goods at the port of destination was undertaken by Pearl River as the carrier for the entire voyage. Therefore, Pearl River shall be held liable for presenting evidence in respect of release of goods at Guatemala. The court of first instance made no ruling on the afore-mentioned evidential documents furnished by Nedlloyd B.V., but on the contrary, determined that Nedlloyd B.V. had not properly fulfilled the obligation of delivery of cargo on the grounds of its failure in discharging the burden of proof in the judgment. The court of appeal was called upon to redress the mistake made by the court of first instance in this respect. IV. The court of first instance partially violated the procedural law in hearing the present case. In this case, the court of first instance established that Nedlloyd B.V. made an indemnity on the basis of the amount of liability to be borne by Pearl River to the holder of the through Bs/L as determined in the Civil Judgments No. YFJERS 436 and 437 (1998) handed down by the Higher People’s Court of Guangdong Province on 22 July, 1999. As shown by the facts in this case, the last round of court hearing was held on 14 April, 1999 , earlier than the time when the foregoing judgments were rendered. Subject to the said provision of the Civil Procedure Law, if the court of first instance intended to rule on the onus to be borne by Pearl River by reference to the amount ascertained in the aforesaid two judgments, then the two judgments should have undergone the legitimate procedures for cross-examination. But in effect, the aforesaid judgments had never been cross-examined by Nedlloyd B.V. and Pearl River at the court hearing, nor had Nedlloyd B.V. any opportunity to plead for the amount ascertained therein. Hence, Nedlloyd B.V. took the view that the court of first instance failed to follow the statutory procedures for cross-examination when determining the amount of indemnity in this case, thus such mistake should be rectified by the court of appeal, and the litigation requests filed by Pearl River in the first instance should be dismissed in accordance with the law. In summary, Nedlloyd B.V. requested the court of first instance to amend the first and the second items of the original judgment according to law, to order that Nedlloyd B.V. be not liable for the losses alleged by Pearl River, and adjudicate according to law that Pearl River bear the legal fees in the first and the second instances of this case. Pearl River argued: I. Whether the overleaf clauses of the memo bills of lading for the second-leg voyage were valid and whether the present suit was time-barred became the focus of attention of the dispute between the two parties. Container Ltd. was of the opinion that this case should be governed by the law of the PRC, and it was not time-barred. Thus Nedlloyd B.V. should be liable to make indemnity for its failure to deliver the goods as agreed upon. II. In this case, the memo bill of lading for the second-leg voyage could not regulate the acts of both parties in transportation. 1. In this case, the memo bill of lading for the second-leg voyage, which had been regained on the spot at the office of Nedlloyd B.V. in Hong Kong, the port of shipment, was devoid of the functions and features of the bill of lading regarding “the document based on which the carrier undertakes to deliver the goods against surrendering the same”. Hence, it was not a bill of lading in legal sense, but the evidence of the taking over of the goods by Nedlloyd B.V. (1) The procedures for issuing the memo bill of lading for the second-leg voyage to Container Ltd. by Nedlloyd B.V. was as follows: Container Ltd. transported the cargo to Hong Kong and handed it over to Nedlloyd B.V. After Container Ltd. paid the freight, Nedlloyd B.V. informed Container Ltd. to send its staff to the Hong Kong office of Nedlloyd B.V. and affix its seal on the reverse side of the memo bill of lading for the second-leg voyage, which was later regained on the spot by Nedlloyd B.V. , who gave the short form bills of lading without overleaf clauses to Container Ltd. instead. The seal affixed by Container Ltd. on the bills of lading served as the evidence of payment of freight, and Nedlloyd B.V. would not release the cargo to the holder of the original bills of lading at the destination port without the endorsement made by Container Ltd.. As stated by Nedlloyd B.V. in his Statement of Appeal, before