GUANGZHOU MARITIME COURT PEOPLE’S REPUBLIC OF CHINA CIVIL JUDGMENT No.GHFS 186(2000) Plaintiff: Hainan Glory Honour Group Co. Ltd. Address: 7th Floor, Dihao Building, Pearl River Square, No.2, Long Kun Bei Lu, Haikou, China Legal Representative: Cai Qiulong, General Manager Agent ad Litem: Du Gang, Lawyer of Guangxin Law Office Agent ad Litem: Li Hongzhi, Employee of Hainan Glory Honour Group Co. Ltd. Defendant: Far Eastern Shipping Company Address: 15, Aleutskaya Street, Vladivostok, 690019, Russia Legal Representative: Victor M. Miskov, Chairman of Board of Directors Agent ad Litem: Wang Jing, Lawyer of Wang Jing Law Firm Agent ad Litem: Fu Diyun, Employee of Hainan Southern Marine Consultants’ Service Co., Ltd. With respect to the cases of dispute over damages arising under the contract of carriage of goods by sea filed by the Plaintiff Hainan Glory Honour Group Co., Ltd. against the Defendant Far Eastern Shipping Company, the Supreme People’s Court handed down a ruling on 7 September, 2000, ordering that Haikou Maritime Court transfer this case to the jurisdiction of this court. After this court entertained this case on 15 November, 2000, a collegial bench was constituted in accordance with law. Both parties were summoned to exchange evidence before the court on 27 November and 5 December. A hearing was held openly on 21 December. . Du Gang and Li Hongzhi, the agents ad litem acting on behalf of the Plaintiff, and Wang Jing, the counterpart acting for the Defendant, attended the proceedings. Now the hearing of this case has been concluded. The Plaintiff Hainan Glory Honour Group Co., Ltd. alleged in his Statement of Complaint that: The Plaintiff was a group company redeveloped on the basis of Hainan Hongjian Trade Co., Ltd., whose credit rights and debt liabilities were fully borne by the Plaintiff. In October 1997, m/v “Grigoriy Aleksandrov” of the Defendant loaded 18,765.002 MT of Prime Steel Wire Rod from Nakhoaka, Russia, among which 9,506.962 MT was in controversy. The original bill of lading covering the consignment was held by the Plaintiff. Upon completion of loading, the said vessel commenced her voyage towards the destination port, i.e., Zhanjiang Port, PRC. On 15 October 1997, the Defendant instructed the agent of m/v “Grigoriy Aleksandrov” at Zhanjiang, Zhanjiang United International Shipping Agency Limited (hereinafter referred to as “Unisco Zhanjiang”), to falsely declare to the departments concerned of Zhanjiang Port that the vessel was only laden with 10,000 MT of Prime Steel Wire Rod to be carried to China. As a result of the false declaration of the Defendant, all the cargo carried on board m/v “Grigoriy Aleksandrov” was seized by No.3 Marine Police Team of the Frontier Defence Force of Guangdong Province (hereinafter referred to as “Marine Police Team”) on 26 October. In spite of the Plaintiff’s possession of the original Bs/L, he was unable to take delivery of the cargo within 5 months upon arrival of the cargo at Zhanjiang. On 20 March, 1998, Marine Police Team raised no objection whatsoever to the cargo and agreed that the cargo of the Plaintiff be handed over to the Customs for disposal. Later, the Plaintiff went through the Customs clearance formalities, but the Defendant still refused to release the cargo without justifiable reasons and deliberately damaged the legitimate rights and interests of the Plaintiff. Inspection of the cargo in dispute made by CCIB revealed that there was a shortage of 965.002 MT, and the quality of part of the cargo was not up to the requirements set forth in the Bs/L to the extent that some cargo was severely rusted. To sum up the above, the Plaintiff asked the court to order that: (I) the Defendant indemnify the Plaintiff for his economic losses of RMB 15,219,791.43, among which: 1. Loss of cargo shortage in the amount of 965.002 MT, which amounted to USD 246,075.51 (converted to RMB 2,040,212.05 on the basis of the exchange rate of 8.291); 2. Loss due to inconsistency in manufacturers between the actual manufacturers and the one specified in the Bs/L, which amounted to RMB 337,197.60 counted on the basis of RMB 60.00 per ton; 3. Loss resulting from breakage and damage of 1,537.38 MT of cargo, which amounted to USD 392,031.90 (converted to RMB 3,250,336.48 on the basis of the exchange rate of 8.291); 4. Loss of falling in market price of RMB 6,321,050.40 counted on the basis of RMB 740 per ton; 5. Loss of interest of the cargo payment under the L/C effected by the Plaintiff (accruing from the day of discharge - 7 November, 1997 to the day of actual delivery - 15 April 1998 on the basis of the corresponding annual deposit interest rate of the People’s Bank of China - 5.5%), which amounted to USD 58,519.31 (converted to RMB 485,183.60 on the basis of the exchange rate of 8.291); 6. Loss of fine for delayed declaration imposed by Zhanjiang Customs in respect of the cargo in dispute, which amounted to RMB 1,291,199.00; 7. Loss of overdue open-storage charges of RMB 718,662.30 collected by the terminal authority; 8. Loss of damage inspection fee of RMB 75,950 collected by CCIB Zhanjiang; 9. Loss of lawyer’s fee amounting to RMB 700,000. (II) Litigious Costs to be borne by the Defendant in the present suit. Altogether the Plaintiff Hainan Glory Honour Group Co. Ltd. provided this court with 36 evidential documents. The Defendant Far Eastern Shipping Company defended that: (I) Hainan Hongjian Trade Co., Ltd. was incorporated on 27 October, 1995 and made an application to Hainan Industrial & Commercial Administrative Bureau on 5 June, 1997 for changing the name to Hainan Glory Honour Group Co., Ltd. (the Plaintiff in this case). On 11 June, Hainan Industrial & Commercial Administrative Bureau approved the said application submitted by Hainan Hongjian Trade Co., Ltd. and issued to the Plaintiff the Business License of Legal Corporation on the same day. Since then, Hainan Hongjian Trade Co., Ltd. ceased to be qualified as a civil subject. (II) The 9,506.962 MT of Prime Steel Wire Rod in dispute was imported and transacted after 11 June, 1997. However, it was Hainan Hongjian Trade Co., Ltd., being no longer qualified as a civil subject, who still concluded the sales contract with the foreign party and resold the cargo in dispute to the domestic buyer. Hence, Hainan Hongjian Trade Co., Ltd. was unlikely to have obtained the bill of lading in a lawful way, nor could the Plaintiff succeed to its rights thereunder. (III) It was on 6 November, 1997 that M/V “Grigoriy Aleksandrov” completed discharging her cargo and that Marine Police Team issued a List of Detained Articles to the Defendant. The foregoing facts demonstrated that the Defendant, as the actual carrier, had delivered the cargo in sound conditions at Zhanjiang port. It was factually baseless for the Plaintiff to allege that the Defendant refused to release the cargo without justifiable reason. (IV) The reason why Marine Police Team did not agree to hand over the cargo to the Customs for disposal until 20 March, 1998 was that the Plaintiff failed to provide to Marine Police Team with the documents pertaining to the importation of the cargo in due course or within an appropriate time, thus the consequence arising therefrom should be borne by the Plaintiff. (V) The damage to or shortage of cargo arising after they had been discharged off the vessel was not within the scope of responsibility of the carrier and the actual carrier, hence the Defendant should not be liable to make compensation therefor. (VI) It was factually baseless for the Plaintiff to allege that the Defendant had instructed Unisco Zhanjiang to falsely declare the quantity of cargo to be imported to China. (VII) The action brought by the Plaintiff before Haikou Maritime Court had exceeded the one-year time limitation. In summary, the Defendant asked the court to dismiss the litigation requests filed by the Plaintiff. The Defendant Far Eastern Shipping Company altogether provided 21 evidential documents to this court. After examination, it was established by this court that: (I) Merits in connection with the carriage, seizure and release of the cargo in dispute On 12 October, m/v “Grigoriy Aleksandrov” owned by the Defendant drew up the Stowage Plan, in which it was stated that m/v “Grigoriy Aleksandrov” was laden with 9,506.962 MT, 4,863.34 MT and 4,394.70 MT, totaling 18,765.002 MT of Prime Steel Wire Rod, and that the loading port was Nakhodka, Russia, and the port of discharge was Zhanjiang, PRC. The specification of the second consignment (4,863.34 MT) was 8.0mm and the quantity was 5,816 bundles, whilst the specification of the third consignment (4,394.70 MT) was 6.5mm, and the quantity was 1,522 bundles. On 15 October, the agent of m/v “Grigoriy Aleksandrov” at Zhanjiang - Unisco Zhanjiang submitted to Zhanjiang Harbor Master an Application for Entry of Sea-going Vessel into the Port, which stated that m/v “Grigoriy Aleksandrov” was expected to arrive at Zhanjiang on 19 October, and the vessel was laden with 10,000 MT of Prime Steel Wire Rod to be imported to China. On 16 October, Zhanjiang Harbor Master approved the said application of Unisco Zhanjiang. On 19 October 1997, m/v “Grigoriy Aleksandrov” arrived at the pilot anchorage of Zhanjiang. On the same day, Marine Police Team seized the vessel at the pilot anchorage of Zhanjiang. The vessel was laden with the three consignments of cargo specified in the Stowage Plan. The cargo in dispute was the first consignment, i.e., 9,506.962 MT of Prime Steel Wire Rod, among which 4,751.012 MT (9,096 bundles) was of the diameter of 6.5mm, and 4,755.950 MT (9,116 bundles) was of the diameter of 8.0mm. The date of shipment of that consignment was 11 October, 1997. The place of origin was Cheliabinsk Steel Plant, Russia. The requirement in respect of quality was GOST380-88, 3SP/PS standard. The unit package was 520 KG per bundle. The unit price was USD 255/MT CIF Zhanjiang, and the total value was USD 2,424,275.31. On 26 October, 1997, the Marine Police Team gave a notice to Unisco Zhanjiang to the effect that, as per the instruction of the Department of Public Security of Guangdong Province, they decided to supervise the discharge of the 18,765.002 MT of Prime Steel Wire Rod loaded on board m/v “Grigoriy Aleksandrov”, and that the cargo would be temporarily under the custody of the Marine Police Team. Thus Unisco Zhanjiang was requested to assist Marine Police Team in discharging and other related work. On 31 October, 1997, the Marine Police Team requested Zhanjiang Port Authority to assist in discharging the 18,765.002 MT of Prime Steel Wire Rod loaded on board M/V “Grigoriy Aleksandrov”, and to keep the same as well. They entered into an Agreement on Lumpsum Port Charges and a Letter of Consignment. It was agreed in the Agreement on Lumpsum Port Charges that the level for lumpsum port charges was RMB 42/MT, and that the lumpsum charges should not include the expenses for loading cargo onto wagons, the weighing charges or open storage charges, and the open storage charges should be counted at RMB 0.10 /MT×day. In the Letter of consignment, the Marine Police Team entrusted Zhanjiang Port Authority to keep the Prime Steel Wire Rod discharged from m/v “Grigoriy Aleksandrov” in custody for about half a year. On the same day, the Marine Police Team asked Unisco Zhanjiang to advise the cargo owners to provide the documents pertaining to importation of the cargo and come to Zhanjiang for investigation within two days. On 6 November, 1997, m/v “Grigoriy Aleksandrov” completed discharging. On 7 November, the vessel departed from Zhanjiang. On 12 November, 1997, Unisco Zhanjiang issued a note, stating that Unisco Zhanjiang was disentitled to perform normal formalities for taking delivery of goods for the cargo owners before all the cargo discharged from M/V “Grigoriy Aleksandrov” had been released by the Marine Police Team from detention. On 26 March, 1998, Unisco Zhanjiang issued a notice stating that under the instruction of the entrusting party of Unisco, the consignee was not allowed to take delivery of the cargo presently,although it was holding the original B/L, failing which nisco should be liable for all consequences and expenses. On 27 March, 1998, Unisco Zhanjiang issued notices to Zhanjiang Container Company and Zhanjiang Port Authority respectively to the effect that under the instruction of the Public Security Bureau of Guangdong Province , the Marine Police Team decided to hand over the seized 9,060 tons of Russian steel wire rods of Hainan Hongjian Trade Co., Ltd. discharged from m/v “Grigoriy Aleksandrov” to the Customs for disposal, and the departure formalities could be performed pending the disposal of the said cargo. The 9,060 tons of steel wire rods referred to in the said Notices was the cargo in dispute. On 30 March and 3 April, 1998, Zhanjiang Hualian Customs Declaration Co., Ltd. submitted the Customs Declaration Form for Imported Cargo, to Zhanjiang Customs in respect of the cargo in question, stating that the proprietor of the cargo was Harbin Oriental International Trade Co., Ltd., that the consignee was Hainan Hongjian Trade Co., Ltd. and that the cargo was 9,506.962 MT of Prime Steel Wire Rod. Zhanjiang Customs affixed a Chop of Examination upon the above Customs Declaration Form and approved release of the cargo on 7 April. As regards the other two consignments of cargo loaded on m/v “Grigoriy Aleksandrov”, i.e. the 4,863.34 MT and 4,394.70 MT of Prime Steel Wire Rod, the Marine Police Team advised Zhanjiang Container Company and Zhanjiang Port Authority on 26 February, 1998 that the Department of Public Security of Guangdong Province had made a decision to hand over the 9,000 MT of Prime Steel Wire Rod to the Auction House of Guangdong Province for auction sale, and Zhanjiang Container Company and Zhanjiang Port Authority were requested to perform the formalities for delivery of 4,500 tons of the said steel products with a diameter of 6.5mm and 4,500 tons of those with a diameter of 8mm to the Auction House of Guangdong Province. In the end, the said cargo was sold by auction at the Auction House of Guangdong Province. Neither the Plaintiff nor the Defendant raised any objection to the foregoing facts, which were thus confirmed by the collegial bench. The Plaintiff submitted the Notice issued by the Marine Police Team, which stated that as per the instruction given by the Department of Public Security of Guangdong Province, the Marine Police Team decided to hand over the seized 9,060 tons of Russian steel wire rods of Hainan Hongjian Co. which were discharged from m/v “Grigoriy Aleksandrov” to the Customs for disposal, and Unisco Zhanjiang was requested to give assistance in this respect. It was on 20 March, 1998 that the aforesaid Notice was given. Based on such evidence, the Plaintiff maintained that the Marine Police Team notified Unisco Zhanjiang on 20 March, 1998 that they had decided to release the cargo in dispute from detention and hand it over to the Customs for disposal. The Defendant raised an objection in this regard, holding that Unisco Zhanjiang received the Notice after 26 March, 1998. But the Defendant failed to furnish the relevant documents to support his view. The collegial bench was of the opinion that in the absence of evidence to be presented by the Defendant in support of his view and in refuting the Plaintiff’s allegation, it shall be ascertained that on 20 March, 1998 the Marine Police Team advised Unisco Zhanjiang of their decision to release the cargo from detention. In order to illustrate the process of seizure of m/v “Grigoriy Aleksandrov” at Zhanjiang, the Defendant submitted the original text of the Elucidation on Detention of m/v “Grigoriy Aleksandrov” at Zhanjiang issued by Unisco Zhanjiang on 11 June, 1998, and the Port Office of Zhanjiang Municipal People’s Government remarked on the Elucidation on Detention of m/v “Grigoriy Aleksandrov” at Zhanjiang on the same day, saying that the above statement was true to fact. The Plaintiff raised an objection to this evidence, maintaining that such evidence was issued by Unisco Zhanjiang at the request of the Defendant, and Unisco Zhanjiang, as the agent of m/v “Grigoriy Aleksandrov” at Zhanjiang, had an interest in this case, thus the document submitted by Unisco Zhanjiang should not be taken as the basis for ascertaining facts. Besides, the Plaintiff held that the Port Office of Zhanjiang Municipal People’s Government was not the institution that seized m/v “Grigoriy Aleksandrov”. Thus it was not empowered to certify that the statement made in the above evidence was true to fact. The collegial bench was of the view that Unisco Zhanjiang, as the agent of m/v “Grigoriy Aleksandrov” at Zhanjiang , had an interest in this case, and that it was the Marine Police Team rather than the Port Office of Zhanjiang Municipal People’s Government that seized m/v “Grigoriy Aleksandrov”, thus the Elucidation on Detention of m/v “Grigoriy Aleksandrov” at Zhanjiang shall not be adopted in lack of other evidence to corroborate it. The Plaintiff alleged that it was on 15 April, 1998 that he actually took delivery of the cargo, but the Plaintiff did not furnish the corresponding evidence. The collegial bench took the view that there was no evidence supporting the Plaintiff’s allegation in regard to the time of taking delivery of goods, and such allegation shall be dismissed by this court. (II) Legal Status of Far Eastern Shipping Company, Richline Shipping Limited, Sunwoo Shipping Co., Ltd. and Unisco Zhanjiang in the present suit. The Defendant presented the copies of the Fixture Note and the Charter Party, alleging that m/v “Grigoriy Aleksandrov” was voyage-chartered to Linkvest (HK) Co., Ltd. on the subject voyage, that the agent and freight guarantor of Linkvest (HK) Co., Ltd. was Sunwoo Shipping Co., Ltd., and that the Defendant was not the carrier in respect of the carriage of the goods in dispute. The Plaintiff objected to both of the said documents, and held that facsimile copies could not serve as the basis for finding facts. The collegial bench held that as the two evidential documents were facsimile copies, they could not serve as the basis for finding facts in lack of other supporting evidence. In order to prove that the Defendant was the carrier in respect of the carriage of the goods in question, the Plaintiff submitted the Bs/L No.1, No.2, No.3 & No.4, which showed that Richline Shipping Limited issued the Bs/L on behalf of the shipowner Far Eastern Shipping Company. The Defendant did not object to the above bills of lading, and held that it had never authorized Richline Shipping Limited to issue the aforesaid bills of lading. But the Defendant did not adduce any evidence to support his view. From the collegial bench’s point of view, the Defendant did not dissent to the authenticity of the said Bs/L when the cargo in question was released, thus the said Bs/L could be taken as the basis for finding facts in this case. On the basis of the contents of the Bs/L, the Defendant shall be ascertained as the carrier in respect of the carriage of goods in controversy and Richline Shipping Limited was the agent of the carrier. The Defendant maintained that Unisco Zhanjiang was appointed by Sunwoo Shipping Co., Ltd. as the agent of m/v “Grigoriy Aleksandrov” at Zhanjiang. Thus Unisco Zhanjiang was the agent of Sunwoo Shipping Co., Ltd. rather than the agent of the Defendant. But the Defendant failed to provide the relative proofs. The Plaintiff raised objection to the proposition of the Defendant, and held that Sunwoo Shipping Co., Ltd. was the agent of the Defendant, and Unisco Zhanjiang had virtually accepted the appointment as the agent of m/v “Grigoriy Aleksandrov”. In this respect, the Plaintiff submitted the copies of Bs/L covering the second consignment of goods (i.e., 4,863.34 MT of Prime Steel Wire Rod) carried by m/v “Grigoriy Aleksandrov”, which showed that Sunwoo Shipping Co., Ltd. issued the Bs/L on behalf of Far Eastern Shipping Company. From the perspective of the collegial bench, the said Bs/L may be taken as the basis for finding the facts, and, based on the Bs/L, it shall be ascertained that Sunwoo Shipping Co., Ltd. was the agent of the Defendant. In view of the fact that the Defendant was the carrier in respect of the carriage of the goods in dispute as well as the shipowner stated in the Bs/L, Unisco Zhanjiang shall be deemed as having been appointed as the agent of m/v “Grigoriy Aleksandrov” at Zhanjiang, and that Unisco Zhanjiang was the agent of the Defendant. There was no evidence supporting the Defendant’s allegation that Unisco Zhanjiang was the agent of Sunwoo Shipping Co., Ltd., which shall not be sustained by this court. (III) The fact relating to the Plaintiff’s Title to Suit Hainan Hongjian Trade Co., Ltd. was incorporated on 27 October, 1995, its Registry number was (QQA) 28404121-7, and its legal representative was Liu Bingjian. On 28 May, 1997, the Plaintiff submitted to Hainan Industrial & Commercial Administrative Bureau an Application for Registration of the Company, which stated that the business life would last from 28 May, 1997 to 27 May 2017. The legal representative was Cai Qiulong and the shareholders (sponsors) included Hainan Hongjian Trade Co., Ltd. On 5 June, 1997, Hainan Hongjian Trade Co., Ltd. submitted to Hainan Industrial & Commercial Administrative Bureau an Application stating that Hainan Hongjian Trade Co., Ltd. was to set up a group company, in which Hainan Hongjian Trade Co., Ltd. would be the core enterprise, and that it applied for changing the name of Hainan Hongjian Trade Co., Ltd. into Hainan Glory Honour Group Co., Ltd. On 11 June, Hainan Industrial & Commercial Administrative Bureau granted approval to the application filed by Hainan Hongjian Trade Co., Ltd., and issued to the Plaintiff the Business License for Legal Corporation, based on which the date of incorporation of the Plaintiff was the same as that of the Defendant, i.e., 27 October, 1995. In the meantime, the Plaintiff also adopted the Registry number of Hainan Hongjian Trade Co., Ltd.[i.e., (QQA) 28404121-7]. Neither the Plaintiff nor the Defendant raised any objection to the foregoing facts, which shall thus be sustained by the collegial bench. The Plaintiff submitted the copy of Sales Contract No.SC/97-08-007, the original bank L/C No.LC51197124, the original telex copy of Bank Acceptance and the Statement of Modification of Subject Status of the Plaintiff unilaterally issued by the Plaintiff, alleging that Hainan Industrial & Commercial Administrative Bureau did not request Hainan Hongjian Trade Co., Ltd. to hand back the business license and company seal when issuing the business license to the Plaintiff. In order to maintain the consistency of business, the Plaintiff carried on a little amount of business activities in the name of Hainan Hongjian Trade Co., Ltd. within a period after June, 1997. Transaction, importation and taking delivery of 9,506.962 MT of Prime Steel Wire Rod were within such business activities. The Plaintiff entered into the Sales Contract No.SC/97-08-007 with Join Basis Limited in the name of Hainan Hongjian Trade Co., Ltd., and purchased 5,000 MT (+ 10%) of Prime Steel Wire Rod with diameters of 6.5mm and 8.0 mm respectively. After the contract was concluded, the Plaintiff, in the name of Hainan Hongjian Trade Co., Ltd., applied to the Industrial & Commercial Bank of China Hainan Branch for opening the L/C No.LC51197124 in favor of Join Basis Limited. Upon arrival of the cargo at the destination port, the Plaintiff requested Unisco Zhanjiang to deliver the goods against the original bills of lading again and again, but Unisco Zhanjiang refused to do so on grounds that the cargo had been seized by the marine police, and the cargo owners could not take delivery of the cargo before the marine police lifted the order of detention. In regard to the above evidence submitted by the Plaintiff, the Defendant confirmed that the copy of the Sales Contract No.SC/97-08-007 was consistent with its original, affirmed the authenticity of L/C No.LC51197124 and the telex copy of Bank Acceptance, and confirmed that the Industrial & Commercial Bank of China Hainan Branch had accepted payment of the amount of USD 2,424,275.31 under the L/C No.LC51197124. But he held that the Statement of Modification of Subject Status of the Plaintiff was issued by the Plaintiff himself, and could not serve as the basis for ascertaining the facts in this case. The collegial bench was of the view that the Defendant confirmed that the copy of the Sales Contract No.SC/97-08-007 was consistent with its original and affirmed the authenticity of L/C No.LC51197124 and the telex copy of Bank Acceptance. Thus the object of the Sales Contract No.SC/97-08-007 was just the 9,506.962 MT of steel wire rods in dispute, and the Industrial & Commercial Bank of China Hainan Branch accepted the L/C No.LC51197124 on 27 October, 1997. With respect to the Plaintiff’s allegation that Hainan Industrial & Commercial Administrative Bureau did not withdraw the business license and company seal of Hainan Hongjian Trade Co., Ltd., as Hainan Industrial & Commercial Administrative Bureau approved the incorporation of the Plaintiff, issued the Business License to the Plaintiff, continued to use the Registry number and date of incorporation of Hainan Hongjian Trade Co., Ltd. as those of the Plaintiff, and approved the application of Hainan Hongjian Trade Co., Ltd. for changing its name, thus the allegation of the Plaintiff was factually baseless and shall not be sustained. In addition, the Plaintiff also alleged that, in order to maintain the consistency of business, the Plaintiff concluded the sales contract with Joint Base Limited, applied to the bank for opening the L/C, obtained the Bs/L and declared the goods to the Marine Police Team and Zhanjiang Customs for importation in the name of Hainan Hongjian Trade Co., Ltd.. Given that the Plaintiff was the group company redeveloped on the basis of Hainan Hongjian Trade Co., Ltd. in which the latter being the core, and that the Defendant failed to adduce any evidence contrary to the Plaintiff’s proposition that he was engaged in the business activities in the name of Hainan Hongjian Trade Co., Ltd., the plaintiff’s proposition was reasonable and shall be sustained by this court. The Plaintiff submitted the Certification of Recognition of Hainan Enterprises issued by the Commercial & Trade Department of Hainan Province on 22 July, 1997, which stated that Hainan Glory Honour Group Co., Ltd. could enjoy the rights of the enterprises under Category (I) set forth in Article I of the Notice on More Freedom to Enterprises of this Province in Engaging in Import & Export Trade and the Relevant Issues issued by Hainan Provincial People’s Government, within the year in which it was registered and may engage in import & export trade in Hainan within the business scope approved by the Industrial & Commercial Administrative Bureau, and that the certificate shall remain valid until 30 June, 1998. The Defendant objected to the authenticity and source of such certificate, but he failed to adduce any evidence to the contrary effect. The collegial bench was of the opinion that such certificate could be taken as the basis for ascertaining the facts in this case in the absence of the evidence to be produced by the Defendant to the contrary effect. Thus the Plaintiff shall be deemed to have the rights of engaging in import & export trade in Hainan. (IV) The fact relating to the losses in this case On 10 May, 1998, CCIB Guangdong issued a Weight Inspection Certification in relation to the cargo in question, certifying that all the said cargo was stacked at the open storage of Zhanjiang Container Company upon discharge at the port, and that CCIB sent its staff to checked the quantity of the cargo on site between 15 April and 8 May, 1998, and that the quantity so counted was 8,815 bundles/ 8,541.96 tons. The inspection fee was RMB 2,852. On 12 May, 1998, CCIB Guangdong issued a Damage Inspection Certification in relation to the cargo in question, certifying that CCIB sent its staff to inspect the damage to the said cargo on site between 21 and 28 March, 1998, and found that the cargo was being corroded. Its surface was severely rusted and the bundles got loose. The depreciation rate of the aforesaid cargo was assessed at 18%, and the cargo sustained a loss of weight for 1,537.55 MT. The damage to the cargo could be attributed to prolonged storage at an open storage, and to the exposure to rain and sunshine as well as the humid weather. The inspection fee was RMB 75,950. On 30 November, 2000, Goods and Materials Information Office of Guangdong Province issued a Certification, indicating that the unit price of Russian steel wire rod with a diameter of 6.5mm was RMB 2,470-2,520 per ton, and that with a diameter of 8.0mm was RMB 2,450-2,500 per ton in October, 1997. The unit price of Russian steel wire rod with a diameter of 6.5mm was RMB 2,220-2,700 per ton , and that with a diameter of 8.0mm was RMB 2,200-2,250 per ton in May, 1998. Neither the Plaintiff nor the Defendant raised any objection to the foregoing facts, which shall be affirmed by this court. In support of his allegation that no cargo damage or cargo shortage was sustained by m/v “Grigoriy Aleksandrov” at the time of discharge on 6 November, 1997, the Defendant adduced the following 2 evidential documents: 1. Copies of the List of Damaged Cargo and the List of Shortlanded Cargo issued by Penavico Zhanjiang, which revealed that the steel wire rods discharged from m/v “Grigoriy Aleksandrov” were 18,212 bundles, 1,522 bundles and 5,816 bundles respectively. There was no remark of cargo damage or cargo shortage on the aforementioned copies of the List of Damaged Cargo and the List of Shortlanded Cargo. The copy of the List of Shortlanded Cargo was identical to the original List of Shortlanded Cargo in the file of case No. GHFSZ 145 (2000) heard by this court. The Plaintiff objected to the above documents, maintaining that the copies could not be accepted as the basis for findings, and that as the Defendant did not submit the concrete proof evidencing the issuance of the List of Damaged Cargo and the List of Shortlanded Cargo by Penavico Zhanjiang, their authenticity could never be determined. The collegial bench held the view that the copy of List of Shortlanded Cargo had been verified to be the genuine copy of the original, thus it could be taken as the basis for finding the facts in this case in the absence of evidence to be provided by the Plaintiff to the contrary effect. Hence, it shall be established that there was no cargo shortage in respect of the three consignments of cargo discharged from m/v “Grigoriy Aleksandrov” at Zhanjiang, which were in the quantity of 18,212 bundles, 1,522 bundles and 5,816 bundles respectively, totaling 25,550. As regards the copy of List of Damaged Cargo presented by the Defendant, it shall be dismissed insomuch as there was no other evidence to corroborate it. 2. Copy of the List of Detailed Articles issued by the Department of Public Security of Guangdong Province on 6 November, 1997, which showed that the Department of Public Security of Guangdong Province seized 25,550 pieces / 18,697.1 tons of steel wire rods on 6 November, 1997. The Plaintiff raised objection to the form and content of this evidence, holding that the facsimile copy could not be accepted as the basis for findings. The collegial bench was of the view that the copy of the List of Detailed Articles issued by the Department of Public Security of Guangdong Province could not be taken as the basis for finding the facts in this case in absence of evidence to be provided by the Plaintiff to the contrary effect. In order to support his allegation that the cargo actually taken delivery of at the terminal of Zhanjiang Port was inconsistent with that specificed in the Sales contract, the Plaintiff submitted the Quality Inspection Certificate issued by CCIB Guangdong in respect of the cargo in dispute on 31 March, 1998, stating that CCIB Guangdong sent its staff to make an on-site inspection of the said cargo, the outcome of which revealed that the cargo was manufactured by three different plants and packed in three different ways, among which 5,598 bundles / 2,922 tons were manufactured by CHELIABINSK with a weight of about 520 KG per bundle, 1,294 bundles / about 3,726 tons were manufactured by an unknown plant with each bundle being lashed by crude round wire and composed of 8-12 small bundles weighing about 3 tons per bundle and about 300 kg per small bundle, and 1,923 bundles / about 1,607 tons were manufactured by ZAPSIB with a weight of 800 KG per bundle. Upon counting, it was found that totally 5,333 tons of the said cargo was not up to the requirements for the weight of bundles and place of origin set forth in the Sales Contract No.SC-97-08-007. The inspection fee was RMB 46,656. The Defendant did not raise objection to the authenticity of such inspection certificate, but objected to the contents thereof without adducing any supporting document. The collegial bench was of the opinion that in the absence of evidence to be furnished by the Defendant to contrary effect, the aforesaid inspection certificate could be taken as the basis for finding facts and sufficed to prove that among those taken delivery of by the Plaintiff, 5,333 tons of the said cargo was not up to the requirements for the weight of bundles and place of origin set forth in the Sales Contract No.SC-97-08-007. In regard to his proposition that he sustained a loss of quality at RMB 60/MT as a result of the inconsistency between the cargo he actually took delivery of and the standard set in