Case of XX Salvage Bureau v. Company A, Company B, Company C, and Third Party XX Electric Company Regarding Salvage Contract Dispute —Criteria for Determining Salvage Operations and the Determination of Salvage Reward and Liable Parties XX Salvage Bureau engaged a transportation company to carry a shipment of goods by sea. Just before arrival, the vessel unexpectedly ran aground. In the absence of a written salvage contract, XX Salvage Bureau assisted in refloating the vessel. This raises the legal issue: Did this constitute a maritime salvage operation, or was it merely voluntary assistance provided gratuitously? Case Review On January 8, 2021, XX Salvage Bureau entered into an International Transportation Contract with Company A, engaging it to transport a batch of steel pipe piles and ancillary components by sea in multiple shipments from Zhongshan Guangxin Wharf to a designated customs clearance anchorage near the Tra Vinh Project in Vietnam. Following the conclusion of the contract, both parties awaited the fulfillment of conditions necessary for staggered shipments, ensuring timely transportation of the cargo to its destination. On June 26, 2021, at approximately 4:00 AM, the calm sea was suddenly disrupted by a rumbling sound—the vessel YUAN JING, which was carrying the said cargo, had unexpectedly run aground in coastal waters near a county in Tra Vinh Province, Vietnam. Following the grounding, Company A contacted XX Salvage Bureau via WeChat and email, requesting assistance in refloating YUAN JING. At 4:48 AM, XX Salvage Bureau deployed tugs and anchor-handling vessels in an attempt to tow YUAN JING off the grounding position, but the initial efforts were unsuccessful. As discussions regarding the refloating operation continued, time elapsed, and at 12:40 PM, with the assistance of XX Salvage Bureau's tugboats, YUAN JING was successfully refloated. However, no prior agreement had been made among the parties regarding compensation for the refloating assistance, leaving a potential dispute unresolved. In the six months following the incident, the parties engaged in significant disputes over whether the operation constituted maritime salvage, the amount of salvage reward, and the parties responsible for its payment. XX Salvage Bureau asserted that, in the process of refloating YUAN JING, it had deployed a total of seven vessels, including a crane vessel, anchor-handling vessels, tugs, and workboats, mobilized 96 personnel, utilized emergency materials to prevent oil pollution, and incurred losses due to vessel and machinery downtime. As a result, on March 31, 2022, XX Salvage Bureau issued a letter to Company A, demanding 15% of the total value of the salved property—equivalent to RMB 15 million—as a salvage reward for the refloating of YUAN JING on June 26, 2021. On May 10, 2022, XX Salvage Bureau sent a follow-up letter to Company A, reiterating its demand for payment of the salvage reward. Given that Company C was the owner of YUAN JING, Company B was the bareboat charterer, and Company B had subsequently chartered the vessel to Company A for cargo transportation, XX Salvage Bureau, on July 13, 2022, issued a letter to all three companies, demanding that they provide full security of RMB 17 million as a guarantee for the salvage reward. As negotiations failed to yield a resolution, XX Salvage Bureau filed a lawsuit with the Guangzhou Maritime Court (GZMC), seeking an order requiring the three companies to jointly pay the salvage reward of RMB 17 million plus interest (calculated from June 26, 2021, the completion date of the salvage operation, to the date of actual payment, at the LPR published by the National Interbank Funding Center). Additionally, XX Salvage Bureau sought an order requiring the three companies to jointly bear the litigation costs of the case. The court established the facts as follows: I. Grounding and Refloating of YUAN JING The vessel YUAN JING is a steel general cargo ship with a gross tonnage of 10,177, a net tonnage of 3,053, a length of 142.805 meters, and a beam of 32.20 meters. Its owner is Company C. Between July 1, 2019, and July 1, 2022, Company C bareboat chartered YUAN JING to Company B and completed the bareboat charter registration with the relevant maritime safety administration. In December 2020, XX Electric Company entered into a procurement contract with XX Salvage Bureau, under which XX Electric Company contracted XX Salvage Bureau for services related to the transportation, pile-driving, and installation of wind turbine foundations. On January 8, 2021, XX Salvage Bureau entered into an International Transportation Contract with Company A, engaging it to transport a batch of wind turbine monopile foundations and integrated ancillary components supplied by XX Electric Company. These items were to be shipped in multiple batches from Zhongshan Guangxin Wharf to the customs clearance anchorage near the Tra Vinh Project in Vietnam. The contract stipulated the transportation would occur from