Container Ltd. consigned the cargo in dispute to Nedlloyd B.V. for shipment, Container Ltd. had entrusted Nedlloyd B.V. to transship the cargo for many times, in which cases Nedlloyd B.V. had issued the bills of lading in the same form as those of Container Ltd. (2) It was stated by Nedlloyd B.V. in his Statement of Appeal that Nedlloyd B.V. had withdrawn the full set of original bills of lading (3/3) issued by it after shipping the cargo to the destination port, and had handed the cargo over to the local Customs for supervision as per the regulation of the port. This was a story fabricated by Nedlloyd B.V. In accordance with shipping practice, the procedure for “delivering the goods in exchange for the bill of lading” in respect of the delivery of goods at the destination port is that the carrier hands over the cargo to the consignee, who endorses the bill of lading, which is then regained by the carrier. But in the present case, despite the fact that the memo bill of lading for the second-leg voyage endorsed by Container Ltd. was still held by Nedlloyd B.V., Nedlloyd B.V. did not deliver the cargo to the consignee. Evidently, the memo bill of lading for the second-leg voyage issued by Nedlloyd B.V. was not regained after delivery of goods at the destination port, but was withdrawn at the time of transshipment at Hong Kong. (3) Nedlloyd B.V. stated in the fax dated 17 February ,1997 that: “As regards the notice of delivery of the aforesaid containers, our agent at Guatemal

HIGHER PEOPLE’S COURT OF ZHEJIANG PROVINC PEOPLE’S COURT OF CHINA CIVIL JUDGMENT No. (2001)Z.J.E.Z.Zi. 105，2001 Appellant(Defendant in the first instance trial): China Pacific Insurance Corporation, Hangzhou Branch; Domicile: No.196, Qingchun Road, Hangzhou, Zhejiang Province. Legal Representative: Lu An’ping, General manager of the corporation. Agent ad litem(specially authorized): Cai Cunqiang, Lawyer from Shanghai Municipal Huali Lawyers Office. Appellee: (plaintiff in the first instance trial): Ying Zhilong, male, born on October 18, 1969, Han Nationality, seaman, residing at No. 29, Renmin Road, Shangyu City, Zhejiang Province. Agent ad litem (specially authorized) Yu Zhihong, Lawyer from Zhejiang Zeda Lawyers Office. The appellant, China Pacific Insurance Corporation Hangzhou Branch refused to comply with the Civil Judgment No. Y.H.S.C.Zi. 164，(2001) issued by Ningbo Admiralty Court, and filed an appeal to this court. This court accepted the appeal and a collegial bench was duly formed. On November 5, 2001, this court held a public hearing of the case. Cai Cunqiang, the agent ad litem of the appellant (China Pacific Insurance Corporation Hangzhou Branch) and Yu Zhihong,Ying Zhilong’s agent ad litem were both present in the court. The cases has now been concluded. The trial of first instance decided: “Zheshaohai 3” belonged to Ying Zhilong, with a loading capacity of 575 tons and a valid certificate for a term November 8, 2000 to November 2, 2001. Ying Zhilong insured it on “all risks” term (Term 96.11.1) on November 15, 2000 at China Pacific Insurance Corporation Hangzhou Branch (hereinafter referred to as Taibao Hangzhou Branch) and both the insurance value and insured amount reached RMB 900,000.00 yuan. The insurance fee was RMB 9,000.00 yuan, with an insurance period from November 16, 2000 to November 15, 2001. The first article in the «Coastal，Inland River Ships Insurance Articles» of November 1, 1996 stipulated that damage from capsizing and sinking of the ship caused by running aground will be borne by the insurance company; and the third article stipulated that all losses, liabilities and expenses caused by the un-seaworthiness of the ship will not be borne by the insurance company. “Zheshaohai 3” shipped 139 cases of glass products of Xiaoshan Municipal Huaxing Construction Materials Co., LTD ( shipment contract indicated 560 tons, consignment note marked 575 tons and the actual weight was 557.3 tons) from Xiaoshan Shimen Port to Fuzhou Harbor on March 6, 2001. When it sailed to the second work-section of the opposite riverside of the entrance to Qiantang River, on March 8, restrained by the water level for sailing out of the port, it was decided to drop anchor and to sail on March 10 after the passing of the tide. At 0200 of March 10, the ship weighed anchor，under the influence of the movement of river water, the front part of the ship declined to the right and led to the running