the Sales Contract No.SC-97-08-007 for the weight per bundle and place of origin, the Plaintiff failed to provide the calculation basis for the aforesaid loss of RMB 60/MT. The collegial bench held the view that the aforementioned calculation adopted by the Plaintiff was factually groundless and shall thus be dismissed. The Plaintiff submitted the original versions of the sales contracts for industrial & mineral products No.HJ970911SS & No.HJ980520SS concluded between the plaintiff and Xiashan Financial & Trade Enterprise Co., Zhanjiang and Xiashan District Pingtong Trade Co., Ltd., Zhanjaing on 15 September, 1997 and 20 April, 1998 respectively. It was agreed in Contract No.HJ970911SS that the unit price of steel wire rods with diameters of 6.5mm and 8.0mm was RMB 2,770/MT, and it was agreed in Contract No. HJ980520SS that the unit price of steel wire rods with diameters of 6.5mm and 8.0mm was RMB 2,030/MT. On this basis , the Plaintiff alleged that he suffered a loss due to the fall of market prices and that the loss should be calculated at RMB 740/MT. The Defendant held that Hainan Glory Honour Group Co., Ltd. had been closed down by the time the said contracts were signed, thus the said contracts should be null and void. The collegial bench held that as the said two contracts were the originals, they could be taken as the basis for ascertaining the facts in this case in the absence of the evidence to be produced by the Defendant to the contrary effect. Thus it shall be ascertained that there was a difference of RMB 740 between the unit price of steel wire rod with a diameter of 6.5mm and that of 8.0mm agreed upon in the Sales Contracts for Industrial & Mineral Products No.HJ970911SS & No.HJ980520SS. In support of his allegation that he had sustained the loss of fine for delayed Customs declaration, the Plaintiff submitted three Special Invoices of Customs Administrative & Institutional Charges, which showed that Harbin Oriental International Trade Co., Ltd. paid to Zhanjiang Customs the fine for delayed Customs declaration in the amount of RMB 1,291,199 on 30 April, 1998. The Defendant made confirmation of the authenticity of the said three documents, but held that such evidence could not prove that the Plaintiff had actually suffered the loss of fine for delayed Customs declaration. The collegial bench held that the said three documents could only attest that Harbin Oriental International Trade Co., Ltd. paid to Zhanjiang Customs the fine for delayed Customs declaration in the amount of RMB 1,291,199 on 30 April, 1998. The Plaintiff submitted a copy of Special Bill for Payment of Fine for Delayed Payment of Customs Dues issued by Zhanjiang Customs on 24 July, 1998, holding the view that the Plaintiff paid to Zhanjiang Customs RMB 140,957.92 as the fine for delayed payment. The Defendant averred that the said Bill was merely a facsimile copy whose authenticity could never be affirmed. The collegial bench held that as the foregoing evidence was merely a copy, thus it could not be taken as the basis for finding the facts in this case in the absence of evidence to be provided by the Plaintiff to the contrary effect. The Plaintiff presented the original Receipts issued by CCIB Zhanjiang on 24 March, 1998 and by the Marine Police Team on 30 April, 1998. The Receipts revealed that Hainan Hongjian Trade Co., Ltd. paid to CCIB Zhanjiang an inspection fee of RMB 84,431 on 24 March, 1998 and paid to the Marine Police Team the handling charges, open storage charges and inspection fee totally amounting to RMB 718,662.30 on 30 April, 1998. The Defendant dissented to the said documents without adducing any proof to the contrary effect. The collegial bench held that such evidence could be taken as the basis for ascertaining the facts in this case in the absence of the evidence to be produced by the Defendant to the contrary effect. Thus the facts stated therein shall be sustained. The Plaintiff alleged that he had paid a lawyer fee of RMB 700,000, but did not produce any evidence to support his allegation. The Defendant objected to such claim of the Plaintiff. The collegial bench took the view that the foregoing allegation of the Plaintiff was not supported by evidence and shall thus be dismissed. (V) Other Facts On 12 March, 1999, Haikou Maritime Court accepted the Application for Property Preservation Prior to the Proceedings filed by Hainan Hongjian Trade Co., Ltd., in which the court was asked to freeze RMB 11,000,000 and its interest obtained by Fesco under the Civil Judgment No. QJZZ 99 (1998)handed down by the Higher People’s Court of Hainan Province and deposited in the account of Haikou Maritime Court. On 15 March, Haikou Maritime Court ruled that the application made by Hainan Hongjian Trade Co., Ltd. be approved and that the said sum be reserved. On 18 March, Hainan Hongjian Trade Co., Ltd. brought a lawsuit against Fesco before Haikou Maritime Court. On the following day, Hainan Glory Honour Group Co., Ltd. issued an Application for alteration of the Name of the Plaintiff and the name of the Applicant for Property Reservation Prior to the Proceedings, requesting that Hainan Glory Honour Group Co., Ltd. be substituted by the Applicant for property reservation and by the Plaintiff on the grounds that Hainan Hongjian Trade Co., Ltd. had changed its name to Hainan Glory Honour Group Co. Ltd.. Hainan Glory Honour Group Co. Ltd. submitted the Statement of Complaint to Haikou Maritime Court, who approved its application and entertained this case. On 28 December 2000, the collegial bench confirmed upon consulting with Judge Feng Minggang of Haikou Maritime Court that it was on 19 march, 1999 that the Plaintiff submitted to Haikou Maritime Court the Statement of Complaint and the Application for alteration of the Name of the Plaintiff and the name of the Applicant for Property Reservation Prior to the Proceedings. At the court hearing, the Defendant submitted that the Plaintiff submitted the Statement of Complaint to Haikou Maritime Court after 14 April, 1999 rather than 19 March, 1999 on the grounds that Hainan Hongjian Trade Co., Ltd. was the Applicant stated in the Ruling on property reservation when Haikou Maritime Court served it on the Defendant on 14 April, 1999. Fu Diyun, the agent ad litem acting for the Defendant proceeded to Haikou Maritime Court on the same day to read over the court files, she found neither the Statement of Complaint nor the Application filed by the Plaintiff. The Defendant raised dissension on the title to suit of Hainan Glory Honour Group Co., Ltd. on 21 April. As such allegation of the Defendant was in conflict with the facts, it shall be dismissed by this court. Both the Plaintiff and the Defendant agreed that this case should be governed by the law of China. It was held by the collegial bench that this case was a dispute over damages arising under the contract of carriage of goods by sea. Both the Plaintiff and the Defendant chose the law of China as the governing law. In the light of the stipulations of Article 145 of General Principles of Civil Law of the PRC, that the party to an action involving foreign elements may choose the law applicable to the dispute arising out of the contract, the law of the PRC should govern the substantive dispute in this case. The Plaintiff was a group company redeveloped on the basis of Hainan Hongjian Trade Co., Ltd.. On 11 June, 1997, the Industrial & Commercial Administrative Bureau of Hainan Province approved the application for changing name filed by Hainan Hongjian Trade Co., Ltd., and issued to the Plaintiff the Business License of Legal Corporation, in which the registry number and date of incorporation of Hainan Hongjian Trade Co., Ltd. continued to be used. Up to then, Hainan Hongjian Trade Co., Ltd. ceased to exist, and was no longer qualified as a civil subject. In order to import the 9,506.962 tons of steel wire rods in question, the Plaintiff concluded the sales contract, applied for opening the letter of credit and obtained the letters of credit in the name of Hainan Hongjian Trade Co., Ltd., so as to be consistent in business operation. Given that Hainan Hongjian Trade Co., Ltd. had been closed down by the time the Plaintiff was engaged in the business activities involved in this case in the name of Hainan Hongjian Trade Co., Ltd., the rights and obligations of Hainan Hongjian Trade Co., Ltd. in this case shall be succeeded by the Plaintiff. As the Plaintiff had a direct interest in the present suit, he had the title to sue in this case. The Defendant argued that the Plaintiff was in illegal possession of the bills of lading, thus he could not exercise the rights thereunder. In view of the fact that the Defendant did not object to the bills of lading at the time of release of the cargo in dispute, and that the Marine Police Team and Zhanjiang Customs considered the cargo in dispute was lawfully imported before they released the cargo from detention, therefore the aforesaid argument of the Defendant had neither factual nor legal basis to support. Thus it shall be dismissed by this court. The agent of the Defendant, Unisco Zhanjiang, declared to Zhanjiang Harbor Master in the Application for Entry of Foreign-going Ship that m/v “Grigoriy Aleksandrov” was laden with 10,000 MT of imported steel wire rods. After the Marine Police Team checked up the import documents of the cargo in dispute submitted by the Plaintiff, they agreed to hand over the cargo of the Plaintiff to the Customs for disposal, and the Customs released the cargo of the Plaintiff in the end. Therefore, it shall be ascertained that Unisco Zhanjiang had made an import declaration of the 9,506.962 tons of steel wire rods to Zhanjiang Harbor Master, the Marine Police Team and Zhanjiang Customs respectively. Given that Unisco Zhanjiang had made an import declaration of the cargo of the Plaintiff, failure of Unisco Zhanjiang to declare the other two consignments carried by m/v “Grigoriy Aleksandrov” did not prevent the Plaintiff from duly taking delivery of his cargo in accordance with law. Given that failure of the Defendant to declare other imported cargo had no causal connection with the failure of the Plaintiff to duly take delivery of his cargo, the Plaintiff could not demand that the Defendant make compensation for the economic losses resulting from his failure to duly take delivery of the cargo, inclusive of the loss due to the fall in the market price claimed by the Plaintiff, loss of interest accrued from cargo payment effected by the Plaintiff, loss of fine for delayed Customs declaration paid by Harbin Oriental International Trade Co., Ltd. to Zhanjiang Customs, and the loss of overdue open storage charges incurred. Presiding Judge Zhan Simin and Judge Huang Weiqing took the view that, basing on the Weight Inspection Certificate issued by CCIB Guangdong, the Plaintiff alleged that there was a cargo shortage of 965.002 MT under the Bs/L in controversy. It was stated in the Weight Inspection Certificate that the Plaintiff had taken delivery of 8,815 bundles of cargo, with 9,397 bundles less than the quantity stated in the Bs/L, while the quantity of cargo discharged from m/v “Grigoriy Aleksandrov” was in line with that stated in the Bs/L. Thus the cargo shortage of 9,397 bundles / 965.002 tons did not occur during the period of responsibility of the carrier. Besides, the Plaintiff also alleged that 1,537.38 tons of cargo had sustained damage on the basis of the Damage Inspection Certificate issued by CCIB Guangdong. The certificate revealed that the damage to the cargo could be attributed to prolonged storage of the cargo at an open place, and exposure to the rain and the sunshine as well as humid weather. Hence, the damage to the cargo in the quantity of 1,537.38 tons did not occur during the period of responsibility of the carrier either. Pursuant to Article 46 of Maritime Code of the PRC, which provides that “The responsibility of the carrier with respect to non-containerized goods covers the period during which the carrier is in charge of the goods, starting from the time of loading of the goods onto the ship until the time the goods are discharged therefrom”, the Defendant shall not be liable for the aforementioned cargo shortage or cargo damage claimed by the Plaintiff, which did not occur during the period of responsibility of the carrier in respect of non-containerized cargo. The Plaintiff alleged that among the cargo in question, 5,619.96 tons of steel wire rods did not meet the requirements in respect of manufacturers and entries in Bs/L as set forth in the Bs/L and that consequently the Plaintiff suffered a loss of quality at RMB 60/ton. When the Marine Police Team appointed the Auction House of Guangdong Province to sell by auction the other two consignments of cargo carried by m/v “Grigoriy Aleksandrov”, i.e., 4,863.34 tons and 4,394.70 tons, the Marine Police Team merely advised Zhanjiang Port Authority and Zhanjiang Container Company to hand over 4,500 tons of steel wire rods with a diameter of 6.5mm and 4,500 tons of steel wire rods with a diameter of 8.0mm to the Auction House of Guangdong Province for auction sale, but did not set special requirements with regard to the manufacturers and packaging. Therefore, it was no wonder that the Plaintiff discovered the package and manufacturers of the cargo were inconsistent with the requirements stated in the Bs/L. Besides, the Plaintiff did not provide the calculation basis in regard to the loss in quality of RMB 60/ton. The claim in this connection shall thus be rejected by this court. Since none of the loss of cargo shortage, loss of cargo damage and loss in quality claimed by the Plaintiff were sustained by this court, the Plaintiff’s claim for inspection fees and lawyer’s fee shall be dismissed by this court. On 26 March, 1998, the agent of the Defendant Unisco Zhanjiang refused to go through the formalities for delivery of cargo to the Plaintiff under the circumstance that the Marine Police Team had agreed to hand over the cargo to the Customs for disposal. Thus the Defendant was in breach of contract by that time and jeopardized the legitimate rights and interests of the Plaintiff. Since the Plaintiff did not adduce evidence to prove that the specific scope of and calculation basis for the losses sustained by the Plaintiff counting from 26 March, 1998 until the Defendant agreed to release the cargo, and from 30 March to the date of making declaration to Zhanjiang Customs, this court had no way to support the plaintiff’s claim for such losses. The Defendant submitted that the action brought by the Plaintiff before Haikou Maritime Court had exceeded the one-year time limitation. It was on 20 March, 1998 that the Marine Police Team, upon checking up the import documents of the cargo in dispute presented by the Plaintiff, advised Unisco Zhanjiang to release the cargo in dispute from detention and it was not until then that the Plaintiff was able to ask the Defendant to deliver the cargo. Thus the time limitation for this suit should start from 20 March 1998. It was on 19 March 1999 that the Plaintiff submitted to Haikou Maritime Court the Statement of Complaint and the Application for Alteration of the Names of the Plaintiff and the Applicant for Property Reservation Prior to the Proceedings. Therefore, the one-year time limitation set forth in Maritime Code of the PRC had not expired, thus the allegation that the defence filed by the Defendant against the claim filed by the Plaintiff had been time-barred shall be dismissed. Acting Judge Huang Qingnan took the view that as As the carrier in respect of the carriage of goods in dispute, the Defendant was obligated to deliver the cargo to the holder of the bill of lading, i.e., the Plaintiff. In normal circumstances, the carrier should be responsible for keeping the cargo in good order and condition before delivery thereof and the withdrawal of the bill of lading albeit the cargo had been discharged off the vessel and stored up at the port. Otherwise he should be liable for compensation. His argument was that the Port was usually entrusted by the agent of the carrier at the destination port to discharge the cargo and to exercise the obligation of keeping the cargo, and the Port could not deliver cargo without the consent of the agent of the carrier. The cargo was still under the custody and control of the carrier at that time. But in the present suit, the Defendant had declared the cargo of the Plaintiff for importation, thus failure of the Plaintiff to take delivery of cargo had nothing to do with the Defendant. Besides, the port was appointed by the Marine Police Team to keep the cargo, which was under the custody of Marine Police Team, thus the Plaintiff was disentitled to ask the Defendant to take all risks respecting the cargo during the period of custody by the Marine Police Team when the Defendant had declared the cargo of the Plaintiff for importation. Therefore, the claim for cargo shortage and cargo damage filed by the Plaintiff shall be rejected. Other opinions of Huang Qingnan were in line with those of the other two members of the collegial bench. To sum up the above, a judgment is hereby entered in accordance with the provisions of Article 145 of General Principles of Civil Law of the PRC and Article 46 of Maritime Code of PRC, as follows: The claim filed by the Plaintiff Hainan Glory Honour Group Co., Ltd. against the Defendant Far Eastern Shipping Company shall be dismissed. The acceptance fee of RMB 86,109 shall be borne by the Plaintiff. Any party who is not satisfied with this judgment may submit to this court within 15 days for the Plaintiff and within 30 days for the Defendant the Statement of Appeal with copies according to the number of the opposing parties. The appeal shall be instituted with the Higher People’s Court of Guangdong Province Presiding Judge: Zhan Simin Judge : Huang Weiqing Acting Judge : Hunag Qingnan (Official Chop of Guangzhou Maritime Court) April 3, 2001 Certified true copy Clerk : Xie Lei

HIGHER PEOPLE’S COURT OF HUBEI PROVINCE PEOPLE’S REPUBLIC OF CHINA CIVIL JUDGMENT No.E-Jing-Zhong-41 , 2001 Appellant (Defendant in the f1rst instance trial): Raw Coal Department of Mining Company of Dianjiang, Chongqing (hereinafter referred to as Mining DepaHment) Domicile: NO.l0l of Renmin Road,west, Guixi Town, Dianjiang County, Chongqing Legal Representative:Yuan Yonghuai, manager of Mining Department Appe1lee (Plaintiff in the first instance trial): Chang]iang Ship Company of Chongqing (hereinafter referred to as Ship Company). Domicile : NO.2 of Shanxi Road, Yuzhong District, Chongqing Lega1 Representative: He Shengping, genera1 manager of Ship Company Agent ad litem: Wu Lunxiang, legal adviser to Ship Company Appellee (Plaintiff in the first instance trial): Changshou Gangbu Company of Chongqing Port(hereinafter referred to as Gangbu Company). Domicile: NO.l3 of Linjiang Road, Fengcheng Town, Changshou County ,Chongqing Legal Representative: Hong Qiyi, manager of Gangbu Company Agent ad litem: Jiang Zhiqin, Lawyer of NO.1 Law Off1ce of Chongqing Agent ad litem: Zhou Liangping, lawyer of NO.l Law Off1ce of Chongqing Defendant in the first instance tria1: Yuan Yonghuai, male, 51 years old, free trader. Domicile: NO.3 of Commercial Street, Guixi Town, Dianjiang County, Chongqing Agent ad litem: Cao Dirong, cadre of Justice Bureau of Dianjiang, Chongqing Agent ad litem: Long Xianming, cadre of Mining Company of Dianjiang, Chongqing The appel1ant Mining Department, refusing to accept the civil judgment of Wuhan Maritime Court filed No. WU-HAI-FA-WAN-SHANG-33,2000 over the dispute about the payment under the contract of carriage of goods by water , made an appeal to this court. This court duly formed a collegial panel and held open hearings for this case. The legal representative Yuan Yonghuai of Mining DepaHment, the agent ad litem Wu Lunxiang, the appellee Ship Company, the agent ad litem of the appellee Gangbu Company, the defendant in the first instance trial Yuan Yonghuai and his agent ad litem appeared in court. The cases has now been concluded . The first instance trial determined that Ship Company and Mining Department as well as Yuan Yonghuai signed a transportation contract on January l4, l995.The contract stipulated that Ship Company was to ship 30,000 tons of coal of Mining Department from Changshou to Nantong Port. On January 9,1996, the two parties signed a contract of carriage of goods by water, which stipulated that Ship Company was to ship 50,000 tons of coal of Mining Department at RMB87-89 per ton from Changshou Port to Jiangyin and Nantong Port. On December 18, l998, Ship Company signed another contract of carriage of goods by water with Mining Department, which stipulated that Ship Company was to ship 30,000 tons of coal of Mining Department at RMB68-70 per ton from Changshou port to Zhenjiang and Nantong Port and stated in special clause No.6 that the consignor shall pay off the freight owed by him gradually by the end of l999. Ship Company shipped the coal to the port of arrival as stipulated in the contracts and handed them over to the consignee. On September 29,1999, Ship Company urged Mining Department and Yuan Yonghuai to pay the freight, and Mining Department and Yuan Yonghuai sent a letter of confirmation in his own handwriting about the transportation agreement to Ship Company. The first instance trial also determined that after Chongqing City became a municipality directly under the central government, the former Raw Coal Department set up by Mining Company of Dianjiang, Sichuan Province was changed into Raw Coal Department of Mining Company of Dianjiang,Chongqing, which was under personal contractual management of Yonghuai. The first instance trial held that the contracts for carriage of goods by water between Ship Company and Mining Department as well as Yuan Yonghuai were legitimate and valid. Ship Company fulfilled his duty of shipping the goods,hence he obtained the right to ask for freight. Mining Department and Yuan Yonghuai should undertake the obligation to pay the freight for consigning the coal for shipment. According to the provisions of the Rules On The Administration of Waterway cargo Transportation issued by the Communications Ministry, Gangbu Company was the agent of Ship Company, hence the consequence of his act should be borne by Ship Company. In accordance with Article l06.1 of the General Principles of Civil Law of the People's Republic of China, Article 130 of the Civil Procedure Law of the People's Republic of China, the court decided as follows: Raw Coal Department of Mining Company of Dianjiang, Chongqing and Yuan Yonghuai shall jointly pay Changjang Ship Company the freight Of RMB86l,462.88 and shall undertake to pay the interest from September 29, 1999 to the day of making payment, according to the annual interest rate of the People’s Bank of China, both of which should be paid off without installment within l0 days upon the coming into force of this judgment. The court acceptance fee in the amount of RMB 8,6l5,other costs of the action RMB 2,584,the total sum being RMB11,199, shall be paid by Mining Department and Yuan Yonghuai jointly. Refusing to accept the judgment made by the first instance trial, Mining Department instituted an appeal to this court claiming that Yuan Yonghuai didn’t sign any contract for raw coal transportation with Ship Company and Gangbu Company, nor did he issue a due bill, so Yuan Yonghuai and Mining Department were not the legal defendants; Ship Company and Gangbu Company didn't present the proof of their owing RMB861,462.88, nor did the judgment state the facts of proof of their owing RMB861,462.88, so Yuan Yonghuai and Mining Department didn't owe Ship Company and Gangbu Company RMB86l,462.88. Mining Department requested to withdraw the first instance judgment in accordance with law. Ship Company and Gangbu Company argued that the grounds for appeal by Mining Department and Yuan Yonghuai were not tenable. Their default freight had been accumulated over years. Based on the bill of arrears and shipping documents of carriage of goods by water, it was enough to determine that Mining Department and Yuan Yonghuai should undertake the liability for payment. They requested to dismiss the appellate petition for appeal submitted by Mining Department and Yuan Yonghuai. In order to claim that Mining Department and Yuan Yonghuai owed freight, Ship Company presented the following evidence in the second instance trial: Evidence l: Elven pieces of waterway cargo transport invoices issued by Chongqing Port stating that the port of discharge was Changshou, and the consignor was Mining Department, all of which were signed and sealed by Yu Zheming in the column “consignor”. This was to prove that Mining Department and Yuan Yonghuai didn't pay the freight for consigning the goods for shipment at Changshou Port. Evidevce 2: The agreement of repayment signed by Mining Department and Gangbu Company on January 14,1995. The agreement stated that Mining Department owed the freight of RMB843,187.30 before December 31, 1994. After negotiations, he would repay RMB300,000 by the end of l995 and pay off the remainder by the end of l996. This evidence proved that Mining Department and Yuan Yonghuai confrmed that they owed the freight. Evidence 3: Two contracts for carriage of goods by water signed by Mining Department and Ship Company in 1996 and 1999. The special clause No.3 of the contract of 1996 stipulated that the freight shall be paid per lighter, and the former debts shall be paid by RMB20,000 per lighter together with the payment of the existing freight, which should be entirely paid off by the end of l996. The special clause No.6 of the transportation contract of 1999 stipulated that the freight owed by Mining DepaHment shall be paid off gradually by the end of 1999. This evidence proved the Mining Department and Yuan Yonghuai didn't pay their default freight. Evidence 4:The receipt produced on April 28, 1995 by You Chuanzhong, the person in charge of business of Mining Department. The receipt stated that on April 28,1995, Yuan Yonghuai asked You Chuanzhong to take six freight receipts from Changshou Port station, which showed the total freight that hadn't been paid yet was RMB368,452.20. This evidence proved that Yuan Yonghuai and Mining Department took away 6 receipts for freight payment without paying the freight. Ship Company requested them to pay the freight on the basis of the delivery bill (cargo invoices) as evidence for effecting payment thereof . Mining Department and Yuan Yonghuai didn't express disagreements over the above evidence, but they held that only due bill and receipt bill of shipping document could prove that they owed the freight. In order to claim that it didn't owe Ship Company freight, Mining Company presented the following evidence in the second instance trial: Evidence 1:The contract of carriage of goods by water for 1998 signed by Mining Department and Ship Company. The contract stated that the way of settlement of freight was to pay the freight once per lighter where the port of shipment was Wanxian and the port of arrival was Nantong. This evidence was used to prove that the way of settlement of freight was to pay per lighter, so the freight had been paid off. Evidence 2: The supplementary agreement of coal transportation signed by Mining Department and Ship Company on July 2,1998. The third article of the agreement provided that if Mining Department didn’t pay off the freight to Ship Company , Ship Company had the right to sell the coal of Mining Department at the market price of the port of arrival to compensate for the freight owed. This evidence was used to prove that if there were any freight due, the coal would have been sold for compensation, so the freight had been paid off. Evidence 3:Six pieces of drafts for freight paid by Mining Department to Ship Company: 1)a remittance of RMBl52,475.20 on February 5, 1996; 2)a remittance of RMB126,756.36 on February 7, 1996; 3)a remittance of RMB325,0l6.49 on September 6, 1996;4)a remittance of RMB8l,942 on February l7,1997;5)a remittance of RMB97,354 on May 13, 1997;6)a remittance of RMB77,740 on May l4, 1998. This evidence proved that an amount of RMB861,284.05 for freight had been paid. However, compared with the amount of RMB861,462.88 they owed which was claimed by Ship Company and Gangbu Company in the statement, there was still an amount of RMB178.83 owed by Mining Department. Ship Company and Gangbu Company didn't raise objection over evidence l and evidence 2 listed above. However, they argued that Mining Department and Yuan Yonghuai didn't pay off the freight according to the contracts, and the coal wasn't sold for compensation either. Mining Department and Yuan Yonghuai affirmed that the coal wasn't sold for compensation. As for Evidence 3, Ship Company and Gangbu Company claimed that none of the six remittances adduced as evidence by Mining Department was for the payment of the freight owed. Firstly, the remittances listed in l), 4) and 6) were for the freight of Wanxian Port, but what this case requested was the freight owed to Changshou Port, so they had nothing to do with this case. Secondly, Hejie Subsidiary, under Changshou Branch of Industrial and Commercial Bank of China presented evidence which proved the receiver of the 5th remittance was not Ship Company. Thirdly, Ship Company's detailed statement of account receivable in 1995, Statistics About the Shipping and Settlement of Literage of February 29, 1996, accounting vouchers of September 9, 1996, teller account of bank deposit in 1996 and relevant waterway cargo shipping documents proved the second remittance was for the freight of the ships numbered J0528 of December 28, 1996, J0510 of December 30,1995 and J05 l4 of January 20, l996; the third remittance was for the freight of ships numbered J0l288 of September 10,1995, J0508 of June 28, 1996 and J01073 and J012l8 of August 22,1996. AIl the freight paid by Mining Department was for what occurred after the repayment agreement of January 14, 1995. Based on the appellate petitions and arguments in the pleadings of both parties together with the evidence produced and the cross-examination made, it was held that the dispute between the two parties of this case focused on whether Mining Department and Yuan Yonghuai were the legal defendants in this case; whether Ship Company's claim that Mining Department and Yuan Yonghuai owed freight as well as the sum of default freight were tenable or not. This court he1d that the yearly contracts for carriage of goods by water and waterway cargo shipping documents signed by Mining Department, Yuan Yonghuai and Ship Company were true reflections of their intention. The transportation contracts and shipping documents were legitimate and valid, and the re1ationship of carriage of goods by water between the two parties was tenable. The carrier Ship Company fulfilledd his obligation of shipping the goods, and the consignor Mining Department and Yuan Yonghuai should pay the freight to Ship Company. Since Yuan Yonghuai signed transportation contracts on behalf of Mining Department, and Yuan Yonghuai didn't raise objection over the decision of the first instance trial that Mining Department was under personal contractual management by Yuan Yonghuai, it was proper to regard Mining Department and Yuan Yonghuai as the defendants in this case. The appellate grounds of Mining Department that Yuan Yonghuai and Mining Department were not the legal defendants in this case was not tenab1e. By using the relevant transportation contracts, shipping documents and repayment agreement. As evidence, Ship Company claimed that Mining Department and Yuan Yonghuai owed them freight. After cross-examination, they turned out to be true, hence the fact that Mining Department and Yuan Yonghuai owed freight was tenable. Mining Department and Yuan Yonghuai argued that the way of settlement of freight provided for in the contracts was to pay per lighter or to compensate for the freight with coal, and there weren’t due bills in existence, all of these proved that no freight was owed. However, the repayment agreement was signed prior to the contracts that stipulated the way of freight payment, and Mining Department and Yuan Yonghuai couldn't provide the proof of paying the freight owed afer repayment agreement. While after cross-examination, none of the payments made by the six remittances was for the freight spectified by repayment agreement. Besides, both the transportation contracts of 1996 and 1999 stated that Mining Department owed freight, and Mining Department and Yuan Yonghuai confirmed that the coal wasn't used for compensation for the freight due. Hence the grounds for appea1 of Mining Department and Yuan Yonghuai that no freight was owed weren’t tenable, and it will not be supported by this court. Ship Company claimed that the amount of payment owed was based on his company's financial account but was not confirmed by the other party, so this court determines the repayment agreement confirmed by both parties as the evidence of the amount of freight due. In the first instance trial, some facts were not determined express1y, but the laws were applied correctly. In accordance with Article 153.1.3 of the Civil Procedure Law of the People's Republic of China, this court decideds as follows: l.Withdraw the civil judgment of Wuhan Maritime Court filed WU-HAI-FA-WAN-SHANG-33, 2000; 2.Raw Coal Department of Mining Company of Dianjiang, Chongqing and Yuan Yonghuai pay Changjiang Ship Company of Chongqing the freight of RMB843,187.30 together with interest(to be calculated according to the corresponding loan interest rate of People's Bank of China from September 29, 1999 to the day of making payment), which should be paid off without installment Within l0 days upon the coming in force of this judgment. For the first instance trial of this case, the court acceptance fee was RMB8,615, other costs of the action RMB2,584, and the total sum was RMB 11,199, of which Mining Department and Yuan Yonghuai shall pay RMB 10,079 and Ship Company RMB 1 ,120. For the second instance trial of this case, the court acceptance fee was RMB8,615, of which Mining Department and Yuan Yonghuai shall jointly pay RMB7,753 and Ship Company shall pay RMB862. This judgment is f1na1. Presiding Judge: Du Hansheng Judge : Qian Jinfen Acting Judge: Wang Shuisheng October 24, 2001 Certified true copy Clerk :Wang Ying