January to June 2021, once the cargo met the necessary conditions for staggered shipments. On February 20, 2021, Company B and Company A signed a time charter contract, under which Company B chartered YUAN JING to Company A for a fixed period of no less than four months. The vessel was delivered to Company C at Yangjiang Anchorage in Guangdong Province on February 17, 2021, and was to be used for transporting and loading all lawful cargoes that met the vessel's stability, weight, and safety requirements. YUAN JING subsequently completed part of the transportation stipulated in the International Transportation Contract between XX Salvage Bureau and Company A, with the voyage involved in the case being the fourth voyage under the contract. II. Expert Witness Opinions An expert called BI, commissioned by XX Salvage Bureau, issued an expert opinion titled "Expert Opinion on the Maritime Salvage of the Vessel YUAN JING" (the "Expert Opinion") on March 28, 2023. The Expert Opinion concludes as follows: The grounding of YUAN JING exposed the vessel to substantial risks, and it was unable to refloat independently, thus necessitating external salvage assistance. XX Salvage Bureau, in line with the principles of salvage agreement, worked round-the-clock, carrying out timely exploration and assessment, and formulating a feasible salvage plan. The Bureau urgently mobilized salvage vessels, equipment, and engineering personnel to salvage the ship, using reasonable efforts to ensure its success. Despite the significant dangers faced by the salvage personnel, they applied sound salvage techniques, achieving notable success. The operation proceeded without fatalities, and both YUAN JING and its cargo were maximally preserved and rescued. Furthermore, the operation effectively prevented sinking or environmental pollution, thereby averting potentially severe losses for all relevant parties. Based on these findings, the expert concluded that XX Salvage Bureau was entitled to 10% of the total value of the vessel and cargo as the salvage reward. The XX Maritime Association, engaged by Company B, issued the "Evaluation Opinion on Issues Related to the Grounding of the Vessel YUAN JING" (the "Evaluation Opinion"). The Evaluation Opinion summarizes the following key points: 1. Evidence suggests that, following the grounding of YUAN JING, no imminent danger was present. Even without tugboat assistance, the vessel could have refloated on its own before the high tide at 15:00 on June 26, 2021. 2. The assistance provided by the tugboats in the refloating operation does not constitute maritime salvage. Therefore, XX Salvage Bureau is not entitled to claim a salvage reward for YUAN JING based on the salvage rates that are typically applied in maritime salvage incidents. 3. Should the second refloating attempt by the tugboats be considered, and if the relevant parties agree to provide economic compensation under the commercial towing method, it is recommended that the rate be 50% of the salvage rate for the vessel "LI ZHOU CHANG RONG", calculated at a rate of RMB 1 per horsepower hour for economic compensation. ZHAO, engaged by Company A, issued the "Analysis of the Expert Opinion on the Maritime Salvage of the Vessel YUAN JING" (the "Analysis") on June 15, 2023. The Analysis critiques the conclusions of the Expert Opinion as follows: 1. The conclusion in the Expert Opinion that YUAN JING faced significant risks after running aground and could not refloat on its own, thus requiring external salvage assistance, is unsupported by direct evidence. 2. No salvage agreement existed between the master of YUAN JING, Company A, and XX Salvage Bureau. XX Salvage Bureau did not engage in a round-the-clock salvage operation, as suggested by the Expert Opinion, because the first attempt to refloat the vessel took only 40 minutes, and the second attempt (in the afternoon) took only 10 minutes. 3. The tugboats deployed by XX Salvage Bureau were solely for assisting with cargo discharge, not as part of a salvage operation. Therefore, the "no effect, no reward" model of salvage does not apply in this case. The Expert Opinion's conclusion that XX Salvage Bureau is entitled to 10% of the total value of the vessel and cargo as salvage reward, based on a contractual salvage rate, represents XX Salvage Bureau's unilateral expectation and should not be accepted. Even if the refloating assistance is deemed a maritime salvage operation, two types of salvage should be considered. The Expert Opinion's choice of the "no effect, no reward" salvage model lacks appropriate justification. The Analysis concludes with the following points: 1. No maritime salvage agreement exists between XX Salvage Bureau and YUAN JING. 2. XX Salvage Bureau's assistance in refloating YUAN JING does not meet the basic criteria for maritime salvage. 3. XX Salvage Bureau's claims for compensation regarding the vessels and personnel involved in the operation lack authenticity, necessity, and reasonableness. 