aground of the ship. Later, affected by the movement of river water, the ship quickly sank. The Accident Liability Identification provided by the port supervision authority indicated that the bad fairway conditions, too much movement of the river water, and ineffective protective measures were regarded as the causes of the accident. After the accident, Ying Zhilong asked Taibao Hangzhou Branch to pay insurance compensation. Taibao Hangzhou Branch surveyed and calculated that the actual glass weight loaded by “Zheshaohai 3” was 578.1 tons, on the basis of the loading bill and weight, as well as the size of the packing shelves provided by Zhebo Sales Department of Guangyu Conglomerate Marketing Management Corporation. Then, Hangzhou Branch entrusted Zhejiang Provincial Ship Survey Bureau to analyze the seaworthiness of the ship and causes of sinking on the basis of the ship stability calculation, the stowage and packing conditions of the cargo in “Zheshaohai 3”. On April 9, the bureau stated in the analysis report that as the cargo on board raised the center of gravity of the ship, the stability of the ship did not meet the stipulated requirements in pertinent laws and rules, and the ship was in a state of un-seaworthiness. When the ship was running aground，under the influence of movement of river water, the restoring moment couldn’t resist the turnover moment，which caused the sinking of the ship. On April 10, Taibao Hangzhou Branch notified Ying Zhilong of their not paying the insurance compensation because the sinking of the ship was within the scope of excluded liability, as stated in the insurance clauses.On June 4, having known of the actual weight of the cargo being 557.3 tons, Taibao Hangzhou Branch entrusted Zhejiang Provincial Ship Survey Bureau once more to survey the stability of “Zheshaohai 3” and conclusion was reached that the integrate stability of “Zheshaohai 3” could not meet the requirements for cargo ships operating in coastal sailing areas under «Examination Regulations for Ships and Maritime Facilities». The first instance court considered that the relationship between both parties concerning the insurance was valid and effective. The fact of the case was clear. Although the loaded weight of cargo was 557.3 tons -less than 575 tons, but improper stowage caused the raising of the center of gravity of the ship, so the ship could not meet the required stability requirements stipulated in the relevant laws, and was in a state of being not suitable for sailing. When the ship ran aground under the influence of the transverse stream, the ship’s restoring moment couldn’t resist the turnover moment of stream，which caused the ship to decline in the way of the movement of the river water. The case came under one of the articles of excluded liability clause in the overleaf clauses of the insurance policy. Under normal conditions, Taibao Hangzhou Branch wouldn’t undertake the compensation liability according to the said reasons. However, Article No. 17 of the «Insurance Law» of the People’s Republic of China stipulates that if the insurance contract includes the article excluding the insurer’s liability, the insurer should clearly explain the article to the insured before signing the contract. Without this clear explanation, the article is not valid. The insurance policy used by Taibao Hangzhou Branch did not distinguish “time polity” from “voyage policy”. Moreover, the Excluded liability articles in the overleaf clauses of the insurance policy were stricter than the stipulations in Article No.144.1.1 of the «Maritime Code of the People’s Republic of China》which reads: un-seaworthiness of the ship at the time of the commencement of the voyage unless where under a time policy the insured has no knowledge thereof ,which means the grounding and sinking of the insured ship was not within the scope of the exclusion clause of the policy. As Ying Zhilong entered his ship (for insurance) in Taibao Hangzhou Branch, the latter should have explained this article to Ying Zhilong, but Hangzhou Branch could not show sufficient evidence to prove its fulfilling the obligation for explanation to Ying Zhilong, nor had it sufficient evidence to prove that Yang Zhilong was aware of the un-seaworthy situation of the ship. The excluded liability article in the overleaf clauses of the insurance policy was therefore invalidated hereby, and Hangzhou Branch’s reasons for refusal were considered