DALIAN MARITIME COURT PEOPLE’S REPUBLIC OF CHINA CIVIL JUDGMENT Plaintiff: FORTUNE UNIVERSAL INC. Address: 2506 Florence Ave, Arcadia, California, United States of America. Legal representative: Shao Xiangchun, Chairman of the Board of Directors. Agent ad litem: Mao Yanguo, lawyer of Dalian Huaxia law office. Defendant: DALIAN JIHANG SHIPPING AGENCY CO., LTD. Address: A-4016, Hengtong Edifice, Zhigong Street, Zhongshan District, Dalian City, People’s Republic of China. Legal representative: Guo Xiuli, general manager. After this court entertained the cases of dispute over compensation for freight losses with respect to an agency contract between the Plaintiff, FORTUNE UNIVERSAL INC. (hereinafter referred to as Plaintiff), and the Defendant, DALIAN JIHANG SHIPPING AGENCY CO., LTD. (hereinafter referred to as Defendant), Judge Xiao Yan, Judge Bu Yuchun and Judge Shen Yanjun constituted the collegial panel legally and heard the case in open sessions. The Plaintiff’s agent ad litem Mao Yanguo and the Defendant’s legal representative Guo Xiuli attended the court hearing. Now the case has been concluded. The Plaintiff alleged that in December 2000, JILIN ZHONGGU INTERNATIONAL CO., LTD. (hereinafter referred to as ZHONGGU CO.) entrusted the Defendant on behalf of the Plaintiff with booking and handling formalities for the carriage of 3 containers of mung beans from Dalian to USA. The Defendant accepted the entrustment and arranged to have the cargo loaded on m/v Chang Jin Tianjin, which departed on January 3rd, 2001. The Plaintiff agreed to and accepted the suggestion of the Defendant that the freight be paid to the Defendant and then transmitted to the carrier because in this way the Defendant could get a cheaper price. The Plaintiff remitted the freight US$4890 to the Defendant on January 16th, and entrusted them to pay to the carrier. The Defendant received the money but didn’t pay to the carrier as they promised. On January 17th, the Plaintiff received the B/L from the Defendant. m/v Chang Jin Tianjin arrived at the Port of Long Beach, USA on January 23rd, 2001. When the Plaintiff was going to take delivery of the cargo, the agent of the carrier demanded them to pay freight because the carrier hadn’t received it at the port of departure and there was a “Freight forward” clause in the B/L. So the Plaintiff paid the freight US$4890 again. As the Defendant didn’t carry out their promise to pay the freight to the carrier, the Plaintiff phoned and faxed to them many times to ask for the freight, but they didn’t reply. So the Plaintiff proceeded against the Defendant and requested that they compensate for the Plaintiff’s freight and other relevant losses. The Defendant pleaded that it was Hu Hongliang, but not the Plaintiff, that entrusted the Defendant with booking and handling formalities for the carriage. Hu Hongliang acted for himself. The Defendant had neither faxed to the Plaintiff or ZHONGGU CO., nor promised to pay the freight to the carrier. Though the fax message received by the Plaintiff and ZHONGGU CO. showed that the sender’s fax number was the Defendant’s, maybe it was Hu Hongliang who used the Defendant’s fax machine. Because the Defendant’s accountant Li Jun had quit the job and they couldn’t find him, they couldn’t identify Li’s signature. Even if the signature were true, the fax was invalid for lack of the Defendant’s stamp. The Defendant collected a list of Hu Hongliang’s debts that showed the Plaintiff’s US$4890 was paid to discharge a debt for Hu but not paid for freight. It was in the presence of the Defendant that Hu Hongliang called the Plaintiff and asked them to remit the money to the Defendant. The Defendant didn’t know what Hu said to the Plaintiff. After offsetting Hu’s debt of RMB40587, the remaining amount of the freight was no more than RMB2261.79. The balance should be returned to Hu, but not to the Plaintiff. The Plaintiff’s assertion that the money was the freight to the carrier was groundless. It should be rejected. The Plaintiff argued against the pleadings of the Defendant, saying that Hu Hongliang was irrelevant to this case. Even if he played a role, he acted for the Defendant. It was established by the court after the examination and hearing that the Plaintiff and ZHONGGU CO. concluded a contract for the sale of goods on December 22nd, 2000. They agreed in the contract that ZHONGGU CO. sells 60MT of mung beans to the Plaintiff under the term F.O.B. Dalian; Payment: T/T; Destination port: Los Angeles, USA. The Plaintiff entrusted ZHONGGU CO. for booking, packing and Customs Procedures and inspection. ZHONGGU CO. entrusted the Defendant and the Defendant accomplished them. On December 28th, ZHONGGU CO. received a fax message from the Defendant’s fax machine that indicated: “The arrangements were as follows: M/V Chang Jin Tianjin, V.053E; B/L SITD053E803/20X3; Destination Port: LONG BEACH; Departure on January 3rd, 2001; Description of Goods: Mung Beans; Quantity: 60MT; Freight: US$1630X3=US$4890.00. Please transmit the fax message to the American company before the festival, so that they may pay the freight”. The fax message also indicated the Defendant’s RMB and US dollar accounts. There was the Defendant’s accountant Li Jun’s signature in the fax. Then ZHONGGU CO. transmitted the fax to the Plaintiff. After the goods were loaded on board, the Defendant got the negotiable B/L (No.SESDLLB803) indicating “Freight to collect” from the carrier SESCO GROUP INC. The B/L showed that: the shipper was ZHONGGU CO.; the consignee was the Plaintiff; the ship was M/V Chang Jin Tianjin (V.053E); the port of departure was Dalian; the port of destination was Long Beach, USA; the cargo was 60MT of mung beans in 3 containers; the date of loading and issuing the B/L was January 3rd, 2001. At the same time, the Defendant received the agency fees of RMB4080. The Defendant didn’t transmit the B/L to the Plaintiff. On January 15th, the Plaintiff received a fax message from the Defendant’s fax machine that repeated the contents of the fax message dated December 28th and asked the Plaintiff to pay the freight to them. The Plaintiff paid the freight through Los Angeles branch of Bank of China to the Defendant. After receiving the freight, the Defendant delivered the B/L to ZHONGGU CO. and ZHONGGU CO. delivered it to the Plaintiff. But the Defendant didn’t pay the freight to the carrier. M/V Chang Jin Tianjin (V.053E) arrived at Long Beach on January 23rd, 2001. When the Plaintiff was going to take delivery of the cargo, they were told that the carrier hadn’t received the freight at the port of departure and there was a “Freight to collect” clause in the B/L, so they should pay the freight of US$4890. The plaintiff paid the freight and took delivery of the cargo. But the defendant hadn’t returned the freight to them. Therefore the Plaintiff brought an action against the Defendant and claimed to the Defendant to compensate for the freight and its interests, counting from January 23rd, 2001 to the date of payment at the corresponding loan interest rate for US dollars issued by the People's Bank of China, and pay the acceptance fee. The plaintiff added claims in the court hearing that the Defendant should compensate for their flight tickets for asking the freight plus notary fee. But they didn’t hand in the acceptance fee. This court froze the account of the Defendant at the request of the Plaintiff during the trial. In hearing this case, the court demanded the Defendant to provide the sample of their accountant Li Jun’s signature to identify the signature in the fax, but the Defendant didn’t. ZHONGGU CO. submitted two letters to this court in order to explain and prove that the Defendant suggested that they pay freight to the carrier in order to get a cheaper price, so the Plaintiff accepted the suggestion. The Defendant presented no evidence which could prove that the two fax messages were sent by Hu Hongliang. Furthermore, the Defendant presented no evidence which could prove that even if the fax messages had actually been sent by Hu, Hu acted for himself only. Besides, the Defendant presented no evidence which could prove that the US$4890 from the Plaintiff was to pay for Hu Hongliang’s debts. The Plaintiff and the Defendant both declared they didn’t know where Hu was. The above facts could be ascertained on the basis of the evidence submitted during the cross-examination, including: the same Bs/L submitted by both the Plaintiff and the Defendant; two faxes and two freight payment vouchers submitted by the Plaintiff; the sales contract in this case, the Customs declaration, the consignment bill of the containers and the shipping order submitted by the Defendant; the letters of explanations submitted by ZHONGGU CO. with another sales contract and payment voucher as proof; and the court’s investigation and the records of the hearing. It was held by this court that this case was about the dispute over compensation for freight losses with respect to an agency contract. Although the contract between them was not in writing, yet, the act of the Defendant who offered by fax and the Plaintiff who accepted by performing an act dealing with matters regarding a contract was in conformity with the legal requirements for a contract. The offer became effective when the Defendant’s fax arrived at the Plaintiff’s. When the Plaintiff remitted the freight to the Defendant on January 16th, 2001, the acceptance became effective and the contract was made. Although the Plaintiff had duties to conclude the contract of carriage and pay the freight as the buyer of the F.O.B. contract, they entrusted the seller with booking and the latter then entrusted the Defendant. The fact that the Defendant had told the Plaintiff to pay the freight (not other fee) to his account showed obviously his intention to pay the freight directly to the carrier on behalf of the Plaintiff. The intention was exact, definite, true and valid. It was an offer by which the Defendant should be bound. The remittance of the freight by the Plaintiff showed that they had accepted the offer and entrusted the Defendant to pay the freight to the carrier. It was an acceptance of an act that showed the Plaintiff’s true intention. It was valid. So the Plaintiff and the Defendant reached an agreement and the relationship of a new contract for paying the freight to the carrier was formed between them. When the Plaintiff paid the freight in accordance with the contract, the Defendant should also have carried out their promise and paid the freight to the carrier. But the Defendant didn’t carry out their promise, so they should be liable therefor. The Defendant declared that Hu Hongliang but not the Defendant who sent the fax messages, but the Defendant submitted no relevant supporting evidence therefor. Even if Hu had been involved in this case, still the Defendant had submitted no evidence to prove Hu acted for himself only. It was reasonable for the Plaintiff to believe that the fax messages were sent by the Defendant, because they received the fax messages in the Defendant’s name from the Defendant’s fax machine. The Plaintiff couldn’t judge whether the faxes showed the Defendant’s intention. When the Plaintiff accepted the fax messages and paid the freight to the Defendant, the relationship of a contract for paying the freight was established. The Defendant should compensate for the Plaintiff’s losses which resulted from the Defendant’s breaching of contract. Furthermore, the Defendant had received the freight and their accountant Li Jun did sign the fax messages. Though the Defendant argued they didn’t know the signature was true or not, but they ought to be able to identify their accountant’s signature. They had the duty to submit Li Jun’s signature on other papers, but they refused to do so. The Defendant also argued that the fax messages were invalid for lack of their business stamp. This was not reasonable because it was inconsistent with the relevant regulations, rules, and trade practice that the employer should be responsible for the consequences of the acts of his employees within the scope of their business functions. The Defendant had no other evidence to prove the list of Hu Hongliang’s debts. Even if the debt were true and Hu wanted to discharge it with the Plaintiff’s freight, Hu and the Defendant’s agreement was invalid owing to the lack of the Plaintiff’s consent. So the Defendant’s declaration that the freight was paid for Hu’s debt had no basis. The Plaintiff alleged that the Defendant should compensate for the freight losses and its losses of interests because the Defendant and the Plaintiff had concluded a contract for paying the freight and the Defendant breached the duties to pay the freight to the carrier. This allegation as it was based on facts and legally well founded should be accepted. The Plaintiff’s claim of the interests from the day on which they paid the second freight was reasonable and should be supported. The plaintiff’s additional claims that the Defendant should compensate for their flight tickets for this case shouldn’t be taken into consideration in this trial because they hadn’t handed in the acceptance fee. The Plaintiff and the Defendant hadn’t concluded an agreement on applicable law. Because the place of the Defendant’s domicile and the places in which the facts of this case occurred were both in the territory of the People’s Republic of China, the law of the People’s Republic of China shall apply in accordance with principle of closest connection. In accordance with Article 64 (1) of the Civil Procedure Law of the People’s Republic of China, Article 145 (2) of the General Principles of the Civil Law of the People’s Republic of China, Article 8, Article 11, Article 13, Article 16 (1), Article 22, Article 26 (1), Article 107 and Article 406 (1) of the Contract Law of the People’s Republic of China, this court hereby decides: The Defendant DALIAN JIHANG SHIPPING AGENCY CO., LTD. shall compensate for the freight losses of US$4890 suffered by the Plaintiff FORTUNE UNIVERSAL INC. and its interests from January 23rd, 2001 to the day on which this judgment becomes effective at the corresponding loan interest rate for US dollars issued by the People's Bank of China. The compensation shall be paid within 10 days after the day on which this judgment becomes effective, failing which the court will enforce Article 232 of the Civil Procedure Law of the People’s Republic of China. The acceptance fee of RMB1620 and the preservation fee of RMB 208 (both prepaid by the Plaintiff FORTUNE UNIVERSAL INC.) shall be paid by the Defendant DALIAN JIHANG SHIPPING AGENCY CO., LTD. If refuses to accept this judgment as final, the Plaintiff may appeal to the Higher People’s Court of Liaoning Province by submitting an appeal petition with 2 copies to this court within 30 days of the date of service of this judgment, while the Defendant may appeal within 15 days thereof. Presiding Judge: Xiao Yan Judge: Bu Yuchun Judge: Shen Yanjun Certified true copy Sep 27th, 2001 Court clerk: Sun Guang

XIAMEN MARITIME COURT PEOPLE’S REPUBLIC OF CHINA CIVIL JUDGMENT ACTION NO.029 OF 1998 Plaintiff (as Defendant in the counterclaim): Guangzhou Maritime Transport (Group) Co.,Ltd Domicile: 20th floor, 308 Binjiang Road, central, Guangzhou, China Legal Representative: Xu Zu Yuan, General Manager Agent ad litem : Chen Hao Jie, lawyer from Guangzhou Bo Wen Law Firm, China Agent ad litem :Wu Qi, Male, served as a marine superintendent in aforesaid Co. Domicile: No.16 south street Dongcheng, Dongchuan Avenue, Guangzhou City, China Defendant (as Plaintiff in the counterclaim): MEDITERRANEAN SHIPPING CO.S.A. Domicile: 40 Avenue Eugene Pittrd, 1206 Geneva, Switzerland Legal Representative: A.BLANC Defendant (as Plaintiff in the counterclaim): JICINIA HOLDING INC. Domicile: Calle50. *102EDIF, Universal PANAMA Legal Representative: ANTONNIA GONZALEZ PEREZ Agent ad litem of the two Defendants: Wang Jie, lawyer from Hai Jie Law Office, Fuzhou, China On 3 December, 1998, Guangzhou Maritime Transport (Group) Co., Ltd. (plaintiff) (hereinafter referred to as G.H Group) brought a lawsuit of collision damage claim against MEDITERRANEAN SHIPPING CO.S.A.(defendant) (hereinafter referred to as SHIPPING CO.) and JAGINIA HOLDING INC.(defendant) (hereinafter referred to as SHIPPING INC) before this court. After accepting this case, this court formed a collegial bench for a public hearing at the first time on 19 July, 1999. Both defendants filed counterclaims on 13 August, 1999, this court accepted them and jointly held public hearings on 13 September and 22 December of 1999 respectively. Cheng Haojie, Wu Qi (agents ad litem of plaintiff) and Wang Jie (agent ad litem of defendants) attended the hearings. This cases has been concluded now. The plaintiff claimed as follows: On 22 January, 1998, m/v “Jian Chi” which belonged to G.H Group (hereinafter referred to as “Jian Chi”) was on her voyage from Fuzhou to Dalian. At about 2015hrs, while the vessel was navigating at the southwest of Dongsha Island in Taiwan Strait, the third mate on duty at the starboard side of the bridge saw a vessel overtaking from behind and caught sight of the aft mastlight of the overtaking vessel. At about 2025, the left ARPA radar of “Jian Chi” plotted the overtaking vessel being 3 miles away, with a true bearing of 200 degree and a course of 40 degree, and the third mate saw the fore and aft mast lights and the portside red light of the overtaking vessel. “Jian Chi” continued to plot the movement of that vessel, and kept her course and speed. At 2035, the distance between the two vessels became closer and closer. However, the overtaking vessel didn’t take any action to avoid collision. In order to avoid collision, “Jian Chi” threw a strong searchlight on her hull and main deck to call attention of that vessel. At 2039, while it was impossible to avoid collision, “Jian Chi” made a hard portside so as to turn left and prevent interaction or collision with her oil tank. While the vessel turned left, she steered hard starboard immediately to keep her stern clear from the overtaking vessel. At 2040, however, because of the fast speed of the overtaking vessel without taking any action to avoid collision in advance, “Jian Chi” collided with her on the left stern at the position of 25°55.3′N, 120°16.7′E. At the moment of collision, “Jian Chi” was heading to 68 degree with the speed of 12 knots, the other vessel was full ahead, and the angle of the two vessels was about 10 to 15 degrees. After the collision, “Jian Chi” reported to the Harbor Superintendency Administration (HSA) of Fuzhou in time and required the other vessel to stop and go together to settle this accident in HSA (Fuzhou), but the other vessel was still on her voyage to Shanghai after informing her name, call sign and home port. Having anchored at the entrance of Min Jiang River and checked the damage to her hull, “Jian Chi” left for Shanghai at 0830 on January 23 for handling the accident. This collision accident caused the plaintiff (G.H Group”) the repair cost of ￥727,176.88 (RMB, same hereafter), survey fee of ￥6,610, cost of tank washing ￥300,000, loss of revenue of operation of ￥1,249,872.20. As a result, the plaintiff applied to the court for ordering the two defendants to compensate for the total economic losses of￥2,283,659.00 and the interest of ￥349,399.83 thereof (from 25 January, 1998 to 23 November, 1998, at the interest rate of 5/10000 per day). The defendant (Holdings Co.) defended as follows: According to the chart work, while the distance between the two vessels was 3 miles, “MSC RAFAELA” could catch sight of the starboard green light and masthead light of "Jian Chi". Therefore, the two vessels were involved in crossing situation instead of overtaking. “Jian Chi” was a give-way vessel, while “MSC RAFAELA” was a stand-on vessel. At 2015, the distance between them was 5 miles: it was impossible to catch sight of the sternlight of "Jian Chi" by " MSC RAFAELA", so it couldn't be said that it was overtaking. The speed of “MSC RAFAELA” was 21 knots and not 19 knots at that time. The main causes of the collision were the gross negligence of “Jian Chi” in looking-out and systematic observation and plotting of radar, and altering her course to hard starboard in the accident which obviously violated her obligations as a give-way vessel. In addition, the losses claimed by the plaintiff (G.S. Group) was unreasonable, some repair work was beyond the scope of damage resulting from the collision, and the cost was too high. The method of calculating the loss of revenue from operation was unreasonable, the tank washing expense was also too high and the calculation of the interests was groundless. The other defendant (shipping Co.) defended that as a managing agent of the said vessel, he should not assume any liability for compensation. He withdrew from the defense on August 14, 1999. The counterclaim plaintiff (Shipping Co. and Holding Inc) claimed as follows: On 21 January, 1998, m/v “MSC RAFAELA”, of which the owner was HOLDING INC. and the demise charterer was SHIPPING CO. was on her voyage from Hong Kong to Shanghai. During the voyage, she collided with “Jian Chi” because the latter altered hard starboard in the accident. After being assured that the other vessel was in safe condition, m/v “MSC RAFAELA” proceeded to Shanghai. On 23 January, she arrived at Shanghai and submitted sea protest to the Harbor Superintendency Administration of the P.R.C in Shanghai (hereinafter referred to as H.S.A. Shanghai) in time, then asked the Classification Society and other relevant institutions to carry out damage survey and requested temporary repair. According to the opinions of the Classification society, m/v “MSC RAFAELA” carried out permanent repair at Antwerp from 15 May to 5 June, 1998. The counterclaim plaintiffs considered that it was wrong for m/v “Jian Chi” to alter her course to starboard as the two vessels came closer and then alter to portside upon sighting the approaching vessel. These actions seriously violated the relevant rules of the International Convention for Preventing Collisions at Sea, 1972 (hereinafter referred to as the Convention), so she should be held 80% liable for the collision. Therefore, they lodged the counterclaim against the defendant (GH Group) to compensate for loss of time of operation and expenses incurred, being USD 432,044.88 and the repair cost of USD 368,359.67 as well as the interest for the above costs covering the period from the day the losses incurred to the day of actual payment. The counterclaim defendant defended as follows: The statement on the collision by the counterclaim plaintiff (SHIPPING CO. and HOLDING INC.) was baseless. There were no records of radar plotting on the logbook and sea protest, which showed that their statement on the movement of m/v “Jian Chi” was groundless. The collision occurred under the situation of overtaking, which had been explicitly admitted in the sea protest by the master of m/v “MSC RAFAELA”. The basic cause of the collision was that the navigator of the m/v “MSC RAFAELA” was seriously negligent in keeping proper look-out and was not abided by the obligations of the give-way vessel. The loss of time and repair cost claimed by the counterclaim plaintiffs (SHIPPING CO. and HOLDING INC.) were much beyond the amount certified by Shanghai Double Hope Maritime Development Co., Ltd. (hereinafter referred to as Maritime). Therefore such defense shall be rejected. After the trial, according to the statements presented by both parties and the evidence provided by them or obtained by this court which had been cross-examined and defended before this court, the court determined the facts of this case as follows: I. There was no dispute on the following facts, so they could be confirmed by this court that: (1), m/v “Jian Chi” Port of registry: Guang Zhou Name of ship owner: Guangzhou Maritime Transport (Group) Co., Ltd. Classification: CCS, steel tanker Gross tonnage: 18,918 Dead Weight tonnage: 31031 Main engine: diesel Service Power: 10600 kW Max. Speed: 12 knots Number of crew (those holding qualification certificates): 33 The said voyage was from Fuzhou to Dalian at1500 hrs on 22 January, 1998. (2) m/v “MSC RAFAELA” Port of registry: Panama Name of ship owner: Holdings Inc. Type of vessel: container vessel Gross-tonnage: 42307 Year Built: 1996 Type of main engine: diesel Service power: 18350KW Max. Speed: 22 knots Number of crew (those holding qualification certificates): all ready The said voyage was from Hong Kong to Shanghai at 2300 hrs on 21 January, 1998. (3) At 2040-2050 hrs on 22 January, 1998, m/v “Jian Chi” collided with m/v “MSC RAFAELA” at the area near the entrance of Min River at the approximate position of 25°55′N, 120°17′E. Each vessel informed its name and port of registry to the other. After being assured that m/v “Jian Chi” was in safe condition, m/v “MSC RAFAELA” rejected the requirement of “Jian Chi” to deal with the collision in Fuzhou harbor, and sailed to Shanghai directly. THE m/v “Jian Chi” also sailed to Shanghai for settlement of the accident the next day. (4) In the sea protest provided to HSA Shanghai on 24/01/1998, the master of "MSC RAFEALA" said that on 22 January, at 2050, while m/v “MSC RAFAELA” was overtaking a vessel at her portside, the vessel Jian Chi altered her course to starboard suddenly and collided with m/v “MSC RAFAELA” at the portside poop deck, damaging the main deck, boat deck and machine room where the ship’s position was 25°55′N, 120°19′E. On 5/2/1998, the master of the m/v “Jian Chi” submitted the sea protest to HSA Shanghai, which stated that on 22 January, at about 2040, m/v “Jian Chi” collided with m/V “MSC RAFAELA” resulting in the damage to the starboard upper deck and hull ,where the ship’s position was 25°55.3′N, 120°16.7′E. With regard to the above mentioned sea protests, HSA Shanghai accepted and sealed on them to prepare for investigation. While submitting the sea protests, both parties provided the relevant logbooks and charts to HSA Shanghai. (5) According to the requirements of the People’s Insurance (property) Company, Shanghai and Guangdong Branches, the Maritime Co. asked the surveyor to carry out survey for damage on board m/v “MSC RAFAELA”. After the survey, it was found that the portside shell plating was damaged from frame 17# to 43# due to the collision with m/v “Jian Chi”. The surveyor considered that the repair of m/v “MSC RAFAELA” in Shanghai would cost USD 78,000, and would take 12 working days for repairing afloat. On 26 January, 1998, the Maritime Co. carried out the damage survey on m/v “Jian Chi”. After the survey, it was found that the starboard shell plating was damaged from frame 10# to 24# due to the collision with m/v “MSC RAFAELA”. The surveyor considered that it would take 15 working days for repairing afloat and he estimated that it would cost ￥580,000. On the same day, CCS Shanghai Branch also assigned surveyor to carry out survey on m/v “Jian Chi”. According to the invoice issued by this Classification Society, the survey fee was ￥6,610. (6) Requested by Shanghai Hua Tai Insurance Agency Consultant Service Ltd. and authorized by the North England P&I club, the Shanghai Fair Consultant Co., Ltd. (hereinafter referred to as Consultant Co.) who on behalf of the hull underwriter sent someone to carry out the damage survey together with the surveyors from Maritime Co. and Classification Society. The surveyors of the Classification Society suggested carrying out temporary repair immediately, and asked m/v “MSC RAFAELA” to be repaired within one month. On 5 February, the surveyor of the Classification Society carried out temporary survey on m/v “MSC RAFAELA” again in Singapore, and suggested that the vessel carry out permanent repair on 12 May. On 22 February, the Classification Society surveyed the vessel at Genoa to determine the damage caused by the collision and to estimate the repair expenses, as well as to examine the invoices provided by the ship owner to support the claim On 26 January,1998, the Consultant Co., on behalf of the hull underwriters of "Jian Chi", carried out a survey regarding the losses resulting from the collision on m/v “Jian Chi” together with the surveyor from Maritime Co. After the survey, the Consultant Co. confirmed that the repair cost of m/v “Jian Chi” was estimated to be ￥403,413, and the time of berthing for repair was about six working days. (7) Because it was necessary to have the tanks of m/v “Jian Chi” cleaned before examination and repair, on 26 January, 1998, G.H Group and Tai Hua Oil Shipping Branch concluded a contract of tank cleaning with Shanghai Gong He Ship service Co., Ltd. Both parties agreed that Gong He Ltd. should be in charge of cleaning off the sludge and dirt at the bottom of the oil tanks. The cleaning fee was ￥300,000 which included the cost as followed: fuel and water used to warm the cleaning water, barge and dispose of the slop from cleaning ,payments for cleaning the oil tanks , pump room and the oil tank of the engine room, and transport of slops by lighter and disposing of same, applying to H.S.A. for cleaning tank and transporting oil slops, etc. On 18 March, GH Group paid the aforesaid costs. (8) After collision, the m/v “Jian Chi” anchored at the entrance of Liu River at 1350 on 25 January, 1998, then carried out vessel survey and prepared for cleaning tanks. On 27 January, tank-cleaning workers arrived and went on board at 0600 and left at 1825 on 31 January. The vessel berthed at the Li Feng Shipping dock of Shanghai Shipping United Docks Co., Ltd. for repair. The repair completed at 1800 on 13 February. (9) On 28 September, 1999, the certificate of marine casualty issued by Shanghai H.S.A certified that on 22 January, 1998, m/v “MSC RAFAELA” collided with m/v “Jian Chi” at sea outside Taiwan Strait. According to the sea protest submitted by m/v “MSC RAFAELA”, she collided with m/v “Jian Chi” when she was overtaking the latter. (10) Records from both parties’ logbooks: The logbook of “Jian Chi” on the 48th page on 22/01/1998 showed that at 1735, the position of the vessel was 25°48′N, 120°E TC 068°. At 2000, the position was 25°48.8′N, 120°7.8′E. At 2155, the course of the vessel was 248°, the visibility at 2000 was in 6th class. The record on this page in the column of important matters was as follows: the vessel used ARPA to plot a vessel overtaking from behind her starboard side with a true bearing of 200°. The distance between them was 3 miles. The overtaking vessel’s course was at 40°, it sailed at 18 knots. From the starboard side the crew caught sight of the fore-aft masthead lights and the portside red light. Through VHF 16 “Jian Chi” received no calling from the overtaking vessel. “Jian Chi” kept sailing without altering her speed and course. At 2035, the overtaking vessel proceeded close to “Jian Chi” to create an emergent situation. “Jian Chi” switched on the searchlight focusing the starboard hull and main deck, warning the overtaking vessel. Meanwhile, it steered hard portside to avoid the overtaking vessel. Due to the high speed of the overtaking vessel, “Jian Chi” failed to avoid collision in time. At 2040, the overtaking vessel seriously damaged the stern of "Jian Chi". The position of the collision was 25°55.3′N, 120°16.7′E. At the time of the collision, “Jian Chi” headed to 68°, with a speed of 12 knots . The other vessel was full ahead. During the hearing, the agent ad litem of the plaintiff acknowledged that the statement under the column of important matters was made after the collision. There was no record of observation by radar in the logbook. The record in the logbook of “MSC RAFAELA” showed: At 0100, the vessel finished with engines and it was bound for Shanghai. The vessel was full ahead as the weather was fine. At 1100, the average speed was 21.54 knots. After sailing 237 miles, the position was 23°40′N, 117°59′E, wind was NE force 6 Beaufort Scale. After sailing 553 miles, the sky was overcast, the vessel sailed at medium speed. At local time 2050 (Greenwich mean time 1250), “MSC RAFAELA” was overtaking a vessel at portside at 25°55′N, 120°19′E. Suddenly, the vessel altered her course, going starboard and collided with the poop deck of our portside. The true course at that time was 030°, with a speed of 21 knots. The record in the logbook of 22/01/1998 showed that at 1430, the position of the vessel was 24°15′N, 118°44.5′E, TC 046° degree. From 12 to 16 hours, there was fog in the first one hour . The visibility was about 3 miles. Two radars were in operation. VHF 16/2182 was switched on. From 1600 to 2000 the radars were still in operation. The visibility reduced. At 1845 the position was 25°19.5′N, 119°55.4′E, the vessel changed course to TC 29°. The details of radar observation were not recorded in the aforesaid logbook. II．