4. Regarding the tugboats and anchor-handling vessels that assisted with the refloating, it is suggested that economic compensation be based on 50% of the salvage rate for the vessel "LI ZHOU CHANG RONG", calculated at RMB 1 per horsepower hour. This would result in an economic compensation amount of RMB 24,800 (RMB 1 × 6200HP × 4 hours) for XX Salvage Bureau. III. Value of the Salved Vessel and Cargo, and Freight Charges (i) Vessel Value After YUAN JING was refloated, no parties conducted an assessment of the value of the salved vessel and cargo. In 2022, YUAN JING was sold by Company C for a vessel price of RMB 60.2 million. (ii) Cargo Value The export customs declaration for the goods shows that the declared date was June 16, 2021, and the total cargo price was USD 6,781,946.70, under the CIF (Cost, Insurance, and Freight) terms. (iii) Freight Charges A dispute arose between XX Salvage Bureau and Company A regarding the performance of their International Transportation Contract. Company A filed a lawsuit with the court, and the court accepted the case on March 15, 2022. On November 30, 2022, the court rendered a civil judgment, and both parties appealed the judgment to the Guangdong Higher People's Court, which issued a final civil judgment on June 20, 2023, dismissing the appeal and upholding the original judgment. The effective judgment determines that Company A had completed the transportation of 30 wind turbine units and six voyages under the contract. The original total freight price was RMB 24,880,000, but due to the overdue contract, an additional RMB 5.6 million in freight charges were incurred. After the judgment became effective, XX Salvage Bureau fulfilled the obligation to pay the aforementioned freight charges. Based on the facts recognized in the effective judgment, the freight charges for the voyage in question were calculated to be RMB 5.08 million. Based on the above, the total value of the salved vessel, cargo, and freight at risk stood at RMB 108,586,798.85. Court Decision On May 31, 2024, GZMC rendered the following civil judgment: 1. Company B and Company C (defendants) shall jointly pay a salvage reward of RMB 1,662,000 to XX Salvage Bureau (plaintiff), along with interest (calculated from September 14, 2022 until the date of full payment at the one-year LPR published by the National Interbank Funding Center). 2. Company A (also a defendant) shall pay a salvage reward of RMB 138,000 to XX Salvage Bureau, along with interest (calculated in the foregoing same manner). 3. All other claims of XX Salvage Bureau are dismissed. Following the announcement of the judgment, none of the parties filed an appeal. Rationale of Judgment The legally effective judgment of the court holds that YUAN JING, which was carrying steel monopile foundations and supporting components for wind turbine installations, ran aground while en route from Zhongshan Guangxin Wharf, Guangdong Province, China, to the customs clearance anchorage of the Tra Vinh Project in Vietnam. Since the grounding occurred in Vietnamese waters, the case involves foreign-related elements. According to Article 8 of the Law of the People's Republic of China on the Application of Law to Civil Relations Involving Foreign Interests, "The characterization of foreign-related civil relations shall be governed by the law of the place where the court is located." The plaintiff asserted that the dispatch of its vessels to assist YUAN JING in refloating constituted maritime salvage and, on that basis, sought salvage reward from the defendants. Thus, this case constitutes a dispute over a maritime salvage contract. According to Article 269 of the Maritime Code of the People's Republic of China (the "Maritime Code"), "The parties to a contract may choose the law applicable to such contract, unless the law provides otherwise. Where the parties to a contract have not made a choice, the law of the country having the closest connection with the contract shall apply." In the court proceedings, all parties chose to apply the laws of the People's Republic of China, and therefore, Chinese law shall govern the substantive disputes in this case. China is a contracting state to the International Convention on Salvage, 1989 (the "Convention"), which entered into force for China on July 14, 1996. According to Paragraph 1, Article 268 of the Maritime Code, "If any international treaty concluded or acceded to by the People's Republic of China contains provisions differing from those contained in this Code, the provisions of the relevant international treaty shall apply, unless the provisions are those on which the People's Republic of China has announced reservations." This case falls within the scope of application of the Convention. Chapter IX (Salvage at Sea) of the Maritime Code was formulated primarily based on the Convention. Where the provisions of Chinese law are consistent with the Convention, both may apply concurrently in this case; where they differ, the provisions of the Convention shall prevail. The