not sufficient. Ying Zhilong was reasonable in his argument and should be given support. According to Article No.17 of the «Insurance Law of the People’s Republic of China», Article No. 244.1.1, and Articles No. 237 and No. 238 of the «Maritime Code of the People’s Republic of China», and Article No. 64.1 of the «Civil Procedure Law of the People’s Republic of China», the court of first instance decided on July 24th ,2001 that Hangzhou Branch should pay Ying Zhilong RMB 900,000.00 yuan as compensation for his loss, plus corresponding bank interest (from April 10, 2001 to the date when the judgment is made)within ten days of the day on which this judgment become effective. The RMB14,010.00 yuan acceptance fee shall be borne by Taibao Hangzhou Branch. After the ruling, Taibao Hangzhou Branch did not comply with the judgment and appealed to this court, alleging that the ship “Zheshaohai 3” was in a state of unseaworthiness before sailing, which led to the sinking of the ship. This was an incontestable fact. Hangzhou Branch also contested that as the owner and acting as the mate and second mate of the ship, the insured should know the ship was in a state of un-seaworthiness. The appellant said that he explained the insurance clauses especially the excluded liability clause in detail, and fulfilled the obligation of explanation stipulated in Article No. 17 of the «Insurance Law». So, Taibao Hangzhou Branch asked the secunda instancia court to rectify the judgment of first instance trial and rebuke Ying Zhilong’s litigation. Appellee Ying Zhilong rejoined in writing and in court trial that the appellant did not undertake the obligation of explanation of the excluded liability clause in the policy; the insurance policy under this case was a time policy. Although the insured was a deck officer of the ship, his post was only a second mate of the “Zheshaohai 3”, and was not responsible for the optimum arrangement of cargo. Even the mate undertaking the responsibility of cargo stowage couldn’t make a stability calculation as the expert ship surveyor did, and couldn’t be aware of the fact that the cargo on deck caused the ship’s stability being not in conformity with the prescribed standard. So, the appellant should still undertake the liability for compensation. In the process of the second instance trial, both the appellant and the appellee provided new evidence. The appellant’s new evidence included: ⅰ) The appellant’s investigation notes respecting Captain Yi Tiangan, Mate Zhan Disheng, Chief Engeneer Ying Jiafu, and Boatswain Jin Jiming . In the notes it was stated that when the accident happened, Ying Zhilong served as second mate and there were 10 pieces of cargo on deck. However, the actual number was 23, which proved that the statement of the crew regarding the stowage of cargo was untrue, and it also proved that the crew knew the ship was in a state of unseaworthiness. ⅱ) Letter of reply by Zhejiang Maritime Affairs Bureau regarding the Outlines of Examinations used by Ying Zhilong and Zhan Disheng, and the excerpts from the «Examination Outlines for Captains and Deck Officers of the People’s Republic of China»”, to prove that a mate has the obligation to calculate the dynamic stability of the ship. The Appellee agreed to evidence No. 2, and was not sure whether evidence No. 1 was in conformity with what the crew stated, but did not provide contrary evidence against it. The Appellee provided the certificate of ownership of “Zheshaohai 3”,showing that the co -owners Ying Zhilong and Zhan Disheng respectively held a 50 per-cent share of the ship, which was agreed by the appellant. This court approved all the said evidence and the confirmation of the evidence by the court of first instance. In the light of the above facts, this court held that “Zheshaohai 3” was owned by Ying Zhilong and Zhan Disheng,where Zhan Dingsheng acted as the mate and Ying Zhilong acted as the second mate; other facts being in conformity with the judgment of the first instance trial. This court held that the appellant issued and signed an insurance policy on November 15, 2000 which did not indicate whether it was a time policy or a voyage policy, but the insurance term stipulated in the policy was one year, which was far longer than the reasonable term needed for a single coastal or inland river voyage, so it could be regarded as a time policy. The ship insurance policy signed by the appellant