The parties had different views over the following facts, and this court ascertained the facts according to the evidence provided by the two parties or collected by this court , together with the statements made by the parties during the court hearing: A. The relationship between the defendant "Shipping Co" and “MSC RAFAELA” On 09/07/1998, the defendant MEDITERRANEAN SHIPPING CO.S.A. stated to this court that he was just a managing agent of “MSC RAFAELA”, but he withdrew the above statement before he filed a counterclaim. During the hearing of the counterclaim, he submitted a copy of the demise C/P to indicate that he was a demise charterer of “MSC RAFAELA”. The plaintiff GH group considered that the statements made by the defendant Shipping Co were self-contradictory and the defendant produced no evidence to support what he claimed. The copy of the demise C/P had no function to provide evidence. The identity of the defendant should be confirmed on the basis of the records of the Classification Society. The court held that: according to the survey report issued by the Classification Society and provided by the counterclaim plaintiff Shipping Co, she was “MSC RAFAELA” vessel’s operator. Under ordinary circumstances, the record made by the surveyor was on the basis of the certificate of registry of the vessel, which was provided by the shipowner. The counterclaim plaintiff refused to submit the evidence in his possession to prove the relationship between himself and “MSC RAFAELA”. As there was no relative evidence to substantiate the facts, the copy of the demise C/P provided by Shipping Co. couldn’t be deemed as evidence to support the claim. The statement that Shipping Co. was a demise charterer of “MSC RAFAELA” was rejected by this court. B. The situation before the collision The plaintiff GH group stated: At about 2015 the third mate on duty saw a vessel overtaking from behind starboard side of the bridge, and the stern masthead light was also in sight. At about 2025, the radar ARPA in the portside of “Jian Chi” plotted that the position of the overtaking vessel was TC 200° with 19 knots speed, course 040 degree. The distance between the two vessels was 3 miles. The third mate saw the fore and aft masthead lights and the portside red light of the overtaking vessel from the starboard side of the bridge. “Jian Chi” kept sailing and observation without changing the course and speed. At 2035 the two vessels proceeded closer and closer, involving in an exigency situation, but the overtaking vessel still took no measure to avoid collision. In order to avoid collision, “Jian Chi” switched on searchlight to illuminate the starboard side hull and the main deck to call the attention of the other ship. At 2039 when the collision was inevitable, “Jian Chi” steered hard to portside to make the fore turn left, to prevent the oil tank from being collided. When the fore turned left, “Jian Chi” steered hard to starboard side immediately to let the aft clear off the overtaking vessel. Due to the high speed of the other vessel, as well as its not taking measures to avoid collision, the stern of starboard side of “Jian Chi” collided with the stern of portside of the other vessel. At 2040, 25°55.3′N, 120°16.7′E. at the time of collision, “Jian Chi” was heading to 68° with a speed of 12 knots, the other ship was at full speed ahead. The angle between the fore of two vessels was about 10° to 15°. At 2155, “Jian Chi” was at 25°58′N, 120°25′42″E with course of 248°. She sailed to Fuzhou port for a survey of the damage made. In order to certify the above facts, the plaintiff submitted the logbook, engine logbook, sea protest and chart work analysis of the collision and the chart. The defendant stated: The time of the collision recorded by “Jian Chi” was 2040, but 2050 by “MSC RAFAELA”. There was 10 minutes difference. At 2015 (for “Jina Chi”, while for “MSC RAFAELA” at 2025) the distance between them was 5.5 miles. “MSC RAFAELA” was in the direction of 85 degree to the starboard side of “Jian Chi”, when “Jian Chi” was at its 2025, “MSC RAFAELA” was in the direction of 75 degree to the starboard side of “Jian Chi”. The distance between them was 3 miles. Therefore, the position when “MSC RAFAELA” approached “Jian Chi” into the visibility range of stern light, was less than 22.5° abaft the beam of “Jian Chi”, instead of more than 22.5° abaft the beam of “Jian Chi”. There was only the starboard sidelight in sight instead of the stern light. The situation before collision was a crossing one instead of overtaking. In order to prove the above facts, the defendant submitted the logbook, engine logbook, sea protest and chart work analysis of the collision and the chart. The court held that according to Rule 13 of the International Convention for Preventing Collisions at Sea, 1972 (hereinafter referred to as Convention), a vessel shall be deemed to be overtaking when coming up with another vessel from a direction more than 22.5 degrees abaft her beam. That is, in such a position with reference to the vessel she is overtaking that at night she would be able to see only the stern light of that vessel but neither of her sidelight. So the overtaking situation consists of three conditions: (A) the overtaking vessel is in a direction more than 22.5 degrees abaft her beam. (B) The overtaking vessel is coming up with the overtaken one. (C) The distance between the two vessels is in the scope of the sternlight of the overtaken vessel. With respect to this case and according to Rule 22 of the Convention, the stern light of “Jian Chi” should be visible at 3 miles range. The plaintiff GH group alleged that the distance between the two vessels at 2025 was 3 miles, at 2015 was over 3 miles. This court held it’s wrong for the crew on duty of plaintiff’s vessel to deem it as an overtaking situation. With reference to the sea protest submitted by “MSC RAFAELA”, Shanghai H.S.A certified that the collision occurred during “MSC RAFAELA” overtaking “Jian Chi”. The master of “MSC RAFAELA” used the word “overtaking” in the logbook and the sea protest. However, there were different understandings about the word "overtaking". The situation before collision should be determined on the basis of logbook, chart or other similar evidence, as well as chart work analysis instead of relying on the statements made by the parties alone. According to the logbook or other relevant evidence, “Jian Chi” proceeded at the course of 68 degree, 12 miles. “MSC RAFAELA” was at the course of 29 degree, 21 miles. “MSC RAFAELA” was at the position less than 22.5 degrees abaft the beam of “Jian Chi”. “MSC RAFAELA” could catch sight of the green right side light of “Jian Chi”. Therefore, the situation should be deemed as a crossing as per Rule 15 of the Convention. C. Damage resulted from collision a. Repair cost of “Jian Chi” The plaintiff GH group claimed for the repair cost of “Jian Chi” RMB 727,176.88 based on the invoice issued by Li Feng shipyard and the receipt issued after examination and acceptance. The defendant expressed the opinion that Li Feng shipyard and the plaintiff GH group were both under China Shipping Group, so they had common interest. The receipt couldn’t be used as evidence. Being short of contract of ship’s repair, the price had no basis for calculation. It was only the damaged stern deck of starboard side of “Jian Chi” resulted from the collision. The plaintiff increased the items of the repair. The court held that the receipt provided by the plaintiff GH group was a document printed by computer on 12/04/1999 without bearing the stamps of the Li Feng shipyard and the plaintiff GH group. The truthfulness and the legality of the receipt couldn’t be confirmed. Therefore the effectiveness of the evidence couldn’t be determined. There was not any other evidence but the invoice to certify the plaintiff GH group’s claim for the ship’s repair cost. It was impossible to checked out whether or not the items of repair were reasonable. Even if according to the receipt, the repair items stated in the receipt differed from the items stated in the survey report issued by Maritime Co. The amount the plaintiff claimed for couldn’t be determined. Maritime Co. carried out survey on the vessel requested by the Hull underwriter of “Jian Chi”. The estimated ship repair cost was about RMB 580,000 in the survey report issued by Maritime Co, and the defendant accepted that amount. Therefore the ship’s repair cost resulted from collision should be fixed at RMB 580,000. b. The tank cleaning expense of “Jian Chi” The plaintiff GH group alleged that “Jian Chi” was in need of tank cleaning and gas free test before repair. Therefore, it took them RMB 30,000 to carry out that work. In order to certify the facts and the expense incurred, he provided the invoice and the agreement on tank cleaning. The defendant’s opinion was: he would accept it, if tank cleaning and gas free test were needed on account of the repair. Nevertheless, clearing off sludge from the tank, pump room and the engine room weren’t resulted from the collision. The costs should be excluded or be reduced in proportion. The court held that, being an oil tanker, “Jian Chi” was in need of gas free test before repair. The tank cleaning expense was a reasonable one incurred after collision and should be borne by the defendant. However, the cleaning items included clearing off sludge which was not caused by the collision. Therefore, the cleaning costs should be reduced in proportion to RMB 280,000. c. Loss of use of “Jian Chi” The plaintiff stated that he had appointed Hua Tong accountant office to conduct a special audit on the loss of use of the ship resulted from the collision. The accountant office issued an audit report No. 3 HHSZ 1998. The report came to a conclusion based on the transport contract, list of report of voyages and other data. The conclusion showed that the average profit per day was RMB 58,569.46. With reference to the report, the plaintiff alleged that the time for loss of use of “Jian Chi” was 21.34 days, and the loss of use of “Jian Chi” in monetary terms reached RMB 1,249,872.20. The plaintiff submitted the above said audit report as evidence. The defendant’s view was that the loss of use should be certified by submitting transport contracts, the proof of the freight earnings and the daily cost. It couldn’t be accepted by providing the above mentioned evidence such as submitting the audit report only. The court noted the audit report provided by the plaintiff attached with the certificate of qualification of the Accountant Office and the certificate of account, and held that though they were not attached with the original evidence concerning the revenues earned from the two voyages of Jian Chi (one was before the collision and the other was after ), yet, considering that Hua Tong accountant office was an independent firm, the audit report was issued on the basis of the two original proofs of profit of the two voyages, such audit report was legally effective. The report could be deemed as evidence with reference to the provisions of Art 10 under the “ Regulations respecting Property Damage Compensation Resulted from Vessel Collision” issued by the Supreme People’s court (hereinafter referred to as Compensation Regulations). However, as to the loss of use claimed by the plaintiff GH which included the time consumed in cleaning off sludge and in increasing the items of ship repair, same should be reduced, as appropriate, and the loss of use should be fixed at 19 days. d. Loss of use of “MSC RAFAELA” The counterclaim plaintiff stated that “MSC RAFAELA” arrived at Antwerp shipyard for repair on 18/05/1998. The repair was finished on 04/06/1998. She left the dock on 05/06/1998. According to the demise C/P between the counterclaim plaintiffs Shipping Co. and Jacinia, the hire of the vessel was USD 20.000 per day. The time spent in the dock for repair was 18 days. The loss of use was USD 360,000. In order to support what they claimed, they submitted the invoice of ship repair cost (which bore the time used for the repair) and the copy of the demise C/P. The counterclaim defendant GH group was of the view that the counterclaim plaintiff should submit the original demise C/P, without which the loss of use couldn’t be determined. The case should be governed by the law of China. The loss of use claimed by the counterclaim Plaintiff should be rejected for failure of producing original evidence according to the above-mentioned “Regulations”. This court held that according to the provisions of Art. 10 of the “Compensation Regulations”, the loss of use should be calculated on the bass of the average net profit of the two voyages before and after the collision. The demise C/P was concluded by the two counterclaim plaintiffs. Not only the original C/P was not available but also there was no other evidence to prove it. According to Art. 78 of the Opinions of the Supreme People’s Court on Some Issues Respecting Application of the Civil Procedure Law of the PRC, the legal effect of the demise C/P couldn’t be confirmed. Therefore, even if the counterclaim plaintiffs had the right to claim for loss of use, it should still be rejected due to the failure to provide sufficient evidence to prove it. e. Repair cost of “MSC RAFAELA” The counterclaim plaintiffs stated that, “MSC RAFAELA” was a container liner engaging in international shipping. In order to avoid increasing the loss, “MSC RAFAELA” continued to operate after having a temporary repair at Shanghai. In May, “MSC RAFAELA” was under repair in Antwerp, Belgium. The above-mentioned repair caused USD540,056.11. “Jian Chi” should be held for 80% liability. The counterclaim defendant GH group should compensate the counterclaim plaintiffs USD 429,329.99. In order to certify the scope of damage, repair and the amount therefor, they submitted the original invoice of ship repair cost and the original survey report issued by Classification Society in Antwerp. The counterclaim defendant GH group expressed the opinion that “MSC RAFAELA” should be repaired at as near a place as possible. It was impossible to check whether it was reasonable by reference to only the invoice of repair cost that was available, without having access to the actual repair items. The repair cost was mush more than the one estimated by Maritime Co. after carrying out survey on it. The repair carried out four months after the collision should be deemed an ordinary repair. The court should accept the survey report issued by Maritime Co. due to its legal effectiveness. The court held that the counterclaim plaintiffs only provided invoices of ship repair cost and survey reports of the ship Classification Society, to support their claims for the costs of ship repair and other expenses. In the absence of contract of ship’s repair, the budget summary of the repair, the settlement list of the ship’s repair or other evidence to certify the repair items, the scope of the repair and whether the repair cost was reasonable or not could not be confirmed. In consideration of the counterclaim plaintiffs’ not producing sufficient evidence to support what they claimed, the amount of ship repair cost couldn’t be determined as what they claimed. With respect to the counterclaim defendant acknowledging the survey on “MSC RAFAELA”, carried out by Maritime Co and according to Art. 75 of the Opinions of the Supreme People’s Court on Some Issues relating to the Implementation of the Civil Procedure Law of the PRC, the cost of repair of “MSC RAFAELA” could be fixed at USD78,000 as it was estimated in the survey report issued by Maritime Co. The court held that the collision between “Jian Chi” and “MSC RAFAELA” occurred in the sea area near the entrance of Min Jiang River. Both of the parties quoted Chinese laws during the claim and defense. According to Art. 273 of the Maritime Code of the PRC, the law of China should be applied in settling the dispute. Before the collision, “Jian Chi” sailed at 12 knots, “MSC RAFAELA” said at 21 knots. The two vessels didn’t take measures to reduce their speed and sail at a safety speed, thus violating Rule 6 of the 1972 Convention, viz. every vessel shall at all times maintain a proper look-out by sight and hearing as well as by making full use of other equipment and apparatus. Though the two vessels had been equipped with radar and the radar was in operation before the collision, they failed to make continuous observation and plotting to make a full appraisal of the risk of collision. They failed to take proper measures to avoid collision, in violation of Rule 5 of the Convention. The situation between “Jian Chi” and “MSC RAFAELA” before collision was crossing instead of overtaking. “MSC RAFAELA” was a stand-on vessel on the starboard side of “Jian Chi”, while “Jian Chi” was a give-way vessel. “Jian Chi” violated Rule 15 of the Convention as it made a wrong appraisal of the situation. She failed to take early action to keep well clear of the other vessel. Although the actual situation before collision was crossing, “MSC RAFAELA” considered herself as an overtaking vessel, where she should have taken the relevant actions as required, but acted as a stand-on vessel instead, in violation of Rule 13 of the Convention. Furthermore, even if “MSC RAFAELA” were a stand-on vessel, she still violated Rule 17 in that she should have acted as will best help to avoid collision when she found the collision could not be avoided by the action of the give-way vessel alone. As a conclusion, this court held that “Jian Chi” should take 50 percent liability for the collision to compensate for the repair costs of “MSC RAFAELA”, While “MSC RAFAELA” should take the other 50 percent liability to compensate for the plaintiff’s repair cost, tank cleaning expense, loss of use and survey fee. The shipowner should take the civil liability for compensation incurred in the collision. Although, MEDITERRANEAN SHIPPING CO.S.A. as the operator was affected in the operation of the ship due to the collision, thus it was concerned with this case, yet the liabilities for the damage arising from the collision of the ships should not be imposed on her. Therefore, the claim lodged by G.H group against MEDITERRANEAN SHIPPING CO.S.A. was dismissed. The vessel’s survey fee incurred after collision claimed by GH group should be determined with reference to the cause of the accident. The defendant Jacinia’s nonpayment for the damages due to the one time uncertainty as to the liabilities for damages arising from the collision shouldn’t be deemed as payment overdue, so the plaintiff's claim for interest rate based on 5/10000 was without legal basis. The interest should be fixed on the basis of the corresponding loan interest rate issued by the People's Bank of China. Therefore the interest for overdue payment claimed by the plaintiff was rejected. Although the counterclaim plaintiff MEDITERRANEAN SHIPPING CO.S.A. acted as a ship operator and had interest to the case, but she was not the shipowner, thus that company had no right to claim against the counterclaim defendant G.H group for the damage to the vessel. The claim lodged by MEDITERRANEAN SHIPPING CO.S.A. in this regards was rejected. According to Art. 237 and Art. 126, of the Civil Procedure Law of the PRC, Rules 5, 6,13,15 and 17 of the International Regulations For Preventing Collisions At Sea, 1972 and Art. 273, and Art. 169 of the Maritime Code of PRC, the judgment is rendered as follows: I. The defendant Jacinia should compensate the plaintiff GH Group, within ten days after this judgment comes into force, for the repair cost of RMB299,000.00, expenses for tank cleaning of RMB140,000.00, loss of use of RMB556,409.88, survey fee of RMB3,305.00 and the interest thereon calculated according to the loan interest rate issued by the People’s Bank of China, from 8th April, 1998 to the date of payment determined by this judgment . II. Other claims by plaintiff GH group against the defendant are dismissed. III. The counterclaim defendant GH group should compensate the counterclaim Plaintiff Jacinia USD39,000 for the repair cost and the interest thereon. The interest should be calculated according to the corresponding loan interest rate as above- mentioned from 5th June, 1998 to the date of payment determined by this judgment. The above amount should be paid within 10 days from the day this judgment becomes effective. IV. The other requests for the counterclaim by Jacinia are dismissed. V. The requests for counterclaim by MEDITERRANEAN SHIPPING CO.S.A. are dismissed. The court fee for the plaintiff's claim is RMB 24,000.00, of which the plaintiff shall pay RMB 14,979.00, the defendant shall pay RMB 9,021.00. The court fee for the counterclaim is RMB 43,107.00 of which the counterclaim Plaintiff MEDITTERAN- EAN SHIPPING CO.S.A. and Jacinia shall pay RMB 41,007.00, while the counterclaim defendant GH group shall pay RMB2,100.00. Should any of the parties refuse to comply with this judgment, the plaintiff GH group may within 15 days and the defendants within 30 days of the receipt of the judgments, file an appeal to the Higher People’s Court of Fujian Province. The application for appeal shall be submitted to this court with copies corresponding to the number of persons of the opponent party. . Presiding judge: Liu Xin Ping Judge: Zhou Cheng You Judge: Lin Jing Certified true copy 21, June 2000 Clerk: Hong Zhi Feng

SHANGHAI MARITIME COURT PEOPLE’S REPUBLIC OF CHINA CIVIL JUDGMENT No. Hu Hai Fa Shang Chong 3 (2001) Plaintiff: Helvetia Schweizerische Versicherungsgesellschaft Domicile: Berliner Strasse 56-58 60311 Frankfurt, Germany Legal Representative of the plaintiff: Dr. Peter Reusch Agents ad litem: Wang Huaijiang, Xu Jianghua, attorneys-at-law of Haixiang Law Firm of Shanghai Defendant: United Developing Co., Ltd. Shanghai New Technological Development Zone Domicile: No. 509 Caobao Rd, Shanghai Legal Representative: Wang Zhihong, Chairman of the Board Agents ad litem: Zhang Chunrong, attorney-at-law of Ronghua Law Firm of Shanghai This court issued the judgment No. Hu Hai Fa Shang 312(1997) over the cases regarding the subrogation dispute arising from the maritime cargo insurance contract between the plaintiff and the defendant on June 23, 2002. On April 25,2001, the Higher People’s Court of Shanghai issued a civil order No. Hu Gao Jing Zhong 508 (2000) which revoked the original judgment and remanded it to this court for retrial. After placing the case on file for retrial on May 29, this court established a collegial bench and held a public hearing for this case on June 21. The agent ad litem of the plaintiff Xu Jianghua and the agent ad litem of the defendant Zhang Chunrong appeared in the court and attended the hearing. The plaintiff alleged that in April 1995, one knitting machine stowed in a container exported by the insured Mayer&Cie Co., Ltd. of Germany, was imported from Germany to Shanghai under B/L No. BRE/SHA/5074, the carrier was the head office of China Ocean Shipping Cooperation (Group), the consignor was Jie Gao Electronic Co., Ltd. (Hong Kong), and the consignee was Jie Gao Electronic Co., Ltd. (Shanghai)(hereinafter called Shanghai Jie Gao Company). On April 7, the consignee picked up the cargo from the port and sent it to the warehouse of the defendant. The next day when the defendant opened the container and began the loading and unloading, the cargo was thrown onto the ground from about 1 meter high and the knitting machine was damaged. Evaluated by the People’s Insurance Company of China, Shanghai Branch, the knitting machine suffered a total loss. As this accident happened in the warehouse of the defendant and the machine hadn’t arrived at the warehouse of the consignee, the liability of the insurer wasn’t terminated yet. On October 12, after having indemnified the insured, the plaintiff obtained the right of subrogation. The Plaintiff held that the accident was caused by the wrong operation of the defendant, which constituted a tortious act. Hence the plaintiff requested the court to adjudicate that the defendant pay the price of the cargo and the freight for a new shipment amounting to German Mark 207,615 in total (roughly equivalent to USD 138,410) and its interest, and bear the legal cost. The defendant argued that the defendant had no relation with this case either in fact or in law. This accident was beyond the scope of the liability of insurance , and the plaintiff should not have paid for the claims. As it was stipulated in the insurance policy that the destination was Shanghai, Shanghai Jie Gao Company was the consignee, and the plaintiff admitted that the goods had arrived at Shanghai Port and been delivered to the consignee, which meant the end of the plaintiff’s liability of insurance. It was not proper for the plaintiff to make any claim for the settlement. In the warehouse-to-warehouse clause in the insurance policy for sea carriage, the warehouse for the arrived goods shall be the warehouse at the destination port. After the goods had been discharged and put into the warehouse at the destination port, the plaintiff’s liability of insurance terminated. When the accidents happened, the insurance contract had already terminated. Hence the German Mayer&Cie Co., Ltd. had no right to claim for compensation and the plaintiff had no right of subrogation. Another thing that shall be considered was that there was no contract relationship or other kind of legal relationship between the defendant and Shanghai Jie Gao Company. The defendant just offered some mechanical and labor assistance for the latter when the latter wanted to pick up the goods and transport it to the appointed place. What’s more, after the happening of the accident, the defendant and Shanghai Jie Gao had negotiated for the settlement of the loss suffered by the latter. As the evidence for supporting his claims, the plaintiff submitted the following documents: (i) Maritime insurance policy issued by the plaintiff; (ii) Proof of the German Mayer&Cie Co., Ltd.’s receipt of the compensation amounting to German Mark 190,000 and its subrogation to the right to claim (namely the letter of subrogation); (iii) Order for the shipment; (iv) Probation report issued by the People’s Insurance Company of China ,Shanghai Branch for this accident; (v) B/L issued by the head office of China Ocean Shipping Cooperation (Group); (vi) Customs entry of the goods; (vii) Certificate for free import of the goods; (viii) Letter from Shanghai Jie Gao to this court about its receipt of the accident handling fees paid by the defendant and the relevant evidence attached; (ix) Statement of cargo damage given by the defendant to the plaintiff; (x) Vouches; (xi) Air transport document for new consignment; (xii) Open policy and its annex; (xiii) Specific stipulations on cargo insurance (ADS clause in 1973, the 1984 version) and the specific conditions for open policy in the German Maritime Insurance General Rules. The defendant didn’t raise any objection to the evidence. As the buyer, CICO Service Center Shanghai was neither a party to the insurance contract in this case, nor a party to the contract for carriage of goods by sea in this case, and the plaintiff failed to proof the relationship between the Center and this case. The order sheet of the Center could not be used to determine the case. With the open policy submitted by the plaintiff, there were some German documents enclosed. But the defendant could not define whether it was about the law of Germany or just the insurance clause of an insurance company in Germany, and the plaintiff didn’t explain. As the documents were just copies and lack of notarization and legalization and the plaintiff only submitted the translation of some clauses which lacked of authenticity, completeness and didn’t meet the requirements of the form of an evidence required by law, it shall not be regarded as evidence. Among other evidence submitted by the plaintiff, the key evidence, such as the insurance policy, the probation report on the damaged cargo, the letter of subrogation were original documents and the specific stipulations (Clause ADS in 1973, 1984 version) on cargo insurance and the specific conditions for open policy in German Maritime Insurance General Rules had been notarized and legalized. Also the aforesaid evidence was inter-related and the defendant had no objection. Therefore the authenticity of such evidence was confirmed. The defendant submitted the following evidence to support his argument: (i) Customs entry of the cargo (ii) Duty free certificate of the cargo (iii) Letter about negotiation between the defendant and Shanghai Jie Gao Co., Ltd. on the settlement of the loss, and some relevant vouchers. The plaintiff didn’t raise any objection to the foregoing evidence and its effectiveness was confirmed. Considering the above said evidence together with what had been obtained from the court trial, the following facts were hereby confirmed: On August 26,1991, the office of the insurance broker WAGNER Insurance Company (hereinafter refereed to as WAGNER) had, on behalf of the plaintiff, executed a contract with the insured, Die Mayer-Firmengrupe, Mayer&Cie. Gmbh&co., for cargo transportation insurance under open policy, of which the insurance term was from January 1, 1992 to January 1, 1993. If there was no objection, on the day of expiration, the insurance contract would renew for another year automatically. It was stipulated in the open policy that the right of transferring the name would take effect on January 1, 1995. WAGNER, on behalf of the plaintiff, issued a standard maritime insurance policy No. 95/2001 to the bearer, on which it was provided that this insurance was included in the aforesaid open policy, the insurable interest was granted to the bearer, the amount of insurance was German Mark 214,300 and the insured cargo was the 20 feet container with 2 pallet shelves. The content of the cargo to be recorded according to the vouchers and the gross weight of the cargo was 3500Kg. The cargo was transported from Albstadt, Germany through Hamburg to Shanghai, China. The period of insurance liability was from warehouse to warehouse with the premium paid. The organization for settling claims was the People’s Insurance Co. of China, Shanghai Branch. The insurance conditions were: ADS of German Maritime Insurance General Rule; the specific conditions for loading (ADS Cargo of 1973, the 1994 version) and the terms and conditions of the insurance contract under the open policy. The form of the insurance policy was ADS all risks policy added with clauses of DTV war, strikes, and risks of machine and means of transport. It was stipulated in the over leaf clauses of the B/L of sea transportation that the period of insurance was warehouse-to-warehouse and pursuant to Article 5 of 1973-1984 version of ADS Cargo, the insurance liability would terminate when the cargo was delivered to the place appointed by the consignee in the destination (the final delivery place). It was stipulated in the specific conditions under the open policy and German Maritime Insurance General Rules (ADS Cargo of 1973, 1984 version) that according to law and in accordance with ADS, the open policy was not an independent policy, while the specific policy was an independent policy. In case the cargo was not transported in the way as agreed, the insurer shall be free from his obligation. In case the cargo had been delivered at the place appointed by the consignee in the destination (the final delivery place) and/or after the discharge of the cargo at the destination port and the cargo was to be forwarded to any other destination not named in the insurance contract and the risk increased because of the change of the destination, and/or after 60 days of the completion of discharge of the insured goods from the carrying vessel at the destination port, the insurance will terminate. If the insured claimed for compensation for the amount of insurance, the insurer will get the right of subrogation, including all the rights and remedies of the insured goods, after paying the insurance premium. Whereas the basis of the insurance contract was the specific provisions respecting cargo in German Maritime Insurance General Rules (ADS Cargo of 1973). During the court hearing the plaintiff failed to prove whether German Maritime Insurance General Rules (ADS Cargo of 1973) was the law of Germany, or just a standard insurance clause of an insurance company. On February 18,1995, in Breman, Germany the carrier issued a maritime transport B/L No. BRE/SHA/504 of the head office of China Ocean Shipping Cooperation (Group), in which it was stipulated that the consignor was Gernan Jie Gao Mechanical Engineering Co. Ltd.