and the Appellee was lawful and valid. Before the voyage of the “Zheshaohai 3”, since the cargo on deck caused the raising of center of gravity of the ship, and the ship’s restoring moment couldn’t resist the turnover moment brought by the transverse stream, and so the case came under the scope of the excluded liability Clause as stated in the overleaf of the insurance policy, i.e. the ship was in a state of un-seaworthiness. According to Article No.17 of the «Insurance Law» of China (i.e. in a contract which includes an insurer’s excluded liability clause), the appellant (insurer) should clearly explain the clause to the insured. Without a clear explanation, the article is not valid. As the appellant couldn’t provide evidence to prove that he had clearly explained the clause to the Appellee, so the excluded liability clause in the insurance policy could not be valid and wouldn’t be legally binding. The reason for appeal - having performed the explanation obligation - presented by the appellant could not be supported by this court. In the light of Article No. 244 of the Maritime Code of China that under a time policy, unless otherwise agreed in insurance contract or the insured had no knowledge thereof, the insurer shall not be liable for the loss or damage arising from the un-seaworthiness of the ship insured. In this case, though the insurer couldn’t ask for exemption from liability according to the excluded liability clause ,yet the insurer could still ask for the relief from liability in accordance with the relevant exception clauses provided for in the Maritime Code of the PRC . In the light of the overleaf clause No. 19 of the insurance policy, as one of the ship owners enjoying the insurance benefits and acting as the mate, Zhan Disheng,the insured, and the captain of the ship should both undertake the obligations of ensuring the ship’s seaworthiness; Before sailing of “Zheshaohai 3”, as a second mate and being on the ship, the insured should clearly know there were 23 pieces of cargo on deck. And, in common sense, loading cargo on deck could influence the ship’s stability and render the ship unsuitable for sailing. In this case, no evidence had been provided to prove that as one of the ship owners, the mate fulfilled the duty of calculating the ship’s dynamic stability, nor was there any evidence to prove that the insured had demanded the captain and mate to calculate the ship’s stability, nor evidence to prove that the insured had execised due diligence to make the ship seaworthy. After the accident, the crew gave a false statement regarding the cargo on deck, which also proved that both the captain and the crew clearly knew that cargo on deck was enough to influence the ship’s stability. So, this court held that the insured clearly knew the ship was un-seaworthy at the beginning of the voyage. The insured did not fulfill their contract obligations, which led to the accident. After the accident, under the pretext of not knowing the ship was in a state of un-seaworthiness, the insured asked not to release the insurer from his liability for compensation/This was not in conformity with the principle of utmost good faith and couldn’t be supported by this court. According to the said statement, the insurer’s appeal that the “Zheshaohai 3” was in a state of un-seaworthiness, a fact which the insured should clearly know, so the appellant could not undertake the liability for compensation was an argument which carried weight.What was held in the judgment of first instance that the appellant did not know the ship was in a state of un-seaworthiness was wrong in fact and inappropriate in substance, so it needed to be rectified. According to Article 153.3.1 of the «Civil Procedure Law of the People’s Republic of China», Article 17 of the «Insurance Law of the People’s Republic of China», and Article No. 244.1.1 of the «Maritime Code of People’s Republic of China», the judgment is entered as follows: 1. Civil Judgment No. Y.H.S.C.Zi.164 (2001) issued by the Ningbo Admiralty Court is hereby dismissed. 2. Appellee Ying Zhilong’s appeal request is dismissed. The acceptance fees for first and second instances of RMB14,010.00 yuan shall be borne by the Appellee Ying Zhilong. This judgment is final. Presiding Judge: Zhou Ping Deputy Judge: Fu Zhichao Deputy Judge: Bao Ruyuan Zhejiang Provincial Higher People’s Court(seal) December 5, 2001 Certificated true copy Clerk: Gao Yilong