(Hong Kong), the consignee was Shanghai Jie Gao Company and the cargo was transported from Hamburg to Shanghai, CY-CY. The cargo with a gross weight of 3500 Kg was packed in a 20 feet container and arrived at Shanghai on March 21. On April 4, the defendant went through the procedures for Customs entry in Caohejing Administration of Customs, Shanghai. The defendant declared that the goods was a cylinder knitting machine with foreign investment, produced in Germany and its CIF price to Shanghai was German Mark 98,000, with the exemption from import duty. On April 7, the container was opened in Caohejing High-technology Zone, Shanghai. It was stipulated in the probation report issued by the People’s Insurance Company of China, Shanghai Branch by request of Shanghai Jie Gao Company, that the knitting machine was placed on a wooden pallet shelf by the consignor, packed in aluminum foil paper, then put into the container. In addition, the assessor was informed by the consignee that on April 8, when the workers lifted the pallet shelf to send the goods to the warehouse, the pallet shelf suddenly turned over and fell on the ground from about 1 meter high. The knitting machine was deformed and, considering the high precision, it was determined that there was no value to repair it. The probation report believed that the reason for the damage was the accident happened during the lifting up of the pallet shelf. On March 19, 1997, some one representing the defendant issued an explanation on the accident that as Shanghai Jie Gao Company had no equipment to open the container, it asked the defendant to offer the service to send the goods to the factory building. On April 7,1995, the goods were put in the open air. On April 8, the operator of the defendant didn’t find any unusual situation when he took out the knitting machine with forklift. When the knitting machine was lifted up and put on a truck to be sent to the factory building of Shanghai Jie Gao Company in accordance with the plan, as Shanghai Jie Gao Company failed to inform the defendant that the fittings in the wrapping bag haven’t been fixed and the machine was overweight by 170kg , the machine inclined and fell on the ground, leading to its total loss. After negotiation, the defendant paid RMB13833.15 for compensation to Shanghai Jie Gao Company, for which the plaintiff was not responsible according to the insurance contract, (including the costs and expenses for the appraisal, packing and exporting the wreckage of the knitting machine, the cost for importation, fees for Custom clearance and storage fees for importing a new knitting machine). On October 12, 1995, the German Mayer & Cie. Gmbh & Co. received the compensation amounting to German Mark 190,000 from the insurance broker of the plaintiff WAGNER Company, meanwhile transferred the right to claim against the third party to the insurer, namely the plaintiff. The plaintiff brought an action to the First Intermediate People’s Court of Shanghai in March, 1997. On August 11, 1997, the case was transferred to this court for hearing. In the notes of the original hearing, the plaintiff stated that the German insured was the seller of the goods in this case, that the goods was sold to German Jie Gao Company, and that it was stipulated in the contract of sale that Shanghai Jie Gao Company was appointed as the consignee and the price term was CIF. This court held that the parties to the contract were entitled to choose the applicable law to the contract according to the principle of self-determination of free will. The plaintiff failed to prove that the parties to the insurance contract in this case made any choice of law to be applied to this case, nor did the plaintiff offer any relevant German law which had the closest connection with the insurance contract. In the court hearing, as the defendant indicated that the law of the PRC shall be the applicable law and the plaintiff agreed, and this was also in conformity with legal principles, hence this court adopted the relevant law of the PRC as the applicable law for defining the relationship of the parties under the insurance contract. In accordance with the provisions of the law of the PRC, the maritime insurance contract was a contract according to which the insurer shall make compensation for the loss of the insured object and bear the consequences resulting from the loss suffered by the insured due to the risks insured against and shall be answerable for the liabilities arising therefrom, while the insured shall pay the insurance premium. In case the loss of the insured object within the scope of coverage under the insurance contract was caused by a third party, the right of claim of the insured against the third party will be transferred to the insurer from the time the insurer paid the compensation. Obviously, pursuant to the provisions of law, the acquisition of the right of subrogation shall be based on the effective insurance contract under which the insurer had made proper and reasonable settlement of the claims by the person entitled to the insurance benefit. As for the improper and unreasonable settlement of claims, the insurer will not automatically have the right of subrogation even with the letter of subrogation. In this case, the plaintiff just only submitted an order for purchase of the goods, which had no substantive relationship with the insurance contract or the contract for carriage of goods by sea. The plaintiff didn’t submit evidential proof as to whether the two trade partners had any agreement on the ownership of the goods or the subrogated party in insurance had the ownership or insurance benefit when the accident happened. Therefore, even the subrogated party held the insurance policy, it couldn’t prove that he had the insurance benefit according to the principle of insurance benefit. In accordance with the plaintiff’s statement in the court, the goods in this case had been sold to the German Jie Gao Company, and Shanghai Jie Gao Company was appointed the consignee. After the arrival of the goods, Shanghai Jie Gao picked up the goods. Obviously, the delivery of the goods indicated the transference of the ownership. At this time, the German insured had no benefit of the goods. As the B/L was in fact a document of title and the consignee stated therein was Shanghai Jie Gao Company which had been proved by the fact that the latter had picked up the goods, thus this court could infer that it was the latter who had the ownership of the goods and shall enjoy the insurance benefit, not the subrogated party in insurance. Whereas the plaintiff had settled the claims of the insured and accepted the letter of subrogation, and considering what was said above, the obtaining of the right of subrogation had no support of law and fact, thus the plaintiff couldn’t have the qualifications of a party to an action. As the plaintiff failed to prove the subrogated party enjoyed any right to the goods when the accident happened, this court didn’t support his claim for his right of subrogation based on the transference of the creditor’s rights from the subrogated party of insurance. It was stipulated in the insurance policy that German Maritime General Rule (ADS Cargo of 1973) was applicable. Although the plaintiff didn’t prove whether it was the law of Germany, it didn’t affect its application to this case. The provisions of the “warehouse-to-warehouse” Clause on the term of insurance liability was applicable to this case. As there were different opinions in the understanding of the clause “place appointed by the consignee (the final delivery place)” between the defendant and the plaintiff, and the plaintiff didn’t quote any legal interpretation in the law of Germany or international convention for “the final delivery place”; besides, there was no such definition or interpretation in the law of PRC either, the famous clause of ICC, which had been widely used internationally, will be used to explain the warehouse-to-warehouse clause. The provisions of the insurance clause that “the insurance will terminate when the goods are forwarded to the place of destination appointed by the consignee, that is the final delivery place”, will be understood as the insurance will terminate after the goods arrived at the destination port and sent to the first warehouse or other storage place of the consignee in the destination. “The first warehouse or other storage place” include the place belonging to, or leased by, or borrowed by the consignee or it’s just a place for deposit. Considering the actual situation of this case, the goods had arrived at Cao Hejing High-Technological Zone of Shanghai, in which the Shanghai Jie Gao Company located, it shall be regarded that the goods had arrived at the final delivery place and the duration of the insurance liability terminated. Furthermore, the container was opened at the place of the defendant, leading to the material change of the mode of transport (from containerized transport to non-containerized transport) and increasing the risk of transport. According to the provisions of the insurance clause, the insurance liability terminated and the insurer was free from any responsibility for the damage to the goods. As the plaintiff’s claim that the damage of the goods happened within the term of the responsibility of insurance had no factual basis, this court does not support it. Since there was no contract between the plaintiff and the defendant, and the cargo damage happened in the territory of China, the law of the PRC shall be applied to this controversy over the tortious act according to the principle that “The law of the place where a tort is committed shall be applied to tortious damage. In accordance with the provisions of the law of the PRC, the work of lifting the goods in this case didn’t come under the statutory regulations basing on the no-fault liability shall be applied. Hence the victim in the tortious act shall prove the facts of damage, the illegality of the action and the causation between the action and the damage. Both the probation report and the statement of facts had description of the situation of the cargo damage, and the probation report also made a presumption of the reason of the cargo damage. But neither of the evidence made an analysis of the liability for the cargo damage. Nor did the plaintiff submit any evidence in support of the fault of the operator of the defendant during his work, while the evidence provided by the plaintiff just proved that it was the package of the goods and the improper distribution of the goods that caused the cargo damage. The plaintiff failed to prove neither the existence of the defendant’s fault nor the causation between the cargo damage and the defendant’s fault. Therefore the plaintiff’s claim that the defendant shall bear the liability of tortious damage had no factual basis and can’t be supported. In conclusion, the plaintiff’s claim will not be supported considering the following facts: (i) The plaintiff didn’t prove that the person subrogated had insurance benefit at the time the accident happened (ii) Since the accident didn’t happen within the time period of “warehouse-to-warehouse”, the plaintiff as an insurer didn’t have any responsibility for indemnity under the insurance. So the plaintiff didn’t have the capacity of being the subject of an action as a subrogated party in the insurance. (iii) The plaintiff didn’t prove that the action of the defendant constituted a tort either. According to Clause 1 of Article 64 of the “Civil Procedure Law of the People’s Republic of China”, Clause 1 of Article 84, Article 142, Article 145 and Article 146 of the “General Principles of Civil Law of the People’s Republic of China” as well as Article 71 and Article 216 and Clause 1 of Article 252 of the “ Maritime Code of the People’s Republic of China”, The judgment is rendered by this court as follows: The claim of the plaintiff, namely the Helvetia Schweizerische Versicherungsgesellschaft, will not be supported. The court acceptance fee of this case is RMB 15,160, which will be borne by the plaintiff. In case the plaintiff or the defendant, as the case may be, refuses to comply with this judgment, the plaintiff can appeal to the Higher People’s Court of Shanghai within 30 days of receipt of this judgment, while the dependent may within 15 days of the receipt of this judgment submit the statement of appeal to this court together with copies thereof according to the number of the litigants of the opponent party. Within 7 days from the next day of submitting the statement of appeal, the appellant shall pay the costs of appeal to this court in advance, which is the same amount as the court acceptance fee for the first instance determined by this judgment. If failed to pay in time, it shall be deemed that the appeal petition has been withdrawn. Presiding Judge: Ni Chunnan Acting Judge: Sheng Jun Acting Judge: Zhang Liang Certified true copy August 7, 2001 Clerk ：Wang Lei

BEIHAI MARITIME COURT PEOPLE’S REPUBLIC OF CHINA CIVIL JUDGMENT No.Hai-Shi-Chu 009(2001) Plaintiff: Zhang Yuanbin, 47 years old, male, Han nationality Domicile: No.12Caixi Road, Xichang Town, Hepu County,Guangxi Zhuang Autonomous Region Agent ad Litem: Pang Xingzhong, attorney-at-law of Xiandao United Law Firm, Guangxi Zhuang Autonomous Region Defendant: Han Qiyao, male, 30 years old, Han nationality, farmer Domicile: Dashitun Village, Bantang Villagers Committee, Lianzhou Town, Hepu County, Guangxi Zhuang Autonomous Region Defendant: Han Yuzhi(father of Han Qiyao), male, 56 years,old, Han nationality, farmer Domicile: the same as above Agent ad Litem: Lin Xiang, staff of Haining Law Office, Nanning City Defendant: Pang Huang, male, 42 years old,Han nationality, farmer Domicile: Lianchang Road, Xichang Town, Hepu County, Guangxi Zhuang Autonomous Region This court, on May 29, 2001, accepted the cases of dispute over neighbor relations concerning the shrimp pond and formed a collegial bench for hearing the case. The litigants were the plaintiff Zhang Yuanbin, and the defendants Han Qiyao, Han yuzhi and Pang Huang. The case was transferred to this court by Hepu County People’s Court of Guangxi Zhuang Autonomous Region. The bench held public hearings on July 3 and August 9 respectively with the presence of the plaintiff Zhang Yuanbin and his Agent ad Litem Pang Xingzhong, the defendants Han Qiyao and Han Yuzhi and their Agent ad Litem Lin Xiang. The defendant Pang Huang refused to appear before the court without proper reasons after being summoned. The hearing of this case has now been concluded. The plaintiff alleged that since 1994 the plaintiff had been going to his shrimp pond neighboring the defendants’ shrimp pond through the dike built by both the plaintiff and the defendants. However, in January 2001 the defendants Han Qiyao and Han Yuzhi piled the silt on the dike while clearing the pond. In April the defendant Pang Huang built a house on the dike, which blocked the sole path to the plaintiff’s shrimp pond. As a consequence, the plaintiff was unable to take care of and fish for the raised winter shrimp to sell in the peak period. The winter shrimp thus died and spring shrimp seedlings could not be bred in time. Therefore, the plaintiff demanded that the defendants clear away the obstruction, restore the dike to its original conditions and compensate for the losses of ￥80,000. The defendants Han Qiyao and Han yuzhi argued that the dike of their shrimp pond was not the only passage to the plaintiff’s shrimp pond because the plaintiff could go to and come back from his shrimp pond via the seaside embankment. The plaintiff was not entitled to the right to pass through the dike. The defendants legally ran their shrimp pond by raising the dike with silt from the bottom of the pond, which did not infringe on or interfere with the plaintiff’s rights. Furthermore, the raised dike was still passable. The defendant demanded that the court reject the plaintiff’s litigant requests because the plaintiff did not present the evidence for the causes and the amount of his losses of ￥80,000. In addition, Han Qiyao should not be the defendant of this suit because the shrimp pond was the property of Han Yuzhi and had nothing to do with Han Qiyao. The defendant Pang Huang made no argument. The following facts were affirmed: the plaintiff, along with Pang Huang and Pang Xong as his partners, bought a shrimp pond of an area of 50 mu. They had applied to the Office of Development and Administration of Beaches of Xichang Town, Hepu County for the certificate of temporary use of beach No. he-di-lin-yong-16(1994) which stated: applicants: Pang Huang, Zhang Yuanbin and Pang Xong; item: shrimp breeding; location and catalogue: the beach of Dongjiang River estuary; usable area:50 mu Around 1997, the shrimp pond was divided among the plaintiff, the defendant Pang Huang and the outsider of this case Pang Xong. The plaintiff had the right to utilize the shrimp pond of the size of 18-mu extending in the east to Pang Xong’ pond, in the west to Shuigou Road，in the south to the uncultivated land and in the north to Han Yuzhi’s pond. In 1996 the defendants Han Yuzhi and Han Qiyao bought a shrimp pond of 40-mu. Both the plaintiff’s pond and the defendants’ pond were located on the beach of Dongjiang River estuary of Xichang Town in Hepu County. The north of the plaintiff’s shrimp pond was bordering part of the south side of the defendants’ (Han Qiyao and Han Yuzhi) shrimp pond. The most convenient passage for the plaintiff to get to and back from his shrimp pond was the dike of the defendants’ (Han Qiyao and Han Yuzhi) shrimp pond. Besides, the plaintiff had been going to and coming back from his shrimp pond through this dike ever since he bought the shrimp pond. This dike was 3 metres wide and open to traffic for vehicles. The plaintiff may make a detour through the seaside embankment, but the walking distance to the plaintiff’s shrimp pond via the embankment would be more than double the distance at least as via the dike. Besides, it would be unsafe and inconvenient. In January, 2001 the defendants Han Qiyao and Han Yuzhi cleared the shrimp pond and piled the silt up on the dike. With the dike bumpy and overgrown with weeds, it was not passable for both foot passengers and vehicles. In April, the defendant Pang Huang built his house on the dike. The kitchen of the house took up in width of approximately two thirds of the dike, the necessary passage for the plaintiff. The plaintiff claimed the losses of ￥80,000 resulting from the deaths of winter shrimp and failure to breed spring shrimp due to the blocked dike. However, the plaintiff did not present sufficient evidence for his claim. The aforementioned facts, after cross-examination and being ascertained and verified by the court, had been entered in the court records and proved by the following evidence:（1）evidence presented by the plaintiff：the certificate of temporary use of the beach and photos of the locale；（2）evidence presented by the defendants Han Qiyao and Han Yuzhi：the certificate of use of the sea beach, receipts of shrimp pond administration fee and the photos of the locale；（3）investigation records of Hepu County People’s Court. In accordance with the facts affirmed and related evidence, this court held: This case was about a dispute over neighbor relations regarding shrimp ponds. The legally prescribed neighbor relations existed between the plaintiff and the defendants, viz. Han Qiyao and Han Yuzhi on the basis of their geographically adjacent shrimp ponds. Neighboring users of shrimp ponds should make things convenient for each other or accept necessary restrictions, i.e. it was a must to properly expand or restrict the right of using shrimp ponds owing to the existing neighbor relations. It was the most convenient way for the plaintiff to go to and come back from his shrimp pond through the defendants’ (Han Qiyao and Han Yuzhi) dike. The plaintiff could reach his shrimp pond through the seaside embankment, but the detour unnecessarily increases the distance and costs. Besides, it was unsafe and inconvenient. Hence, for the plaintiff, reaching his shrimp pond through the defendants’ (Han Qiyao and Han Yuzhi) dike best accords with the spirit of promoting production and facilitating people's life. Besides, the fact that the plaintiff had been passing by this dike to his pond was a long-time practice and should be protected by law. The defendants Han Qiyao and Han Yuzhi had the right of using their shrimp pond, but the exercise of this right shall be restricted according to law. In the spirit of facilitating people's life and enhancing unity and mutual assistance, the defendants should pay due regard to the existing practice and permit or at least not to obstruct the plaintiff’s passing through the dike. In neighbor relations, neighboring users should respect each other’s rights and consider each other’s interests. It was prohibited to benefit oneself at the expense of others. In this case the defendants Han Qiyao and Han Yuzhi improperly blocked the dike while clearing their shrimp pond and refused to make it passable.Thus, the two defendants at fault shall be responsible for the removal of obstacles and restoration to the original passable conditions of the dike. The defendant Pang Huang built his house on the dike and the kitchen of the house took up in width of about two thirds that of the dike, which resulted in impassability of the dike. Therefore, the defendant Pang Huang should demolish the kitchen, i.e. he should undertake the responsibility to remove obstacles and restore the dike to its original conditions. Although the right of using shrimp pond was under the name of the defendant Han Yuzhi, the shrimp pond was mutually operated and managed by the Hans’ and was the main source of income for the whole family. And, withal, Han Qiyao, as the son of Han Yuzhi, mainly operated and managed the shrimp pond. Consequently, it was correct to have Han Qiyao as a defendant and demand him to bear civil liability. The argument of the defendant’s representative that Han Qiyao should not be qualified for the defendant of the case did not agree to the facts found out by this court and shall be rejected. On the other hand, the plaintiff did not present sufficient evidence to prove the existence of the losses and the inevitability of the losses resulting from the dike’s being blocked and made impassable. That is, the plaintiff did not prove the causality between the acts of the defendants and the losses of the plaintiff. Hence, the losses of ￥80,000 claimed by the plaintiff shall not be supported by this court. Pursuant to Article 83 of the General Principles of the Civil Law of the People's Republic of China:“In the spirit of facilitating production, making things convenient for people's life, enhancing unity and mutual assistance, and being fair and reasonable, neighboring users of real estate shall maintain proper neighbor relations over such matters as water supply, drainage, passageway, ventilation and lighting. Anyone who causes obstruction or damage to his neighbor, shall stop the infringement, eliminate the obstruction and compensate for the damage”, this Court hereby decides as follow: 1.The defendant shall restore the shrimp pond dike to its original passable condition and remove the obstacles to the passage through the dike by the plaintiff Zhang Yuanbin within 15 days after the judgment becomes effective; 2. The defendant Pang Huang shall demolish the kitchen of the temporary house built on the shrimp pond dike and remove the obstacles to the passage through the dike by the Plaintiff within 15 days after the judgement becomes effective; 3. The other litigant requests of the plaintiff shall be dismissed. The fee for acceptance of the case is ￥3,520 and other litigation fees are ￥300, being totally￥3,820, of which the plaintiff Zhang Yuanbin shall bear the sum of ￥2,520, the defendants Han Qiyao and Han Yuzhi shall bear the sum of ￥900, the defendant Pang Huang shall bear the sum of ￥400. The three defendants shall pay directly to the plaintiff within 10 days after the judgment becomes effective. This court shall not refund the fee for the acceptance of the case paid in advance. If any litigant contests this judgment, it may submit a written appeal to this court within 15 days upon the delivery of the judgment with number of copies corresponding to the number of litigants from the opposing party and appeal to the Higher People’s Court of Guangxi Chuang Autonomous Region. The appeal fee of ￥3,520 yuan shall be paid in advance within 7 days upon the date of the expiration of the appeal period (the account: the special account for litigant fee, the Higher People’s Court of Guangxi Zhuang Autonomous Region; the number of the account: 886100010; the deposit bank: Gucheng Road Branch of Nanning City, China Agriculture Bank). If the payment is delayed without application for postponement, the appeal shall automatically be deemed as being withdrawn. Presiding Judge Zhang Qiancheng Judge Ni Xuewei Judge Liu Qiaofa (Official Chop of Beihai Maritime Court) Date 5th September, 2001 Certified true copy Clerk Chen Bo

BEIHAI MARITIME COURT PEOPLE’S COURT OF CHINA CIVIL JUDGMENT No. Hai-Shi-Chu 002(2001) Plaintiff: Shenzhen Xunlong Shipping Co., Ltd. Domicile: 2nd Floor, Shekou Station, Shenzhen, Guangdong Province Legal Representative: Cui Tieying, General Manager Agents ad Litem: Zhao Jinsong, legal Counsel Deng Xiaomao, Lawyer of Guangdong Qizheng Law Office Defendant: Jinwan Trade Co., Ltd., Fangchenggang Domicile: Xingang Road, Jinsha, Gangkou District, Fangchenggang, Guangxi Legal Representative: Weng Zhaojin, General Manager Agent ad Litem: Yin Nianchang, Male, Han nationality, Teacher at Zhanjiang Oceanography University Defendant: Guangxi Ocean Shipping Co., Ltd. Domicile: No. 37, Gucheng Road, Nanning, Guangxi Legal Representative: He Jianping, General Manager Agent ad Litem: Yuan Xiaoyong, Lawyer of Yongjiang Law Office This court, after entertaining the cases of dispute over compensation for damage arising from collision of ships between the plaintiff Shenzhen Xunlong Shipping Co., Ltd. and the defendants Jinwan Trade Co., Ltd., Fangchenggang (hereinafter referred to as “Jinwan Co.”) and Guangxi Ocean Shipping Co., Ltd. (hereinafter referred to as “Ocean Shipping Co.”) on 9th January, 2001, duly formed a collegial bench and evidence was exchanged before the court on 28th March, 2001. The court held public hearings on 29th March and 12th November, 2001 respectively. Zhao Jinsong and Deng Xiaomao, the agents ad litem of the plaintiff, Weng Zhaojin, the legal representative of the defendant Jinwan Co., his agent ad litem Yin Nianchang, and Yuan Xiaoyong, the agent ad litem of the Defendant Ocean Shipping Co. attended the court hearings. Now this case has been concluded. The plaintiff alleged that: at 2100 hrs of 7th September, 2000, the passenger ship Xun Long 2, owned by the plaintiff, left HK-Macao Wharf, Hong Kong. After it entered the North Channel, Xun Long 2 sighted a small cargo vessel (Xiong Chang 1, owned by the defendants) approaching on starboard bow. Xun Long 2 took prompt emergency measures to avoid collision by sounding one-blast signal, reducing her speed and stopping her engine urgently. However, the ships still collided with each other at 2106 hrs. The accident was caused by Xiong Chang 1’s failure to maintain a proper look-out, to proceed at a safe speed, choose the right time to cross the channel and take effective action to avoid collision when risk of collision existed. Xiong Chang 1 seriously breached the International Regulations for Preventing Collisions at Sea and thus shall be solely liable.. After the accident, Xun Long 2 reported the accident to Hong Kong Maritime Department in time and applied to China Classification Society (CCS) for survey. As a result of the accident, Xun Long 2 sustained losses of RMB 3,066,002.10 including cost of repairs, loss of time and so on. Therefore, the court was pleaded to enter a judgment ordering the defendant to compensate the plaintiff for the aforesaid loss and bear the legal cost of this case. The defendant Jinwan Co. defended that the collision proved to be true. However, Xun Long 2 proceeded in the channel at a high speed with bad lookout. Therefore, the majority of liability for the collision should fall on the plaintiff while the minor on the defendant. Among the cost of repair of the plaintiff’s ship, those items which didn’t come under or result from the collision such as the cost of repairs of the main propeller and the expense for changing the window curtains and the carpets, all of which shall be deducted from the cost of repairs alleged by the plaintiff. The consequential loss shall not be certified as the losses to be compensated for. The defendant shall only be liable for the losses caused by the collision in proportion to the extent of the liability it shall bear. The Defendant Ocean Shipping Co. defended that this company was neither the shipowner nor the operator of Xiong Chang 1 and the crew members on board the ship were not manned by this company. Therefore, this company should not be held responsible for the dispute over the collision. After examination, it was established that at 2100 hrs of 7th September, 2000, Xun Long 2, owned by the plaintiff, left Hong Kong-Macao Wharf, Zhonghua, Hong Kong for Shekou, Shenzhen with 35 passengers on board. Liang Zewen, the master, was steering the ship; Zhang Sian, the chief mate, and Zheng Dong were monitoring the night visual instrument and radar plotting; Fan Dongben, the engineer, was monitoring the engine. After leaving the wharf, Xun Long 2 entered the North Channel of Victoria Port, approaching Buoy No. 4 on a true course of 320 deg. and at a speed of 32 knots (the ship held the Certificate of Speed Immunity issued by Hongkong Channel Authority permitting the ship to sail at the speed of 30 knots in the channel.). At 2035 hrs, Xiong Chang 1, owned by the defendant, left Cuiyong Container Terminal for the anchorage to wait for berth while Su Weicheng, the second mate, was steering the ship; Gao Yingguang, the master, was controlling the speed; Weng Zhaojin, the able-seaman, was engaged in radar-plotting. At that time, the weather in the water area of Hong Kong was excellent. The wind was northeasterly force 4; the sea was slight. The visibility was 3-5 miles. At 2107 hrs, in the vicinity of Long. 114º7′30″E, Lat. 22º9′12″N, Xun Long 2 sighted Xiong Chang 1 at a distance of about 0.4 mile forward of her starboard beam and sounded one-long-blast and made a hard-to-port to avoid collision. However, before the rudder effect came into force, Xiong Chang 1 collided at an angle of about 90ºon her frames no. 18-23 of her starboard side. Only 20 seconds after sighting of Xiong Chang 1 by Xun Long 2, the collisions of the two ships occurred. Xiong Chang 1 submitted that she was proceeding on a true course of 220 deg. and at a speed of 4-5 knots, and that 10 seconds after the sighting of yellow light and red-blue side-light of Xun Long 2, the collision occurred. The radar monitoring plan made clear that neither ship took any action of reducing speed nor maneuvering to avoid collision. After the collision, Xun Long 2 was permitted to send the injured passengers on board back to Hong Kong-Macao Wharf for medical treatment at a slow speed. At that night, Xun Long 2 was towed to Hong Kong Friendship Shipyard Co., Ltd. (hereinafter referred to as “Friendship Shipyard”) for berthing and repair. On 8th September, 2002, CCS, entrusted by the plaintiff, and China Survey Co. Ltd. who was entrusted by Huaan Property Insurance Co., Ltd., the insurer of Xun Long 2 and (China Survey Co. Ltd. in turn entrusted Hong Kong Marine Survey Co., Ltd. to carry out the survey on the spot), inspected the damage arising from collision jointly and issued the written reports respectively. As confirmed by the parties at the court hearing, the survey report No. 2000BS2256 issued by China Survey Co., Ltd. could be taken as documentary evidence to prove the damage to Xun Long 2. The report stated: “All damage to Xun Long 2 was in the position between frame No. 18 and frame No. 23, indicating that Xiong Chang 1 collided on the frames 18-20 of Xun Long 2 at right angle and all the damage was above the water line. The report listed 30 items of damage to Xun Long 2 in 8 categories and estimated the cost of repairs at HK$1,350,000.00. Afterwards, the plaintiff entrusted CCS to inspect Xiong Chang 1. Gao Yingguang, the master of the ship, did not allow the surveyor of CCS to come on board who thus failed to conduct the survey. However, when inquired by Hong Kong Marine Department, the master and Weng Zhaojin, the sailor, admitted their not having been trained or having been trained only for about 2 days to conduct the radar plotting and lacking of fundamental idea of maneuvering ships. Gao Yingguang, the master, alleged in the marine investigation report that the paint on the port bow of Xiong Chang 1 was scraped off. Xun Long 2 was repaired at Friendship Shipyard from 8th September to 15th October, 2000, during which the plaintiff put the ship into operation from 30th September to 8th October for the National Holiday operation. During the period when the ship was repaired at Friendship Shipyard from 8th September to 29th September and from 9th October to 15th October, in order to maintain the normal operation of the voyage from Shekou to Hong Kong, the plaintiff chartered a passenger ship twice from other company to take the place of Xun Long 2. The plaintiff submitted to this court the invoices for the payment of various expenses including towage paid to Friendship Shipyard, cost of repairs, hire paid during the time the ship was under repair, port dues, cost of bunker and lubricating oil, survey charges paid to CCS, expenses of boarding and traffic of the passengers delayed due to the collision, traffic and communication expenses for settling this accident, fee of marine investigation, legal consulation fee and lawyer’s fee, totaling HK$3,066,002.10, which included towage after the collision in the amount of HK$45,745, cost of repairs of the life rafts in the amount of HK$73,020, cost of repairs charged by Friendship Shipyard in the amount of HK$1,500,880 which included HK$151,402.50 for the cost of repair of the main propeller, cost for change of releasers of the life rafts, cost for change for new window curtains and new rugs, cost of repair of engine, additional expenses arising from temporary operation on the National Holidays and the added wharfage and mooring charge arising therefrom; HK$600,000 and HK$190,911 for the hire of the chartered ship from other company to take the place of Xun Long 2 from 8th September to 29th September, 2000 and from 8th October to 15th October, 2000 respectively; and HK$391,708 for bunker, HKS9,894.80 for lubricating oil, HK$119,017 for port dues occurred during the chartering period; HK$32,100 for survey fee for CCS; expenses for boarding and traffic of the passengers delayed due to the collision in the amount of HK$15,638.30; expenses of traffic and communication for settling this accident in the amount of HK$15,020; fee of marine investigation in the amount of HK$2,931; HK$5,000 for legal consultation fee; and HK$64,137 for lawyer’s fee. It had also been established that Xun Long 2 was a twin aluminium alloy speedy passenger ship built in Norway in August 1998 with the following particulars: LOA 38m, breadth 11.20m, depth 3.90m, GT 531 MT, NT 159 MT and HP 3,152 KW. The Certificate of Vessel’s Registration was obtained on 14th August, 1998 and the owner was the plaintiff. Xiong Chang 1 was a general cargo ship built in Vietnam and registered in Fangchenggang, Guangxi Zhuang Autonomous Region. The particulars of the ship were as follows: LOA 53.55m, breadth 7.63m, depth 3.2m, GT 298 MT, NT 176 MT and HP 224 KW. The ship held two sets of certificates, one of which included the Certificate of Vessel’s Registration of the PRC stating that the ownership was obtained on 12th June, 1996, and the Nationality Certificate of PRC which was valid from 12th June 1996 to 12th June 2001, both of which showing that the registered shipowner was Jinwan Co. and the legal representative of the shipowner was Weng Zhaojin; the other set contained the Certificate of Vessel’s Nationality of the PRC which was valid from 21st November, 1997 to 20th November, 2002, and several Permits for Sailing at Hong Kong and Macao which were valid from May, 1997 to 30th May, 2000, from 18th September, 1997 to 17th September, 2000, from 30th May, 2000 to 30th May, 2002 respectively, both of which showing that the shipowner and the operator was the defendant Ocean Shipping Co.. Jinwan Co. was a private company under the name of Weng Zhaojin. Because individual ship operators were not allowed to operate on international ocean shipping, the company, on 20th July, 1997, entered into a ship management agreement with Ocean Shipping Co. which stipulated: The ownership of Xiong Chang 1 remains with Jinwan Co. The Ocean Shipping Co. consented that Jinwan Co. may go through the shipping procedures including the certificate of registration, Operation Certificate under the name of Ocean Shipping Co.. Shipping Operation Area: Coast of China including Hong Kong and Macao and from China to Vietnam. Management Duration: 1997 to 1998; Ocean Shipping Co., as the manager, shall be entitled to be paid the management fee in the amount of RMB30,000 per year by the shipowerner and the operator. Afterwards, Xiong Chang 1, as agreed, was registered under the name of Ocean Shipping Co. and acquired the permit for undertaking ocean shipping business for voyages to Hong Kong and Vietnam. However, Jinwan Co. did not pay the management fee to Ocean Shipping Co. as agreed. After the expiration of the management agreement, Ocean Shipping Co neither applied to relevant authorities for canceling the ocean shipping permits and the corresponding certificates obtained by Xiong Chang 1 under the name of Ocean Shipping Co., nor publicly declared to rescind the management relationship with Jinwan Co.. Jinwan Co. was engaged in ocean shipping all the time under the name of the Ocean Shipping Co. while Ocean Shipping Co. did not manage the ship in reality. The aforesaid facts being supported by the documents submitted by the plaintiff were cross-examined by the parties and recognized by the collegial bench. The documents submitted by the Plaintiff were: certificates of both ships; Certificate of ship’s Nationality; deck log book of Xun Long 2; Marine Accident Reports filled in by both ships after the collision for Hong Kong Marine Department; Hong Kong Marine Department’s Ascertainment Opinions on the accident; radar plotting plans; list of cost of repairs and other vouchers from the Friendship Shipyard; survey reports of CCS and China Survey Co., Ltd., Those submitted by the Defendant were Ship Management Agreement, Hongkong Maritime Safety Administration’s Investigation Document and the record of court hearings by this court. This court held that this was a case of dispute over the compensation for damages arising from collision of ships. Both defendants had their domicile in Guangxi and the plaintiff brought an action claiming compensation for damage arising from collision before this court. Therefore, this court had jurisdiction pursuant to law. Although the accident occurred in the waters of Hong Kong, both the plaintiff and the defendants were in mainland China and the ports of registry were in China too. Therefore, according to paragraph 3 of Article 273 of the Maritime Code of the PRC: “If the colliding ships belong to the same country, no matter where the collision occurs, the law of the flag state shall apply to claims against one another for damages arising from such collision”, the International Regulations for Preventing Collisions at Sea, 1972 and relevant laws of the PRC shall be applied. The actual owner of Xiong Chang 1, the defendant Jinwan Co., was not qualified to engage in international ocean shipping. Obtaining relevant de jure qualification by registering the ship under the name of the other company certainly did not make the ship meet the statutory seaworthiness requirements objectively or de facto. The ship’s complement, from the master to the sailor on duty, being not acquired necessary professional skills or fundamental knowledge on ocean shipping, were not good at operating the radar on board for making radar plotting or equivalent systematic observation, and were not familiar with the navigation rules of look-out, crossing narrow channels or fairways prescribed by the International Regulations for Preventing Collisions at Sea, even didn’t understand them at all. When intended to cross the channel, the ship did not observe nor found out the sailing of the ships in the channel and the surroundings closely, ie. it failed to maintain a proper look-out by sight and hearing as well as by all available means appropriate in the prevailing circumstances and conditions, and consequently failed to sight Xun Long 2 sailing at high speed in the channel. It was only 10 seconds after the ship Xiong Chang 1 crossed the channel rashly and sighted Xu Long 2 that the two ships collided with each other. Obviously, the close-quarters situation had already arisen at the moment when Xiong Chang 1 crossed the channel. According to Article 5 and paragraph 4 of Article 9 of the International Regulations for Preventing Collisions at Sea, 1972 which provides: “A vessel shall not cross a narrow channel or fairway if such crossing impedes the passage of a vessel which can safely navigate only within such channel and fairway”, Xiong Chang 1 was negligent in look-out and should not cross the channel when there were ships sailing there. Therefore, the greater share of the blame for the close-quarters situation should be attributed to her. Although Xun Long 2 held the Speed Immunity Certificate issued by Hong Kong Fairway Administration allowing her to proceed in the channel at the speed of 30 knots, that didn’t mean that she could proceed in the channel at that high speed at any time under any circumstances. When the visibility was less good in the evening than in day time and the North Channel of Port Victoria was very busy, Xun Long 2 should have proceeded at a safe speed, as appropriate, taking into account the time, place and so on. In fact, Xun Long 2 took a laissez-faire attitude towards the safety of herself and any other ship by proceeding at a high speed all the time. Xun Long 2 was at fault in the occurrence of the accident. The fact that it was about 0.4 mile between the two ships when Xun Long 2 sighted Xiong Chang 1 and though maintained a look-out before the sighting, Xu Long 2 failed to sight Xiong Chang 1 meant that Xung Long 2 was at fault in maintaining a proper look-out. For a ship proceeding at a speed of 30 knots, the distance of 0.4 mile could not allow sufficient time and distance for it to take effective action to avoid collision. Therefore, it could be established that before the sighting of the Xiong Chang 1, the close-quarters situation had already been there. Xun Long 2 was blamed for causing the close-quarters situation. Under the close-quarters situation, Xun Long 2 alleged that one long blast was sounded by her to warn Xiong Chang 1. However, under such conditions, the International Regulation for Preventing Collision at Sea provided that the ship shall immediately give at least five short and rapid blasts on the whistle and such signal may be supplemented by a light signal of at least five short and rapid flashes. The action of sounding one long blast was far from being enough. Though made a hard-to-port to avoid collision, there was no positive result in Xun Long 2’s attempt to avoid collision and it was collided by Xiong Chang 1 almost at right angle. Evidently, it was impossible for the ship proceeding at a high speed to take effective actions to avoid collision in such a short time and distance. In fact, the relevant evidence made it clear that up to the collision, neither ship took actions to alter the route or slow down the speed. According to the rule that the blame for causing close-quarters situation is the main principle for the apportionment of liability, while whether the action to avoid collision was taken as a minor point for considerations and under the provisions of Articles 5, 6, 7, 8, 9, 34 of the International Regulation for Preventing Collision at Sea, 1972, taking into account the circumstances under which the close-quarters situation came into existence, and whether the action to avoid collision was taken, also whether such action was appropriate and effective, this court held that the major share, ie. 70% of the liability, should be attributed to Xiong Chang 1, while the minor share, ie. 30% to Xun Long 2. The defendant Jinwan Co.’s defense that the main responsibility for the collision must fall on Xun Long 2 was contrary to the facts ascertained by this court and thus was not tenable. The cost of repairs of Xun Long 2 charged by the Friendship Shipyard was HK$ 1,500,880. However, because the damage to the ship caused by the collision was all above the water line, the repairs of the main propeller and part of the engine under the water line, the replacement of the releasers and connectors of the life rafts, the change of new window curtains and the purchase of new rugs shall not be treated as repairs of the damage caused by the collision. Therefore, such costs shall not be regarded as the cost of repairs of the damage caused by the collision. The additional expense arising from the temporary operation during the National Holidays was the result caused by the plaintiff in putting the ship under repair into operation rather than the inevitable result of the collision of ships. Therefore it shall not be treated as cost of repairs of damage caused by the collision. The additional wharfage and mooring service charge was the running cost in operation and thus shall not be counted as cost of repairs either. The above-mentioned three items, which shall not be counted as the cost of repairs of damage caused by collision, adding up to HK$ 151,402.50, shall be deducted from the cost of repairs charged by the Friendship Shipyard. Therefore the cost of repairs of damage caused by the collision was HK$ 1,349,477.50, which shall be supported pursuant to the proportion of the blame for the collision. After the collision, the plaintiff paid HK$ 45,745 for towage, HK$ 73,020 for the repair of life rafts, HK$ 32,100 for survey fee, and HK$ 15,638.30 as expenses for the boarding and traffic of the delayed passengers, which were all inevitable expenses caused by the collision and thus the claims for which shall be supported by this court according to law. The plaintiff hired a passenger ship to take the place of Xun Long 2 from 8th September to 29th September, 2000 and paid the hire of HK$ 600,000. The hire could be regarded as the loss of time and shall be indemnified by the parties liable for the collision. The fact the plaintiff put the ship into operation during the National Holidays made it clear that the ship had been repaired and could be used, and to send it to the shipyard for further repairs afterwards was unnecessary. Therefore the hire of HK$ 190,911 for hiring the passenger ship to take the place of Xun Long 1 from 8th to 15th October shall not be accepted. As to HK$ 391,708 for bunker, HK$ 9,894.80 for lubricating oil and HK $119,017 for port dues occurred during the chartering period and claimed by the plaintiff, such charges and expenses were normal running costs for the operation of the ship and had nothing to do with the collision, and shall not be agreed by this court either. As to the expenses for traffic and communication in the amount of HK$ 15,020 for handling the accident, the accident investigation fee in the amount of HK$ 2,931, legal consultation fee in the amount of HK$ 5,000, lawyer’s fee in the amount of HK$ 64,137, were not agreed by this court because the plaintiff failed to submit sufficient evidence. To sum up, the cost of repairs sustained by the plaintiff and other acceptable economic losses was HK$ 2,115,980.80 all together, 70% percent of which amounting to HK$ 1,481,186.56, shall be borne by Xiong Chang 1. As the owner of Xiong Chang 1, the defendant Jinwan Co. shall be primarily liable for the collision caused by the ship. Although the defendant Ocean Shipping Co. was not the de facto owner of the ship, yet the defendant consented to and assisted Jinwan Co. in registering Xiong Chang 1 under its name, which turned the defendent into the de jure owner of the ship, entitling her to lawfully possess, utilize, profit from and dispose of the ship, and, when the ship infringed upon another people’s rights, obliging her to compensate for the losses, restore it to its original conditions in the capacity of the owner pursuant to law. In addition, Ocean Shipping Co.’s aforesaid act objectively enabled Jinwan Co., who was not qualified for international shipping operation, to be engaged in shipping between Hong Kong and Macao. Ocean Shipping Co. was the manager of Xiong Chang 1 in name, however, in reality, Ocean Shipping Co. adopted a “none of my business” attitude towards the shipping qualification and capacity of the ship and never performed her duty of management. Therefore, Ocean Shipping Co. was at fault subjectively and was guilty of dereliction of duty objectively in neglecting the managment of the ship. After the expiration of the management agreement, Ocean Shipping Co. neither applied to the relevant authorities for canceling the ocean shipping permits and the corresponding certificates obtained by Xiong Chang 1 under the name of Ocean Shipping Co., nor declared openly to rescind the management relationship with Jinwan Co. Jinwan Co. was engaged in ocean shipping all the time under the name of the Ocean Shipping Co. Therefore, it could be ascertained that both defendants modified the performance duration of the management agreement by their acts, and up to the time of the accident, Xiong Chang 1 was still under the management of Ocean Shipping Co. Because Ocean Shipping Co. was the de jure owner of Xiong Chang 1 and was also responsible for the management of the same, she shall be liable jointly and severally for the damage arising from the ship’s tortious act of collision. According to Article 169 of the Maritime Code of the PRC: “If the colliding ships are all in fault, each ship shall be liable in proportion to the extent of its faults … The ships in fault shall be liable for the damage to the ship, the goods and other property on board pursuant to the proportion prescribed in the preceeding paragraph…”and Article 130 of the General Principles of the Civil Law of the PRC: “If two or more persons jointly infringe upon another person’s rights and cause him damage, they shall bear joint liability.”, The judgment is entered as follows: 1. The defendant Jinwan Trade Co., Ltd. Fangchenggang shall compensate the plaintiff Shenzhen Xunlong Shipping Co., Ltd., within 10 days upon the day on which this judgment comes into force, HK$ 1,481,186.56 for cost of ship’s repairs and any other economic losses, for which the defendant Guangxi Ocean Shipping Co., Ltd. shall be jointly and severally liable. 2. Any other claims lodged by the plaintiff are dismissed. The acceptance fee of RMB 29,340 for this case shall be paid by the plaintiff, the defendant Jinwan Co. and the defendant Ocean Shipping Co. in the amount of RMB 9,340, RMB 10,000 and RMB 10,000 respectively. The acceptance fee prepaid by the plaintiff shall not be refunded by this court separately, while that to be borne by the defendants shall be directly paid to the plaintiff within 10 days upon the day on which this judgment comes into force. Any party who contests this judgment may lodge an appeal before the Higher People’s Court of Guangxi Zhuang Autonomous Region by submitting a statement of appeal to this court with copies in the number of the opposing parties within 15 days upon the service of this judgment. The appeal fee of RMB 29,340 shall be prepaid within 7 days upon the expiration of the time limit for filing appeals. The appeal shall be considered as withdrawn in case neither the appeal fee is paid in time nor the application for deferred payment thereof is filed in time. Payee: Litigation-Fee-Special-Account of the Higher People’s Court of Guangxi Zhuang Autonomous Region Account No. 886100010 Deposit Bank: Agricultural Bank of China Gucheng Road Branch, Nanning Presiding Judge Zhang Desheng Judge Zhang Qiancheng Judge Ni Xuewei (Official Chop of Beihai Maritime Court) Date 19th December, 2001 Certified true copy Clerk Xiao Zibei

SHANGHAI MARITIME COURTt PEOPLE’S REPUBLIC OF CHINA CIVIL JUDEMENT No. Hu Hai Fa Shang Chu 407(2000) Plaintiff : Deqing County Xinshi Oil Factory Domicile: 1 Tayuan Rd, Xinshi, Deqing County Zhejiang Province Legal Representative: Lu Chaoqun, Chairman of the Board Agent ad litem: Li Ming, lawyer of Shanghai Municipal Siwei Law Firm Defendant: Dynamic Care S.A. Panama Domicile: 52 Zossimadou & Tsamadoy St. 185 31 Piraeus, Greece Legal Representative: Vasilatos Dionysios, director of the company Agent ad litem: Huang Shungang, Chen Youmu, lawyers of Shanghai Municipal Huali Law Firm The cases of dispute between the plaintiff Deqing County Xinshi Oil Factory and the defendant Dynamic Care S.A. Panama on the difference of losses in maritime shipping of goods was accepted by this court on November 30, 2000. This court duly formed a collegial bench and held open hearings on April 10 and May 10, 2001. The agent ad litem Li Ming representing the plaintiff and the agent ad litem Chen Youmu representing the defendant were present at the court to intervene. The hearing of the case has now been concluded. The plaintiff stated: the plaintiff imported from Europe 49,856.69 tons of rape-seeds at the price of USD212.50 per ton, a total of USD 10,594,547. The goods were shipped by the defendant’s ship Vita Hope to Shanghai, China. On August 31, 2000, the defendant issued 4 order bills of lading. On October 7 of the same year, Vita Hope arrived at Minsheng Wharf of Shanghai Port and unloaded the goods. On October. 12, the unloading completed. In inspecting the goods, it was found short of 817.08 tons at a loss of an amount of USD173,629.50, and 4,700 tons of the seeds were moulded and deteriorated and mixed with foreign substance, at a depreciation rate of 12%-15%, causing a loss of USD119,850. The above shortage and loss of goods totaled USD293,479.50. The expenses incurred for inspection and application to the court for arresting the ship and legal cost totaled RMB42,000 yuan, equivalent to USD5,000. The plaintiff requested the court to decide that the defendant compensate the plaintiff for the loss of goods of USD293,479.50, plus the bank interest on that amount for the period beginning from the date of claim to the date of coming into effect of the judgment, and that the defendant bear the legal cost and other expenses incurred in the amount of USD5,000. The defendant alleged: The plaintiff could not prove that it had the right of action for the goods under this case. The consignor under the 2 bills of lading was not the seller under the sales contract, and not the owner of the goods under the bills of lading. Thus he had no right to endorse the bills of lading for transfer. SGS-CSTC Standards Technical Services Co., Ltd. (hereinafter referred to as “SGS”) was entrusted by the plaintiff to issue a draft inspection report for a shortage of goods of 124 tons. The report was acknowledged by the defendant as an evidence with legal effect. The plaintiff’s claim against the defendant for a compensation for over 800 tons of loss of goods based on the operation report on bag-filling by the loading and unloading company at the unloading wharf should not be supported. The record of bag-filling operation by Minsheng Harbor Co. was an indirect evidence. Though its weighing apparatus may be accurate, the possibility of erroneous recording could not be ruled out because the record was made by the unloading party on its own，and it could not indicate the actual loading conditions. When SGS made the draft inspection, both the ship side and cargo side were present and they together made the calculations. Even there might be errors, but it was legally fair. The report by SGS stating that the shortage of goods being 124 tons was still within the reasonable error rate of 5% for bulk loading and unloading. Therefore, there was no shortage in unloading. Moreover, the verification method for damage by SGS submitted by the plaintiff was not well-based and the result was not determined; it should not be taken as the basis for deciding the case. As for whether the goods were moulded and deteriorated, the quality of the goods should actually be examined and inspected and the results 　be obtained therefrom. The results should be indicated by such relevant data as the acid content, mould content, etc. The examination report by SGS only provided the data of FFA content, which could not prove that the value of the goods was affected. The amount of loss and depreciation rate of goods determined by SGS report went against the principle of seeking from facts. According to the requirements for inspection of goods, the damaged goods should be separated from the good ones and then to determine the amount and rate of loss. However, the inspection personnel did not operate in accordance with this requirement. The plaintiff did not take any measure to prevent the increase of losses, but mixed the so-called damaged goods with the good ones in filling the bags. This could not prove that there was damage to the goods. The expenses incurred by the lawsuit, application for the arrest of the ship and lawyers’ fee claimed by the plaintiff were not the expenses inevitably incurred and should not be claimed by the defendant. The evidence submitted to this court by the plaintiff and the cross-examination by the defendant were as follows: Evidence One: The 4 bills of lading for the goods involved in this case proved the quantity and the ownership of the goods by the plaintiff， but the defendant held that bill of lading No. 2 had no endorsement; that the name of the consignor under bills of lading No. 3 and No. 4 was not consistent with that of the seller in the trade contract and that the defendant was not the legal holder of the bills of lading. Evidence Two: The invoice of goods proved the unit price and total price of the goods, the description of the quality of the goods by the seller, 　against which the defendant had no objection. Evidence Three: The inspection report of the quantity and quality of the goods involved in this case by SGS. Evidence Four to Evidence Nine were appendixes to that report. Evidence Three to Evidence Nine were respectively the description of the condition of the ship, head-notes of the draft inspection, record by the inspectors about the clogging of goods, stowage plan of the ship, daily report of the loading port, pictures of the damaged goods: proving that through the draft inspection of the goods involved in this case there was a shortage of 124 tons. Owing to the defect existing in the ship itself the conclusion might not accurately indicate the actual quantity of the goods unloaded. The report proved that there were around 4,700 tons of goods clogged, moulded and deteriorated and mixed with foreign substance with a depreciation rate of 12%-15%. The defendant held that the report was made out and consigned by the plaintiff unilaterally. There were many supplements to the report; there were faxed documents and much of the wording was tendentious. The defendant did not acknowledge the quantity of loss of the goods. The draft inspection by the SGS inspectors might have erroneous head-notes, which were made out without the knowledge of the defendant. It was only when the plaintiff brought an action that the defendant knew that the plaintiff had objection to the quantity of goods. The defendant only acknowledged the draft inspection report of the shortage of 124 tons as signed by it. Evidence Ten: Jia Xiaodong, staff from SGS, faxed to Zhang Zhenxian, staff of the plaintiff, proving that the goods appeared loose and clogged that could be broken by pressing with hand. The inspectors held that the defendant was partly responsible for the care for the goods. The defendant expressed doubts as to whether Jia Xiaodong had the qualifications for an inspector, and did not acknowledge the effect of this evidence. Evidence Eleven: The fax from Shanghai Mingyang Freight Forwarding Co., Ltd. to Zhongrun Fat and Oil Industrial Co., Ltd. and the plaintiff of this case which proved that from Oct. 7 to 12, 2000 Deqing Xinshi Oil Factory and Zhongrun Fat and Oil Industrial Co., Ltd. applied for unloading. The ship anchored at No 2 berth of Minsheng Wharf and used the gantry-crane grab bucket to unload the goods and operated the bag filling straight away. According to the record reported by Xinhua Harbor Co. the actual quantity unloaded was 48,418 bags at 60kg/bag, totaling a net weight of 2,905.08 tons; 70,693 bags at 65kg/bag, totaling 4,595 tons. Minsheng Harbor Co. actually unloaded 639,069 bags at a net weight of 65kg/bag, totaling 41,593.485 tons. The total weight of the above was 49,030.61 tons, short of 817.08 tons. The defendant held that the status of Mingyang Co. was not clear, while the loading and unloading company at the wharf was appointed by the plaintiff. It did not acknowledge the effect of this evidence. Evidence Twelve: The daily report by Minsheng Harbor Co. Shanghai Port on unloading of import goods that proved the shortage of 817.08 tons in the unloaded goods, the loss of shortage was shared by the plaintiff and Zhongrun Fat and Oil Co., Ltd. The defendant held that this evidence indicated that there were actually two consignees, which involved the right of action of the plaintiff. Besides, the way of weighing by bag-filling was not agreed upon between the plaintiff and the carrier, so it should not bind on the carrier. Evidence Thirteen: The explanation on matters as recorded in regard to “Shanghai Port Loading and Unloading and Miscellaneous Operation Documents” by Minsheng Harbor Co., Shanghai that proved that the operation documents recorded the different operations that had occurred between Minsheng Harbor Co. and the defendant, such as the time of the starting of operation and completion of operation of the different hatchways, the number of opening and closing operations of the hatches and the time of lease of harbor machinery by the defendant. The record of the tonnage of operation by every shift in the document was based on the record in the manifest provided by the defendant. The record of the last shift of unloading was obtained from comparing the number of accumulated operations of the previous shifts with the figure recorded in the ship’s paper, which could not truly indicate the exact quantity of unloaded goods and should not be the evidence for delivery and acceptance of goods between the ship side and the cargo side. Minsheng Harbor Co.’s automatic bag-filling weighing equipment had been certified and verified as qualified equipment by the National Technical Supervisory Department with an error value of 0.15%, lower than the permissible weighing error value. The actual quantity of unloaded goods involved in this case was 48,418 bags with a net weight of 60kg/bag, 709,762 bags with a net weight of 65kg/bag, short of 817.08 tons than that recorded in the ship’s manifest. Besides, the goods were mixed with a large amount of foreign substance. The defendant held that this evidence was contradictory to the plaintiff’s Evidence No.Eleven. Minsheng Harbor Co. had not weighed all the goods by filled bags. It only filled the 65kg/bag of goods, while Xinhua Harbor Co. filled the 50kg/bag of goods. The goods involved in this case was actually unloaded and weighed by two harbor companies. The plaintiff could not prove the relationship between Minsheng Harbor Co. and Xinhua Harbor Co. The evidence provided by Minsheng Harbor Co. could not reflect the facts, and had no truthfulness and fairness in it. Evidence Fourteen: The inspection report produced by SGS Romania S.A. on inspecting the quantity and quality of the goods at the loading port proved that the goods were good in quality and the quantity conformed to the record in the bill of lading at the loading port. The defendant had no objection to this. Evidence Fifteen: The business license, the certificate verifying the company’s qualifications for foreign investment, the approval certificate of foreign invested enterprise，all proved that the inspection firm consigned by the plaintiff was qualified as such. The defendant raised no objection to this. Nevertheless, though SGS was a qualified inspection firm, it had not performed the obligations of an inspector， therefore its report was invalid. Evidence Sixteen: The business license and the certificate of inspection and verification of bag-filling weighing equipment of Minsheng Harbor Co. that proved that its equipment had been verified as up to the standard and workable．The defendant held that it could not determine whether Shanghai Inspection Technical Institute was qualified to issue the certificate and whether the scales for packages were used for weighing the goods involved in this case. This evidence could not be acknowledged. Evidence Seventeen: The declaration form, the certificate from the original producer, the trade contract and letter of credit of the imported goods that proved that the unit price of the goods was USD212.50/ton. The defendant raised no objection to this. Evidence Eighteen: SGS’s supplementary explanation on the commodity inspection report that proved that the inspectors working in draft measuring discovered that the ship’s draft mark, the measuring hole of the ballast water tank and the plan for pipeline provided were obviously defective. In view of such defects in the ship，the accuracy of the results of weighing might be greatly affected; the inspecors made reservations to the results. The inspectors held that according to usual practice the weighing of bulk goods was usually conducted by ways of measuring ship’s draft and weighing onshore. Weighing onshore included filling bags quantitatively or weighing by weigh-bridge. When one of these weighing methods was proved to have serious errors owing to objective reasons (such as, the condition of the ship greatly affects the accuracy of weighing by draft), the alternative method, such as the weighing onshore may be adopted. The inspectors stated that according to their knowledge the different operation districts in Shanghai Port, including Minsheng Harbor Co., conducted regular maintenance on their onshore weighing equipment and had them officially calibrated according to law by the authorities. They had been accepted as a basis for handing over of quantities by importers and terminal customers. The defendant held that the SGS inspectors had already indicated that the company’s commodity inspection reports had to be issued uniformly by the Beijing headquarters, while this evidence was issued in the name of SGS Shanghai Co. The defendant did not acknowledge the effect of this evidence. Evidence Nineteen: The contract between the International Insurance Business Department under People’s Insurance Co. of China,, Zhejiang Provincial Branch and Shanghai Municipal Siwei Law Office; A uniform Shanghai lawyers’ service invoice issued by Shanghai Siwei Law Office to Zhejiang Provincial Branch of the consignor China People’s Insurance Co., and the voucher for remittance account issued by the consignor to the consignee Shanghai Municipal Siwei Lawyers’ Firm through the bank. All these proved that the consignor Deqing Xinshi Oil Factory entrusting Liming, lawyer from Shanghai Municipal Siwei Lawyers’ Firm, to act as attorney for the case of damage to the goods, thus incurring attorney’s fee. The defendant held that the plaintiff had no right of action for the lawyer’s fee and the law did not provide that a lawsuit must be conducted through an attorney. The plaintiff’s petition regarding the attorney’s fee should not be supported. Evidence Twenty: The letter of guarantee from the British Insurance and Compensation Association, which proved that the plaintiff’s petition for custody involved in the dispute in this case and the loss of the cost for arresting the ship incurred therefrom. The defendant held that the loss was not inevitable and should not be compensated for. The defendant submitted the following evidence to the court and the plaintiff commented on those evidence as follows: Evidence One: The draft inspection report issued by SGS Romania S.A. at the loading port. It proved that the carrier received 49,856.38 tons of goods for loading at the port. The plaintiff had no objection to this. Evidence Two: The bill of loading and unloading operations and miscellaneous operations issued by the port of Shanghai and the handing- over list for load reduction between the ship side and the cargo side. This proved that the carrier at the unloading port and the cargo handling company employed by the plaintiff confirmed the unloaded goods being 49,857 tons, and also proved that up to October 10, 2000 the goods in cargo holds Nos. 2, 4 and 6 had all been unloaded, while those in Nos. 1, 3, 5 and 7 were in the process of being unloaded. The plaintiff had no objection to the form of evidence. However, it objected to the statistical figures of the total quantity of goods. It held that the figure was not the true indication of the actual quantity. Besides, the record stating that there was a large amount of foreign substance mixed in the goods proved that the quality of the goods was defective. Evidence Three: The fax by Shanghai Zhongheng Consultant Co., Ltd. to China People’s Insurance Co., Shanghai Branch. It proved that the inspectors from Zhongheng Co., while inspecting the goods carried in the ship on Oct. 10, 2000, discovered that the goods in No.3 and No.6 holds were slightly clogged, that the rape-seeds clogged and faded in color amounted around 1,500 tons, that the goods in No.1 and No.7 holds were in good condition and that the goods in No.2, No.4 and No.6 holds were already unloaded. The inspectors from Zhongheng Co. held that the ship was in good condition and the clogging of the goods resulted from the humidity of the goods being too high before loading, and that it was due to the quality of the goods themselves. The plaintiff held that Zhongheng Co. was not legally qualified as inspector，that its fax submitted to Shanghai People’s Insurance Co. had nothing to do with the client of this case. The effect of the evidence should not be acknowledged. Evidence Four: The analysis report by T.J. Sears, captain from Cushing Associates. It proved that there was mistake in the SGS’s inspection report at the unloading port. The plaintiff held that the status and position of the reporter had not been determined and the report was based on the judgment on the materials provided by the defendant. The effect of the report should not be acknowledged. Evidence Five: The inspection report by SGS Romania S.A. and BBN International Goods Inspection Co., Ltd. at the loading port. It proved that there was no unsatisfactory condition of the goods, that the cargo holds were dry, clean and suitable for stowing and transporting goods. The plaintiff held that this evidence could not prove that the goods were delivered in good condition at the unloading port. The defendant should be held responsible for the supervision of the goods. Evidence Six: The preliminary inspection report by Captain R.R. Mathews and Associates to the defendant. It proved that in making special investigation on the claim for damage to the goods by the plaintiff, the inspectors held that the goods were only slightly damaged. The plaintiff held that the status and qualifications of the report maker were not determined. The reporter and the defendant had common interests. Its evidence was not objective and fair. Evidence Seven: The report on the fumigation of the ship at the loading port. It proved that the goods after being loaded was fumigated. According to the requirements the cargo holds must be closed for 10 days after fumigation. The plaintiff held that this evidence had nothing to do with this case. Evidence Eight: The letter addressed by the captain from the ship Vita Hope to the supervisor of the ship. It proved that the goods in No.3 and No.5 holds were slightly clogged, that the unloading operation was normal, that the plaintiff did not refuse to accept the goods, that the weather was good while loading and during the voyage, and that the results of inspection showing that the goods did not contain sea water. The plaintiff held that the captain did not reflect the facts. The contents of the evidence should not be acknowledged. Evidence Nine: The report on comments by experts from Control Union. It proved that the commodity inspection report of SGS was not scientific-based and standardized. The plaintiff held that the analysis of the experts did have evidential effect. Evidence Ten: The voyage charter party between the consignor and the defendant. It proved that the unloading work at the unloading port was conducted by a cargo handling company arranged by the consignee. The plaintiff had no objection to this. Evidence Eleven: The fax sent by SGS staff to the captain of Vita Hope on Oct. 11, 2000. It proved that the plaintiff claimed that the damage to the goods was discovered on Oct. 10, 2000. There was no discovery of damage to the goods before this date. The plaintiff did not acknowledge this evidence. Evidence Twelve: The factual record of time of unloading at the unloading port. It proved that the agent appointed by the plaintiff signed his name on the record to confirm that the goods were in good condition on leaving the ship. The plaintiff held that this evidence only recorded the time of unloading and could not prove the quality of the goods was good on delivery. Evidence Thirteen: The statement jointly signed by the agent of the plaintiff at the loading port and the first mate of the defendant, certifying that the dispute between the two parties at the loading port had nothing to do with the moulded deterioration of the goods. The plaintiff held that this evidence was a statement made for the benefit of the defendant in evading responsibility. There was no evidential effect in it. Evidence Fourteen: The analysis and assessment on the SGS inspection report on the damage to the goods by A.G. Scott, expert and former member of London Charter Ship Association, member of Cereal and Vegetable Seeds Trading Association and arbitrator of London Maritime Arbitration Committee. It proved that the inspection report had not analyzed the basic data of the water content in the goods, that the determination of the relationship between FFA content and depreciation rate did not come up to the standards, and that the basis for determining the damage was not adequate. The plaintiff held that the qualifications of the expert providing this report had not been determined, that he had no right to express his opinion on cases that happened in China. Besides, the plaintiff could not determine whether the defendant had provided all the necessary materials as bases for the expert to comment on. The plaintiff did not acknowledge the objectivity of the above comments by the expert. Proceeding from the evidence submitted by the plaintiff and the defendant, this court confirmed the facts as follows: On May 29, 2000, Glencore Co. in Switzerland concluded with the plaintiff Deqing Xinshi Oil Factory a sales contract for 50,000 tons of rape-seeds at a unit price of USD212.50/ton. On July 28, 2000, Glencore Co. signed a voyage Charter Party with the defendant. on Aug. 28 and 31, 2000 respectively, the captain of Vita Hope belonging to the defendant issued 4 clean order bills of lading, among which the consignor of No 1 and 2 bills of lading was Glencore Co., the consignor of No 3 bill of lading was Salco Grain AG, and the consignor of No 4 bill of lading was Deqing Xinshi Oil Factory. The loading port was Constantza and the unloading port was Shanghai, China. The carrier was Vita Hope and the name of the goods was rape-seeds from Europe, weighing respectively 11,184.5 tons, 30,000 tons, 7,058.99 tons and 1,613.2 tons, totaling 49,856.69 tons. The above 4 bills of lading were endorsed by the consignor and transferred to the plaintiff. On October 3, 2000, the ship arrived at Shanghai and anchored at Luhuashan Anchorage in the evening. The pilot and the inspectors from SGS arranged by the plaintiff boarded the ship. On Oct. 4, draft inspection began. On October 5, the Vita Hope reduced the load to the sea-going vessel Shuangfeng. Judging from draft inspection, the reduced load was 7,500 tons. On October 6 evening, Vita Hope anchored at Minsheng Wharf, Berth No. 2 of Shanghai and began to unload the goods. The reduced load and unloaded goods were filled into bags with fixed quantities in the harbor area and then shipped to Zhejiang and Henan. According to the record in the cargo operation bill of Shanghai Port loading/unloading and sundry operations and the counting bill of handing over between the Vita Hope and the sea-going vessel Xinshuangfeng in reducing the load of imported goods, on October 10, No. 2, 4 and 6 cargo holds completed unloading and No. 1, 3, 5 and 7 were being unloaded; the total unloaded goods weighed 41,336 tons. On the same day, inspectors from SGS together with the captain and the inspectors from the Insurance and Compensation Association entrusted by the defendant inspected the goods in No. 1, 3, 5 and 7 holds. On October 11, the staff from SGS faxed to the captain, stating that on Oct. 10, during the unloading process, SGS inspector discovered that there were clogged rape-seeds in No.3 and No.5 holds. Inspectors from SGS and the Insurance and Compensation Association jointly examined the goods. The results were as follows: the clogged rape-seeds could be kneaded loose with fingers; the clogged layers were 5-6 meters from the hatchway of No. 3 and No.5 holds. There were 2 meters thick of clogged layers in both of the two holds, that is, about 2,905 sq.m. of rape-seeds clogged. The inspectors from the Insurance and Compensation Association and SGS took samples and conducted further tests. On Oct. 11, unloading completed. The loading/unloading and sundry operations bill of Shanghai Port and the counting bill of handing over in reducing load of imported goods between Vita Hope and sea-going vessel Xinshuangfeng stated a total quantity of 49,767 tons of goods unloaded. The defendant and the cargo handling company entrusted by the plaintiff both signed in confirmation. On October 12, the bag-filling weighting accumulated figure at the port was 49,039.61 tons. On October 13, the staff from SGS made a final draft inspection in Shanghai GD Changqing Sea Transportation Engineering Co,, Ltd. The record of SGS draft inspection showed that the time of the completion of draft inspection was 22:00 hours on October 11, and the result was that the total weight of the unloaded goods was 49,732.197 tons. The representative from the defendant signed and affixed his seal on that record for confirmation. The commodity inspectors made the head-notes “Owing to defects of the ship, the results of the draft inspection could be erroneous” on the results of the draft inspection. The head-notes had not been acknowledged by the defendant. During the inspection, the plaintiff and the inspectors from SGS did not analyze the damaged goods and did not separately stacked the goods. The plaintiff sold part of the goods to Zhejiang Zhongrun Fat and Oil Co., Ltd. On October 20, SGS issued the report of commodity inspection. The result was: It was estimated that up to October 10, 2000 there were altogether 3,500 tons of clogged goods. Since Oct. 10, 1,200 tons more of clogged goods were found. The total amount of moulded and deteriorated clogged goods was 4,700 tons. The depreciation rate of the 4,700 tons of goods was 12%-15% (C&F+import tax+VAT+insurance). It was found that SGS was an approved Sino-foreign joint venture enterprise, having a qualification certificate of a foreign invested, inspected and verified company. Its scope of business was to examine, verify, supervise, inspect goods, appraise and offer other technical services entrusted by customers. Tongbiao Standards Technical Service Co., Ltd. Shanghai Branch was subordinate to SGS, being its branch company, without the qualifications of an independent legal entity，its scope of business was to offer supervisory, verification, assessment and consultant services to ensure the guarantee system of the quality of goods for enterprises, to supervise quality and set up laboratories for verification, inspection and quality test, inspection of equipment and examination of technical development and issuance of certification documents according to the needs of business. Zhongheng Consultant Co., Ltd. was a domestic joint venture limited liability company and an independent legal entity. Its scope of business was to offer services of technical consultation on the piloting of ships, power of ships, supervision of transportation of goods by water, Professional Consultancy Services on maritime accidents, consultation on market information and real estates information. It was also found out that on October 11, 2000, the plaintiff involved in the case of dispute petitioned for the custody of property, requesting that the ship Vita Hope belonging to the defendant be arrested, thus resulting in the charge for arrest of RMB5,000 yuan. On November 10, International Insurance Business Department of Zhejiang Provincial Branch of China People’s Insurance Co. signed an attorney contract with Shanghai Municipal Siwei Lawyers Firm, stipulating that Siwei Lawyers Firm appoint Li Ming, a lawyer, to act as the agent ad litem for Deqing County Xinshi Oil Factory for the case of damage to goods. The invoice for lawyers’ fee made out by Shanghai Municipal Siwei Lawyers Firm amounted to RMB168,731 yuan. China People’s Insurance Co., Zhejiang Branch remitted the amount through the bank to Shanghai Municipal Siwei Lawyers Firm. The above facts were proved by the plaintiff’s evidence One to Nine, Eleven to Thirteen, Fifteen to Twenty and the defendant’s evidence Two, Ten, Eleven and the notes of court hearing by this court. This court held that the transfer of the ownership of goods in the trade contract and the transfer of bills of lading under the transport contract were different in legal relationships. The 4 bills of lading issued by the defendant in this case were order bills of lading, which could be transferred after being endorsed to order or endorsed in blank. The 4 bills of lading in this case were all endorsed by the consignor as stated in the bills of lading to be transferred to the plaintiff. The plaintiff was legal in holding the bills of lading and had the right to assent its stand of rights to the goods involved in the bills of lading. According to the bills of lading the relationship in the contract for sea carriage of goods between the plaintiff and the defendant had been legally established. The provisions of the bills of lading were binding on both parties. The parties to bills of lading shall each perform its own obligations wholly, appropriately and timely and were entitled to exercise their rights. The arguments of the defendant that the plaintiff had no right for action for the goods in bills of lading No.3 and No.4 had no legal basis and was not adopted by this court. As provided by law, the carrier’s period of responsibility for non-containerized goods should begin from the time of loading of the goods onto the ship to the time of discharging the goods from the ship. The goods are under its custody and care for the whole period. When the carrier delivers the goods to the consignee, the consignee should notify the carrier in writing of the shortage of or and damage to the goods if any. If the shortage or damage was not apparent, the consignee should notify the carrier in writing of all the relevant information about the goods within 7 days beginning from the next day of the delivery of goods, otherwise, the taking over should be considered as a prima facie evidence of the delivery of all the goods in good order and condition by the carrier. If the carrier and the receiver of the goods conduct joint inspection of the goods on delivery, such written notification about the loss of or damage to the goods is not necessary. The delivery of the goods involved in this case started from the 5th and finished on 11October., 2000. In the course of the delivery of the goods, the plaintiff did not submit to the defendant a written notification about the shortage of and damage to the goods. The inspectors from SGS engaged by the plaintiff made the head-notes on the draft inspection conclusion that on October 13 “owing to the defects of the ship, the results of inspection may be erroneous”, but the head-notes was not signed and confirmed by the defendant, while the plaintiff did not prove that the written head-notes was served to the defendant within 7 days beginning from the next day when the goods were delivered. Therefore, on the completion of unloading, the signing and confirmation of the conclusion of a shortage of 124 tons of goods through draft inspection should be considered as a prima facie evidence of the delivery of the exact quantity of goods by the defendant to the plaintiff. Shanghai Minsheng Harbor Co. was not a commodity inspection and verification entity; the bag-filling weighing method, though calibrated and examined by the authorities concerned and a verification certificate had been issued, was not agreed beforehand by the carrier and the consignee or confirmed by the defendant afterwards. The defendant had no means to supervise and control such situation as whether the record of weighing was accurate or complete. After the bags were filled, the goods were carried away. The defendant had no means to re-check. The plaintiff could not prove that the shortage of goods happened during the period of custody by the carrier. As soon as the goods were delivered, the risks and responsibilities were at the same time shifted from the defendant to the plaintiff. According to international shipping practice, the permissible rate of error for a large quantity of bulk cargo in international sea transportation was 5%. The total quantity of goods involved in this case was 49,856.69 tons. Apart from the shortage of 124 tons of goods jointly confirmed by the carrier and the receiver and then denied by the plaintiff, the plaintiff had not proved that other shortages occurred during the period of the defendant’s responsibility. Therefore, even the defendant delivered 124 tons less , it was still within the reasonable permissible rate of error of 5%. In regard to a written notification for the shortage of goods and the counting of the quantity of the goods, the plaintiff did not perform his obligation of producing evidence, and it did not prove that the shortage of goods occurred during the period of the custody by the carrier. The plaintiff’s request for a suit for the shortage of goods was not supported by this court. As for the damage to the goods, the inspectors engaged by the plaintiff，together with the defendant，inspected No 1, 3, 5 and 7 cargo holds on October 10, 2000 during the period of unloading. The inspectors from SGS notified the defendant in writing on October 10, 2000, of the damage to the goods in No.3 and No.5 holds. This should be considered as the prima facie evidence that the defendant did not deliver to the plaintiff the goods in good order and condition as described in the bills of lading. Since the plaintiff could not prove that it had notified the defendant in writing of the damage to the goods in No. 2, 4 and 6 holds during the delivery or within 7 days beginning from the next day of the delivery, this should be regarded as the prima facie evidence that the defendant had delivered the goods in good order and condition in No. 2, 4 and 6 cargo holds to the plaintiff . The verification report on the damage to the goods issued by the inspectors engaged by the plaintiff stated that up to October 10 there was a total of 3,500 tons of damaged goods and 1,200 tons of damaged goods after October 10. Under the circumstances that the defendant had no effective evidence to deny such a conclusion, this report should be regarded as the conclusive evidence that the defendant had not delivered to the plaintiff 4,700 tons of goods in good order and condition. Sorting and separation of goods was a necessary means for the protecting on and remedy of goods prescribed by the Commodity Inspection Law. SGS held that the damage to the goods was not so serious to make it necessary to separate and sort the goods, and such separation and sorting would increase unnecessary loss. SGS was a legally established entity and an inspection organization qualified for verification and was entitled to and capable of assessing the quantity of damaged goods and the depreciation rate in inspecting the extent of damage to the goods, taking into consideration the factor of market prices. The defendant was not able to provide effective evidence to prove that the conclusion of SGS inspection report on the quantity of damaged goods and the depreciation rate was erroneous and its basis for the defence regarding the quantity of damaged goods and inappropriate determination of the depreciation rate by the plaintiff’s inspectors had no factual support. The defendant held that the damage to the goods was caused by the inherent defects of the goods itself, but it did not provide this court with effective evidence. Therefore, its stand also lacked the support of facts. The sale of part of the goods received by the plaintiff to Zhejiang Zhongrun Fat and Oil Co., Ltd. was affected by such factors as the selling price, market risk and marketing channel. It had no direct and inevitable causality with the actual damage suffered by the plaintiff owing to the defendant’s responsibility in transportation. Therefore, the basis of the argument of the defendant that the goods sold by the plaintiff did not suffer actual damage was not supported by this court. The plaintiff and the defendant had no objection to the unit price of USD212.50 of the goods in this case. The request for a suit made by the plaintiff only on the basis of C&F value of the damaged goods and the minimum of depreciation rate of 12% should be supported. The claim by the plaintiff in applying for the custody of property before the lawsuit, giving rise to the expenses of RMB5,000 yuan for arresting the ship was a reasonable expenditure incurred for holding its right in lawsuit and was entitled to claim compensation from the defendant. This request should be supported. The attorney’s fee of the plaintiff was paid by the outsider China People’s Insurance Co., Zhejiang Branch. The plaintiff did not provide to this court with effective evidence on any agreement regarding the payment of lawyer’s fee between the two parties. The petition had no legal basis and was, therefore, not supported. In accordance with articles 46, 51, 55, 79 and 81 of the “Maritime Code of the People’s Republic of China” and Article 8, Item 1 Article 60 and Article 107 of the “Contract Law of the People’s Republic of China”, it is decided as follows: 1. The defendant shall pay the plaintiff for the damage of 4,700 tons of goods in an amount of USD119,850, plus interest, within 10 days beginning from the day on which this judgment comes into effect. (The interest shall be calculated from Nov. 8, 2000 to the day on which this judgment comes into effect, basing on the corresponding foreign exchange rate of current deposit.); 2. The defendant shall pay the plaintiff the property custody fee of RMB5,000 yuan within 10 days beginning from the day on which this judgment comes into effect; and, 3. The plaintiff’s other requests are not supported. The fee for court hearing of RMB22,421.90 yuan shall be shared by the plaintiff at RMB11,391.70 yuan and the defendant, RMB9,030.20 yuan. The above amount was prepaid by the plaintiff and the defendant shall pay its amount due to the plaintiff in 7 days beginning from the day on which this judgment comes into effect. In case of any objection to this judgment, the plaintiff may submit to this court an appeal request within 15 days upon the service of this judgment, and the defendant, within 30 days upon the service of this judgment. They shall submit the number of duplicates corresponding to the number of clients of the other party. The appeal shall be made to Higher Municipal People’s Court of Shanghai. The party making the appeal shall prepay to this court the fee for appeal equal to that paid to the court of first instance within 7 days beginning from the day on which the appeal request was submitted. In case the payment was not made within the time prescribed, it shall be regarded as the withdrawal of the appeal. Presiding judge: Ma Peifang Alternate judge: Sun Yingwei Alternate judge: Shen Jun Shanghai Maritime Court (seal) June 12, 2001 Certified true copy Clerk: Qian Xu

DALIAN MARITIME COURT PEOPLE’S REPUBLIC OF CHINA CIVIL JUDGMENT No. DHFSC149(2001) Plaintiff: FORTUNE UNIVERSAL INC. Address: 2506 Florence Ave, Arcadia, California, United States of America. Legal representative: Shao Xiangchun, Chairman of the Board of Directors. Agent ad litem: Mao Yanguo, lawyer of Dalian Huaxia law office. Defendant: DALIAN JIHANG SHIPPING AGENCY CO., LTD. Address: A-4016, Hengtong Edifice, Zhigong Street, Zhongshan District, Dalian City, People’s Republic of China. Legal representative: Guo Xiuli, general manager. After this court entertained the cases of dispute over compensation for freight losses with respect to an agency contract between the Plaintiff, FORTUNE UNIVERSAL INC. (hereinafter referred to as Plaintiff), and the Defendant, DALIAN JIHANG SHIPPING AGENCY CO., LTD. (hereinafter referred to as Defendant), Judge Xiao Yan, Judge Bu Yuchun and Judge Shen Yanjun constituted the collegial panel legally and heard the case in open sessions. The Plaintiff’s agent ad litem Mao Yanguo and the Defendant’s legal representative Guo Xiuli attended the court hearing. Now the case has been concluded. The Plaintiff alleged that in December 2000, JILIN ZHONGGU INTERNATIONAL CO., LTD. (hereinafter referred to as ZHONGGU CO.) entrusted the Defendant on behalf of the Plaintiff with booking and handling formalities for the carriage of 3 containers of mung beans from Dalian to USA. The Defendant accepted the entrustment and arranged to have the cargo loaded on m/v Chang Jin Tianjin, which departed on January 3rd, 2001. The Plaintiff agreed to and accepted the suggestion of the Defendant that the freight be paid to the Defendant and then transmitted to the carrier because in this way the Defendant could get a cheaper price. The Plaintiff remitted the freight US$4890 to the Defendant on January 16th, and entrusted them to pay to the carrier. The Defendant received the money but didn’t pay to the carrier as they promised. On January 17th, the Plaintiff received the B/L from the Defendant. m/v Chang Jin Tianjin arrived at the Port of Long Beach, USA on January 23rd, 2001. When the Plaintiff was going to take delivery of the cargo, the agent of the carrier demanded them to pay freight because the carrier hadn’t received it at the port of departure and there was a “Freight forward” clause in the B/L. So the Plaintiff paid the freight US$4890 again. As the Defendant didn’t carry out their promise to pay the freight to the carrier, the Plaintiff phoned and faxed to them many times to ask for the freight, but they didn’t reply. So the Plaintiff proceeded against the Defendant and requested that they compensate for the Plaintiff’s freight and other relevant losses. The Defendant pleaded that it was Hu Hongliang, but not the Plaintiff, that entrusted the Defendant with booking and handling formalities for the carriage. Hu Hongliang acted for himself. The Defendant had neither faxed to the Plaintiff or ZHONGGU CO., nor promised to pay the freight to thecarrier. Though the fax message received by the Plaintiff and ZHONGGU CO. showed that the sender’s fax number was the Defendant’s, maybe it was Hu Hongliang who used the Defendant’s fax machine. Because the Defendant’s accountant Li Jun had quit the job and they couldn’t find him, they couldn’t identify Li’s signature. Even if the signature were true, the fax was invalid for lack of the Defendant’s stamp. The Defendant collected a list of Hu Hongliang’s debts that showed the Plaintiff’s US$4890 was paid to discharge a debt for Hu but not paid for freight. It was in the presence of the Defendant that Hu Hongliang called the Plaintiff and asked them to remit the money to the Defendant. The Defendant didn’t know what Hu said to the Plaintiff. After offsetting Hu’s debt of RMB40587, the remaining amount of the freight was no more than RMB2261.79. The balance should be returned to Hu, but not to the Plaintiff. The Plaintiff’s assertion that the money was the freight to the carrier was groundless. It should be rejected. The Plaintiff argued against the pleadings of the Defendant, saying that Hu Hongliang was irrelevant to this case. Even if he played a role, he acted for the Defendant. It was established by the court after the examination and hearing that the Plaintiff and ZHONGGU CO. concluded a contract for the sale of goods on December 22nd, 2000. They agreed in the contract that ZHONGGU CO. sells 60MT of mung beans to the Plaintiff under the term F.O.B. Dalian; Payment: T/T; Destination port: Los Angeles, USA. The Plaintiff entrusted ZHONGGU CO. for booking, packing and Customs Procedures and inspection. ZHONGGU CO. entrusted the Defendant and the Defendant accomplished them. On December 28th, ZHONGGU CO. received a fax message from the Defendant’s fax machine that indicated: “The arrangements were as follows: M/V Chang Jin Tianjin, V.053E; B/L SITD053E803/20X3; Destination Port: LONG BEACH; Departure on January 3rd, 2001; Description of Goods: Mung Beans; Quantity: 60MT; Freight: US$1630X3=US$4890.00. Please transmit the fax message to the American company before the festival, so that they may pay the freight”. The fax message also indicated the Defendant’s RMB and US dollar accounts. There was the Defendant’s accountant Li Jun’s signature in the fax. Then ZHONGGU CO. transmitted the fax to the Plaintiff. After the goods were loaded on board, the Defendant got the negotiable B/L (No.SESDLLB803) indicating “Freight to collect” from the carrier SESCO GROUP INC. The B/L showed that: the shipper was ZHONGGU CO.; the consignee was the Plaintiff; the ship was M/V Chang Jin Tianjin (V.053E); the port of departure was Dalian; the port of destination was Long Beach, USA; the cargo was 60MT of mung beans in 3 containers; the date of loading and issuing the B/L was January 3rd, 2001. At the same time, the Defendant received the agency fees of RMB4080. The Defendant didn’t transmit the B/L to the Plaintiff. On January 15th, the Plaintiff received a fax message from the Defendant’s fax machine that repeated the contents of the fax message dated December 28th and asked the Plaintiff to pay the freight to them. The Plaintiff paid the freight through Los Angeles branch of Bank of China to the Defendant. After receiving the freight, the Defendant delivered the B/L to ZHONGGU CO. and ZHONGGU CO. delivered it to the Plaintiff. But the Defendant didn’t pay the freight to the carrier. M/V Chang Jin Tianjin (V.053E) arrived at Long Beach on January 23rd, 2001. When the Plaintiff was going to take delivery of the cargo, they were told that the carrier hadn’t received the freight at the port of departure and there was a “Freight to collect” clause in the B/L, so they should pay the freight of US$4890. The plaintiff paid the freight and took delivery of the cargo. But the defendant hadn’t returned the freight to them. Therefore the Plaintiff brought an action against the Defendant and claimed to the Defendant to compensate for the freight and its interests, counting from January 23rd, 2001 to the date of payment at the corresponding loan interest rate for US dollars issued by the People's Bank of China, and pay the acceptance fee. The plaintiff added claims in the court hearing that the Defendant should compensate for their flight tickets for asking the freight plus notary fee. But they didn’t hand in the acceptance fee. This court froze the account of the Defendant at the request of the Plaintiff during the trial. In hearing this case, the court demanded the Defendant to provide the sample of their accountant Li Jun’s signature to identify the signature in the fax, but the Defendant didn’t. ZHONGGU CO. submitted two letters to this court in order to explain and prove that the Defendant suggested that they pay freight to the carrier in order to get a cheaper price, so the Plaintiff accepted the suggestion. The Defendant presented no evidence which could prove that the two fax messages were sent by Hu Hongliang. Furthermore, the Defendant presented no evidence which could prove that even if the fax messages had actually been sent by Hu, Hu acted for himself only. Besides, the Defendant presented no evidence which could prove that the US$4890 from the Plaintiff was to pay for Hu Hongliang’s debts. The Plaintiff and the Defendant both declared they didn’t know where Hu was. The above facts could be ascertained on the basis of the evidence submitted during the cross-examination, including: the same Bs/L submitted by both the Plaintiff and the Defendant; two faxes and two freight payment vouchers submitted by the Plaintiff; the sales contract in this case, the Customs declaration, the consignment bill of the containers and the shipping order submitted by the Defendant; the letters of explanations submitted by ZHONGGU CO. with another sales contract and payment voucher as proof; and the court’s investigation and the records of the hearing. It was held by this court that this case was about the dispute over compensation for freight losses with respect to an agency contract. Although the contract between them was not in writing, yet, the act of the Defendant who offered by fax and the Plaintiff who accepted by performing an act dealing with matters regarding a contract was in conformity with the legal requirements for a contract. The offer became effective when the Defendant’s fax arrived at the Plaintiff’s. When the Plaintiff remitted the freight to the Defendant on January 16th, 2001, the acceptance became effective and the contract was made. Although the Plaintiff had duties to conclude the contract of carriage and pay the freight as the buyer of the F.O.B. contract, they entrusted the seller with booking and the latter then entrusted the Defendant. The fact that the Defendant had told the Plaintiff to pay the freight (not other fee) to his account showed obviously his intention to pay the freight directly to the carrier on behalf of the Plaintiff. The intention was exact, definite, true and valid. It was an offer by which the Defendant should be bound. The remittance of the freight by the Plaintiff showed that they had accepted the offer and entrusted the Defendant to pay the freight to the carrier. It was an acceptance of an act that showed the Plaintiff’s true intention. It was valid. So the Plaintiff and the Defendant reached an agreement and the relationship of a new contract for paying the freight to the carrier was formed between them. When the Plaintiff paid the freight in accordance with the contract, the Defendant should also have carried out their promise and paid the freight to the carrier. But the Defendant didn’t carry out their promise, so they should be liable therefor. The Defendant declared that Hu Hongliang but not the Defendant who sent the fax messages, but the Defendant submitted no relevant supporting evidence therefor. Even if Hu had been involved in this case, still the Defendant had submitted no evidence to prove Hu acted for himself only. It was reasonable for the Plaintiff to believe that the fax messages were sent by the Defendant, because they received the fax messages in the Defendant’s name from the Defendant’s fax machine. The Plaintiff couldn’t judge whether the faxes showed the Defendant’s intention. When the Plaintiff accepted the fax messages and paid the freight to the Defendant, the relationship of a contract for paying the freight was established. The Defendant should compensate for the Plaintiff’s losses which resulted from the Defendant’s breaching of contract. Furthermore, the Defendant had received the freight and their accountant Li Jun did sign the fax messages. Though the Defendant argued they didn’t know the signature was true or not, but they ought to be able to identify their accountant’s signature. They had the duty to submit Li Jun’s signature on other papers, but they refused to do so. The Defendant also argued that the fax messages were invalid for lack of their business stamp. This was not reasonable because it was inconsistent with the relevant regulations, rules, and trade practice that the employer should be responsible for the consequences of the acts of his employees within the scope of their business functions. The Defendant had no other evidence to prove the list of Hu Hongliang’s debts. Even if the debt were true and Hu wanted to discharge it with the Plaintiff’s freight, Hu and the Defendant’s agreement was invalid owing to the lack of the Plaintiff’s consent. So the Defendant’s declaration that the freight was paid for Hu’s debt had no basis. The Plaintiff alleged that the Defendant should compensate for the freight losses and its losses of interests because the Defendant and the Plaintiff had concluded a contract for paying the freight and the Defendant breached the duties to pay the freight to the carrier. This allegation as it was based on facts and legally well founded should be accepted. The Plaintiff’s claim of the interests from the day on which they paid the second freight was reasonable and should be supported. The plaintiff’s additional claims that the Defendant should compensate for their flight tickets for this case shouldn’t be taken into consideration in this trial because they hadn’t handed in the acceptance fee. The Plaintiff and the Defendant hadn’t concluded an agreement on applicable law. Because the place of the Defendant’s domicile and the places in which the facts of this case occurred were both in the territory of the People’s Republic of China, the law of the People’s Republic of China shall apply in accordance with principle of closest connection. In accordance with Article 64 (1) of the Civil Procedure Law of the People’s Republic of China, Article 145 (2) of the General Principles of the Civil Law of the People’s Republic of China, Article 8, Article 11, Article 13, Article 16 (1), Article 22, Article 26 (1), Article 107 and Article 406 (1) of the Contract Law of the People’s Republic of China, this court hereby decides: The Defendant DALIAN JIHANG SHIPPING AGENCY CO., LTD. shall compensate for the freight losses of US$4890 suffered by the Plaintiff FORTUNE UNIVERSAL INC. and its interests from January 23rd, 2001 to the day on which this judgment becomes effective at the corresponding loan interest rate for US dollars issued by the People's Bank of China. The compensation shall be paid within 10 days after the day on which this judgment becomes effective, failing which the court will enforce Article 232 of the Civil Procedure Law of the People’s Republic of China. The acceptance fee of RMB1620 and the preservation fee of RMB 208 (both prepaid by the Plaintiff FORTUNE UNIVERSAL INC.) shall be paid by the Defendant DALIAN JIHANG SHIPPING AGENCY CO., LTD. If refuses to accept this judgment as final, the Plaintiff may appeal to the Higher People’s Court of Liaoning Province by submitting an appeal petition with 2 copies to this court within 30 days of the date of service of this judgment, while the Defendant may appeal within 15 days thereof. Presiding Judge: Xiao Yan Judge: Bu Yuchun Judge: Shen Yanjun Certified true copy Sep 27th, 2001 Court clerk:

BEIHAI MARITIME COURT PEOPLE’S COURT OF CHINA CIVIL JUDGMENT No. Hai-Shi-Chu 002(2001) Plaintiff: Shenzhen Xunlong Shipping Co., Ltd. Domicile: 2nd Floor, Shekou Station, Shenzhen, Guangdong Province Legal Representative: Cui Tieying, General Manager Agents ad Litem: Zhao Jinsong, legal Counsel Deng Xiaomao, Lawyer of Guangdong Qizheng Law Office Defendant: Jinwan Trade Co., Ltd., Fangchenggang Domicile: Xingang Road, Jinsha, Gangkou District, Fangchenggang, Guangxi Legal Representative: Weng Zhaojin, General Manager Agent ad Litem: Yin Nianchang, Male, Han nationality, Teacher at Zhanjiang Oceanography University Defendant: Guangxi Ocean Shipping Co., Ltd. Domicile: No. 37, Gucheng Road, Nanning, Guangxi Legal Representative: He Jianping, General Manager Agent ad Litem: Yuan Xiaoyong, Lawyer of Yongjiang Law Office This court, after entertaining the cases of dispute over compensation for damage arising from collision of ships between the plaintiff Shenzhen Xunlong Shipping Co., Ltd. and the defendants Jinwan Trade Co., Ltd., Fangchenggang (hereinafter referred to as “Jinwan Co.”) and Guangxi Ocean Shipping Co., Ltd. (hereinafter referred to as “Ocean Shipping Co.”) on 9th January, 2001, duly formed a collegial bench and evidence was exchanged before the court on 28th March, 2001. The court held public hearings on 29th March and 12th November, 2001 respectively. Zhao Jinsong and Deng Xiaomao, the agents ad litem of the plaintiff, Weng Zhaojin, the legal representative of the defendant Jinwan Co., his agent ad litem Yin Nianchang, and Yuan Xiaoyong, the agent ad litem of the Defendant Ocean Shipping Co. attended the court hearings. Now this case has been concluded. The plaintiff alleged that: at 2100 hrs of 7th September, 2000, the passenger ship Xun Long 2, owned by the plaintiff, left HK-Macao Wharf, Hong Kong. After it entered the North Channel, Xun Long 2 sighted a small cargo vessel (Xiong Chang 1, owned by the defendants) approaching on starboard bow. Xun Long 2 took prompt emergency measures to avoid collision by sounding one-blast signal, reducing her speed and stopping her engine urgently. However, the ships still collided with each other at 2106 hrs. The accident was caused by Xiong Chang 1’s failure to maintain a proper look-out, to proceed at a safe speed, choose the right time to cross the channel and take effective action to avoid collision when risk of collision existed. Xiong Chang 1 seriously breached the International Regulations for Preventing Collisions at Sea and thus shall be solely liable.. After the accident, Xun Long 2 reported the accident to Hong Kong Maritime Department in time and applied to China Classification Society (CCS) for survey. As a result of the accident, Xun Long 2 sustained losses of RMB 3,066,002.10 including cost of repairs, loss of time and so on. Therefore, the court was pleaded to enter a judgment ordering the defendant to compensate the plaintiff for the aforesaid loss and bear the legal cost of this case. The defendant Jinwan Co. defended that the collision proved to be true. However, Xun Long 2 proceeded in the channel at a high speed with bad lookout. Therefore, the majority of liability for the collision should fall on the plaintiff while the minor on the defendant. Among the cost of repair of the plaintiff’s ship, those items which didn’t come under or result from the collision such as the cost of repairs of the main propeller and the expense for changing the window curtains and the carpets, all of which shall be deducted from the cost of repairs alleged by the plaintiff. The consequential loss shall not be certified as the losses to be compensated for. The defendant shall only be liable for the losses caused by the collision in proportion to the extent of the liability it shall bear. The Defendant Ocean Shipping Co. defended that this company was neither the shipowner nor the operator of Xiong Chang 1 and the crew members on board the ship were not manned by this company. Therefore, this company should not be held responsible for the dispute over the collision. After examination, it was established that at 2100 hrs of 7th September, 2000, Xun Long 2, owned by the plaintiff, left Hong Kong-Macao Wharf, Zhonghua, Hong Kong for Shekou, Shenzhen with 35 passengers on board. Liang Zewen, the master, was steering the ship; Zhang Sian, the chief mate, and Zheng Dong were monitoring the night visual instrument and radar plotting; Fan Dongben, the engineer, was monitoring the engine. After leaving the wharf, Xun Long 2 entered the North Channel of Victoria Port, approaching Buoy No. 4 on a true course of 320 deg. and at a speed of 32 knots (the ship held the Certificate of Speed Immunity issued by Hongkong Channel Authority permitting the ship to sail at the speed of 30 knots in the channel.). At 2035 hrs, Xiong Chang 1, owned by the defendant, left Cuiyong Container Terminal for the anchorage to wait for berth while Su Weicheng, the second mate, was steering the ship; Gao Yingguang, the master, was controlling the speed; Weng Zhaojin, the able-seaman, was engaged in radar-plotting. At that time, the weather in the water area of Hong Kong was excellent. The wind was northeasterly force 4; the sea was slight. The visibility was 3-5 miles. At 2107 hrs, in the vicinity of Long. 114º7′30″E, Lat. 22º9′12″N, Xun Long 2 sighted Xiong Chang 1 at a distance of about 0.4 mile forward of her starboard beam and sounded one-long-blast and made a hard-to-port to avoid collision. However, before the rudder effect came into force, Xiong Chang 1 collided at an angle of about 90ºon her frames no. 18-23 of her starboard side. Only 20 seconds after sighting of Xiong Chang 1 by Xun Long 2, the collisions of the two ships occurred. Xiong Chang 1 submitted that she was proceeding on a true course of 220 deg. and at a speed of 4-5 knots, and that 10 seconds after the sighting of yellow light and red-blue side-light of Xun Long 2, the collision occurred. The radar monitoring plan made clear that neither ship took any action of reducing speed nor maneuvering to avoid collision. After the collision, Xun Long 2 was permitted to send the injured passengers on board back to Hong Kong-Macao Wharf for medical treatment at a slow speed. At that night, Xun Long 2 was towed to Hong Kong Friendship Shipyard Co., Ltd. (hereinafter referred to as “Friendship Shipyard”) for berthing and repair. On 8th September, 2002, CCS, entrusted by the plaintiff, and China Survey Co. Ltd. who was entrusted by Huaan Property Insurance Co., Ltd., the insurer of Xun Long 2 and (China Survey Co. Ltd. in turn entrusted Hong Kong Marine Survey Co., Ltd. to carry out the survey on the spot), inspected the damage arising from collision jointly and issued the written reports respectively. As confirmed by the parties at the court hearing, the survey report No. 2000BS2256 issued by China Survey Co., Ltd. could be taken as documentary evidence to prove the damage to Xun Long 2. The report stated: “All damage to Xun Long 2 was in the position between frame No. 18 and frame No. 23, indicating that Xiong Chang 1 collided on the frames 18-20 of Xun Long 2 at right angle and all the damage was above the water line. The report listed 30 items of damage to Xun Long 2 in 8 categories and estimated the cost of repairs at HK$1,350,000.00. Afterwards, the plaintiff entrusted CCS to inspect Xiong Chang 1. Gao Yingguang, the master of the ship, did not allow the surveyor of CCS to come on board who thus failed to conduct the survey. However, when inquired by Hong Kong Marine Department, the master and Weng Zhaojin, the sailor, admitted their not having been trained or having been trained only for about 2 days to conduct the radar plotting and lacking of fundamental idea of maneuvering ships. Gao Yingguang, the master, alleged in the marine investigation report that the paint on the port bow of Xiong Chang 1 was scraped off. Xun Long 2 was repaired at Friendship Shipyard from 8th September to 15th October, 2000, during which the plaintiff put the ship into operation from 30th September to 8th October for the National Holiday operation. During the period when the ship was repaired at Friendship Shipyard from 8th September to 29th September and from 9th October to 15th October, in order to maintain the normal operation of the voyage from Shekou to Hong Kong, the plaintiff chartered a passenger ship twice from other company to take the place of Xun Long 2. The plaintiff submitted to this court the invoices for the payment of various expenses including towage paid to Friendship Shipyard, cost of repairs, hire paid during the time the ship was under repair, port dues, cost of bunker and lubricating oil, survey charges paid to CCS, expenses of boarding and traffic of the passengers delayed due to the collision, traffic and communication expenses for settling this accident, fee of marine investigation, legal consulation fee and lawyer’s fee, totaling HK$3,066,002.10, which included towage after the collision in the amount of HK$45,745, cost of repairs of the life rafts in the amount of HK$73,020, cost of repairs charged by Friendship Shipyard in the amount of HK$1,500,880 which included HK$151,402.50 for the cost of repair of the main propeller, cost for change of releasers of the life rafts, cost for change for new window curtains and new rugs, cost of repair of engine, additional expenses arising from temporary operation on the National Holidays and the added wharfage and mooring charge arising therefrom; HK$600,000 and HK$190,911 for the hire of the chartered ship from other company to take the place of Xun Long 2 from 8th September to 29th September, 2000 and from 8th October to 15th October, 2000 respectively; and HK$391,708 for bunker, HKS9,894.80 for lubricating oil, HK$119,017 for port dues occurred during the chartering period; HK$32,100 for survey fee for CCS; expenses for boarding and traffic of the passengers delayed due to the collision in the amount of HK$15,638.30; expenses of traffic and communication for settling this accident in the amount of HK$15,020; fee of marine investigation in the amount of HK$2,931; HK$5,000 for legal consultation fee; and HK$64,137 for lawyer’s fee. It had also been established that Xun Long 2 was a twin aluminium alloy speedy passenger ship built in Norway in August 1998 with the following particulars: LOA 38m, breadth 11.20m, depth 3.90m, GT 531 MT, NT 159 MT and HP 3,152 KW. The Certificate of Vessel’s Registration was obtained on 14th August, 1998 and the owner was the plaintiff. Xiong Chang 1 was a general cargo ship built in Vietnam and registered in Fangchenggang, Guangxi Zhuang Autonomous Region. The particulars of the ship were as follows: LOA 53.55m, breadth 7.63m, depth 3.2m, GT 298 MT, NT 176 MT and HP 224 KW. The ship held two sets of certificates, one of which included the Certificate of Vessel’s Registration of the PRC stating that the ownership was obtained on 12th June, 1996, and the Nationality Certificate of PRC which was valid from 12th June 1996 to 12th June 2001, both of which showing that the registered shipowner was Jinwan Co. and the legal representative of the shipowner was Weng Zhaojin; the other set contained the Certificate of Vessel’s Nationality of the PRC which was valid from 21st November, 1997 to 20th November, 2002, and several Permits for Sailing at Hong Kong and Macao which were valid from May, 1997 to 30th May, 2000, from 18th September, 1997 to 17th September, 2000, from 30th May, 2000 to 30th May, 2002 respectively, both of which showing that the shipowner and the operator was the defendant Ocean Shipping Co.. Jinwan Co. was a private company under the name of Weng Zhaojin. Because individual ship operators were not allowed to operate on international ocean shipping, the company, on 20th July, 1997, entered into a ship management agreement with Ocean Shipping Co. which stipulated: The ownership of Xiong Chang 1 remains with Jinwan Co. The Ocean Shipping Co. consented that Jinwan Co. may go through the shipping procedures including the certificate of registration, Operation Certificate under the name of Ocean Shipping Co.. Shipping Operation Area: Coast of China including Hong Kong and Macao and from China to Vietnam. Management Duration: 1997 to 1998; Ocean Shipping Co., as the manager, shall be entitled to be paid the management fee in the amount of RMB30,000 per year by the shipowerner and the operator. Afterwards, Xiong Chang 1, as agreed, was registered under the name of Ocean Shipping Co. and acquired the permit for undertaking ocean shipping business for voyages to Hong Kong and Vietnam. However, Jinwan Co. did not pay the management fee to Ocean Shipping Co. as agreed. After the expiration of the management agreement, Ocean Shipping Co neither applied to relevant authorities for canceling the ocean shipping permits and the corresponding certificates obtained by Xiong Chang 1 under the name of Ocean Shipping Co., nor publicly declared to rescind the management relationship with Jinwan Co.. Jinwan Co. was engaged in ocean shipping all the time under the name of the Ocean Shipping Co. while Ocean Shipping Co. did not manage the ship in reality. The aforesaid facts being supported by the documents submitted by the plaintiff were cross-examined by the parties and recognized by the collegial bench. The documents submitted by the Plaintiff were: certificates of both ships; Certificate of ship’s Nationality; deck log book of Xun Long 2; Marine Accident Reports filled in by both ships after the collision for Hong Kong Marine Department; Hong Kong Marine Department’s Ascertainment Opinions on the accident; radar plotting plans; list of cost of repairs and other vouchers from the Friendship Shipyard; survey reports of CCS and China Survey Co., Ltd., Those submitted by the Defendant were Ship Management Agreement, Hongkong Maritime Safety Administration’s Investigation Document and the record of court hearings by this court. This court held that this was a case of dispute over the compensation for damages arising from collision of ships. Both defendants had their domicile in Guangxi and the plaintiff brought an action claiming compensation for damage arising from collision before this court. Therefore, this court had jurisdiction pursuant to law. Although the accident occurred in the waters of Hong Kong, both the plaintiff and the defendants were in mainland China and the ports of registry were in China too. Therefore, according to paragraph 3 of Article 273 of the Maritime Code of the PRC: “If the colliding ships belong to the same country, no matter where the collision occurs, the law of the flag state shall apply to claims against one another for damages arising from such collision”, the International Regulations for Preventing Collisions at Sea, 1972 and relevant laws of the PRC shall be applied. The actual owner of Xiong Chang 1, the defendant Jinwan Co., was not qualified to engage in international ocean shipping. Obtaining relevant de jure qualification by registering the ship under the name of the other company certainly did not make the ship meet the statutory seaworthiness requirements objectively or de facto. The ship’s complement, from the master to the sailor on duty, being not acquired necessary professional skills or fundamental knowledge on ocean shipping, were not good at operating the radar on board for making radar plotting or equivalent systematic observation, and were not familiar with the navigation rules of look-out, crossing narrow channels or fairways prescribed by the International Regulations for Preventing Collisions at Sea, even didn’t understand them at all. When intended to cross the channel, the ship did not observe nor found out the sailing of the ships in the channel and the surroundings closely, ie. it failed to maintain a proper look-out by sight and hearing as well as by all available means appropriate in the prevailing circumstances and conditions, and consequently failed to sight Xun Long 2 sailing at high speed in the channel. It was only 10 seconds after the ship Xiong Chang 1 crossed the channel rashly and sighted Xu Long 2 that the two ships collided with each other. Obviously, the close-quarters situation had already arisen at the moment when Xiong Chang 1 crossed the channel. According to Article 5 and paragraph 4 of Article 9 of the International Regulations for Preventing Collisions at Sea, 1972 which provides: “A vessel shall not cross a narrow channel or fairway if such crossing impedes the passage of a vessel which can safely navigate only within such channel and fairway”, Xiong Chang 1 was negligent in look-out and should not cross the channel when there were ships sailing there. Therefore, the greater share of the blame for the close-quarters situation should be attributed to her. Although Xun Long 2 held the Speed Immunity Certificate issued by Hong Kong Fairway Administration allowing her to proceed in the channel at the speed of 30 knots, that didn’t mean that she could proceed in the channel at that high speed at any time under any circumstances. When the visibility was less good in the evening than in day time and the North Channel of Port Victoria was very busy, Xun Long 2 should have proceeded at a safe speed, as appropriate, taking into account the time, place and so on. In fact, Xun Long 2 took a laissez-faire attitude towards the safety of herself and any other ship by proceeding at a high speed all the time. Xun Long 2 was at fault in the occurrence of the accident. The fact that it was about 0.4 mile between the two ships when Xun Long 2 sighted Xiong Chang 1 and though maintained a look-out before the sighting, Xu Long 2 failed to sight Xiong Chang 1 meant that Xung Long 2 was at fault in maintaining a proper look-out. For a ship proceeding at a speed of 30 knots, the distance of 0.4 mile could not allow sufficient time and distance for it to take effective action to avoid collision. Therefore, it could be established that before the sighting of the Xiong Chang 1, the close-quarters situation had already been there. Xun Long 2 was blamed for causing the close-quarters situation. Under the close-quarters situation, Xun Long 2 alleged that one long blast was sounded by her to warn Xiong Chang 1. However, under such conditions, the International Regulation for Preventing Collision at Sea provided that the ship shall immediately give at least five short and rapid blasts on the whistle and such signal may be supplemented by a light signal of at least five short and rapid flashes. The action of sounding one long blast was far from being enough. Though made a hard-to-port to avoid collision, there was no positive result in Xun Long 2’s attempt to avoid collision and it was collided by Xiong Chang 1 almost at right angle. Evidently, it was impossible for the ship proceeding at a high speed to take effective actions to avoid collision in such a short time and distance. In fact, the relevant evidence made it clear that up to the collision, neither ship took actions to alter the route or slow down the speed. According to the rule that the blame for causing close-quarters situation is the main principle for the apportionment of liability, while whether the action to avoid collision was taken as a minor point for considerations and under the provisions of Articles 5, 6, 7, 8, 9, 34 of the International Regulation for Preventing Collision at Sea, 1972, taking into account the circumstances under which the close-quarters situation came into existence, and whether the action to avoid collision was taken, also whether such action was appropriate and effective, this court held that the major share, ie. 70% of the liability, should be attributed to Xiong Chang 1, while the minor share, ie. 30% to Xun Long 2. The defendant Jinwan Co.’s defense that the main responsibility for the collision must fall on Xun Long 2 was contrary to the facts ascertained by this court and thus was not tenable. The cost of repairs of Xun Long 2 charged by the Friendship Shipyard was HK$ 1,500,880. However, because the damage to the ship caused by the collision was all above the water line, the repairs of the main propeller and part of the engine under the water line, the replacement of the releasers and connectors of the life rafts, the change of new window curtains and the purchase of new rugs shall not be treated as repairs of the damage caused by the collision. Therefore, such costs shall not be regarded as the cost of repairs of the damage caused by the collision. The additional expense arising from the temporary operation during the National Holidays was the result caused by the plaintiff in putting the ship under repair into operation rather than the inevitable result of the collision of ships. Therefore it shall not be treated as cost of repairs of damage caused by the collision. The additional wharfage and mooring service charge was the running cost in operation and thus shall not be counted as cost of repairs either. The above-mentioned three items, which shall not be counted as the cost of repairs of damage caused by collision, adding up to HK$ 151,402.50, shall be deducted from the cost of repairs charged by the Friendship Shipyard. Therefore the cost of repairs of damage caused by the collision was HK$ 1,349,477.50, which shall be supported pursuant to the proportion of the blame for the collision. After the collision, the plaintiff paid HK$ 45,745 for towage, HK$ 73,020 for the repair of life rafts, HK$ 32,100 for survey fee, and HK$ 15,638.30 as expenses for the boarding and traffic of the delayed passengers, which were all inevitable expenses caused by the collision and thus the claims for which shall be supported by this court according to law. The plaintiff hired a passenger ship to take the place of Xun Long 2 from 8th September to 29th September, 2000 and paid the hire of HK$ 600,000. The hire could be regarded as the loss of time and shall be indemnified by the parties liable for the collision. The fact the plaintiff put the ship into operation during the National Holidays made it clear that the ship had been repaired and could be used, and to send it to the shipyard for further repairs afterwards was unnecessary. Therefore the hire of HK$ 190,911 for hiring the passenger ship to take the place of Xun Long 1 from 8th to 15th October shall not be accepted. As to HK$ 391,708 for bunker, HK$ 9,894.80 for lubricating oil and HK $119,017 for port dues occurred during the chartering period and claimed by the plaintiff, such charges and expenses were normal running costs for the operation of the ship and had nothing to do with the collision, and shall not be agreed by this court either. As to the expenses for traffic and communication in the amount of HK$ 15,020 for handling the accident, the accident investigation fee in the amount of HK$ 2,931, legal consultation fee in the amount of HK$ 5,000, lawyer’s fee in the amount of HK$ 64,137, were not agreed by this court because the plaintiff failed to submit sufficient evidence. To sum up, the cost of repairs sustained by the plaintiff and other acceptable economic losses was HK$ 2,115,980.80 all together, 70% percent of which amounting to HK$ 1,481,186.56, shall be borne by Xiong Chang 1. As the owner of Xiong Chang 1, the defendant Jinwan Co. shall be primarily liable for the collision caused by the ship. Although the defendant Ocean Shipping Co. was not the de facto owner of the ship, yet the defendant consented to and assisted Jinwan Co. in registering Xiong Chang 1 under its name, which turned the defendent into the de jure owner of the ship, entitling her to lawfully possess, utilize, profit from and dispose of the ship, and, when the ship infringed upon another people’s rights, obliging her to compensate for the losses, restore it to its original conditions in the capacity of the owner pursuant to law. In addition, Ocean Shipping Co.’s aforesaid act objectively enabled Jinwan Co., who was not qualified for international shipping operation, to be engaged in shipping between Hong Kong and Macao. Ocean Shipping Co. was the manager of Xiong Chang 1 in name, however, in reality, Ocean Shipping Co. adopted a “none of my business” attitude towards the shipping qualification and capacity of the ship and never performed her duty of management. Therefore, Ocean Shipping Co. was at fault subjectively and was guilty of dereliction of duty objectively in neglecting the managment of the ship. After the expiration of the management agreement, Ocean Shipping Co. neither applied to the relevant authorities for canceling the ocean shipping permits and the corresponding certificates obtained by Xiong Chang 1 under the name of Ocean Shipping Co., nor declared openly to rescind the management relationship with Jinwan Co. Jinwan Co. was engaged in ocean shipping all the time under the name of the Ocean Shipping Co. Therefore, it could be ascertained that both defendants modified the performance duration of the management agreement by their acts, and up to the time of the accident, Xiong Chang 1 was still under the management of Ocean Shipping Co. Because Ocean Shipping Co. was the de jure owner of Xiong Chang 1 and was also responsible for the management of the same, she shall be liable jointly and severally for the damage arising from the ship’s tortious act of collision. According to Article 169 of the Maritime Code of the PRC: “If the colliding ships are all in fault, each ship shall be liable in proportion to the extent of its faults … The ships in fault shall be liable for the damage to the ship, the goods and other property on board pursuant to the proportion prescribed in the preceeding paragraph…”and Article 130 of the General Principles of the Civil Law of the PRC: “If two or more persons jointly infringe upon another person’s rights and cause him damage, they shall bear joint liability.”, The judgment is entered as follows: 1. The defendant Jinwan Trade Co., Ltd. Fangchenggang shall compensate the plaintiff Shenzhen Xunlong Shipping Co., Ltd., within 10 days upon the day on which this judgment comes into force, HK$ 1,481,186.56 for cost of ship’s repairs and any other economic losses, for which the defendant Guangxi Ocean Shipping Co., Ltd. shall be jointly and severally liable. 2. Any other claims lodged by the plaintiff are dismissed. The acceptance fee of RMB 29,340 for this case shall be paid by the plaintiff, the defendant Jinwan Co. and the defendant Ocean Shipping Co. in the amount of RMB 9,340, RMB 10,000 and RMB 10,000 respectively. The acceptance fee prepaid by the plaintiff shall not be refunded by this court separately, while that to be borne by the defendants shall be directly paid to the plaintiff within 10 days upon the day on which this judgment comes into force. Any party who contests this judgment may lodge an appeal before the Higher People’s Court of Guangxi Zhuang Autonomous Region by submitting a statement of appeal to this court with copies in the number of the opposing parties within 15 days upon the service of this judgment. The appeal fee of RMB 29,340 shall be prepaid within 7 days upon the expiration of the time limit for filing appeals. The appeal shall be considered as withdrawn in case neither the appeal fee is paid in time nor the application for deferred payment thereof is filed in time. Payee: Litigation-Fee-Special-Account of the Higher People’s Court of Guangxi Zhuang Autonomous Region Account No. 886100010 Deposit Bank: Agricultural Bank of China Gucheng Road Branch, Nanning Presiding Judge Zhang Desheng Judge Zhang Qiancheng Judge Ni Xuewei (Official Chop of Beihai Maritime Court) Date 19th December, 2001 Certified true copy Clerk Xiao Zibei