key disputed issues in this case are as follows: 1. The nature of the plaintiff's assistance in refloating YUAN JING (whether it constitutes maritime salvage); 2. Whether the plaintiff is entitled to claim salvage reward, and the determination of the salvage reward amount; 3. The parties responsible for paying the salvage reward; 4. The interest on the salvage reward. The court's analysis of these disputed issues is set out below: I. The Nature of the Plaintiff's Assistance in Refloating YUAN JING According to Paragraph 1, Article 1 of the Convention, "salvage operation" means any act or activity undertaken to assist a vessel or any other property in danger in navigable waters or in any other waters whatsoever. The court held that the plaintiff's assistance in refloating YUAN JING constituted maritime salvage. The specific rationale is as follows: First, YUAN JING and its cargo qualify as legally recognized objects of salvage. Article 171 of the Maritime Code stipulates that "The provisions of this Chapter shall apply to salvage operations rendered at sea or any other navigable waters adjacent thereto to ships and other property in distress." Article 172 further defines the relevant terms: (1) "Ship" means any ship referred to in Article 3 of this Code and any other non-military, public service ship or craft that has been involved in a salvage operation therewith; (2) "Property" means any property not permanently and intentionally attached to the shoreline and includes freight at risk; ..." The plaintiff conducted salvage operations on YUAN JING, its cargo, and freight at risk. At the time of the incident, YUAN JING was engaged in commercial transport rather than military or governmental service. The cargo consisted of steel monopile foundations and associated components, which fall within the scope of "property" as defined by the applicable legal provisions. Second, YUAN JING and its cargo were in a state of actual and foreseeable danger, rather than merely a hypothetical risk. In the context of maritime salvage, the concept of "danger" does not require an absolute or immediate peril; rather, it is sufficient that, based on the circumstances at the time, the danger was reasonably foreseeable and unavoidable. Although, following the grounding of YUAN JING, the vessel's master arranged for an inspection by the crew, which revealed no damage or deformation to the hull, no displacement or loosening of the stowed cargo, and the fact that the vessel was in an area experiencing a rising tide at the time, these factors do not justify the conclusion that YUAN JING was not in danger or that it could have refloated without external assistance. According to an email sent by Company A to the plaintiff on the day of the incident, the rising tide caused strong currents at the site, creating a risk of pushing the vessel into shallower waters, thereby exacerbating the danger. As a result, waiting for the highest tide was not a viable option, and Company A explicitly requested the plaintiff to assist YUAN JING in refloating at the earliest possible time. This demonstrates that, based on the on-site assessment conducted by YUAN JING and Company A, YUAN JING was indeed in a state of danger. The Evaluation Report and the Analysis only evaluated the degree of danger based on buoyancy loss while failing to consider the risks posed by tidal currents. Furthermore, the plaintiff's assistance in refloating YUAN JING did not arise from any statutory or contractual duty to provide salvage services. Initially, the plaintiff and Company A agreed that the cargo would be delivered at the customs clearance anchorage near the Tra Vinh Project in Vietnam. However, the parties subsequently mutually agreed to change the delivery location to the project's offshore operational site, which was still some distance from the grounding location. The plaintiff had only entered into an International Transportation Contract with Company A, under which Company A bore sole responsibility for any safety-related incidents occurring during transportation, and there was no contractual provision imposing a salvage obligation on the plaintiff. Finally, the plaintiff successfully assisted in refloating YUAN JING through two towing operations. Evidence in the case file indicates that, after YUAN JING ran aground, both Company A and the vessel's master directly communicated with the plaintiff, urgently requesting the plaintiff to develop a refloating plan and dispatch tugboats for assistance. The defendants contended that the refloating of YUAN JING was not directly attributable to the plaintiff's salvage operations. However, neither the Expert Opinion, the Evaluation Report, nor the Analysis asserted that, at 12:40 on June 26, 2021, when YUAN JING was successfully refloated, the water depth was already sufficient for the vessel to refloat on its own. The defendants also asserted that the plaintiff towed YUAN JING toward shallower waters, thereby placing it in greater danger, and thus the operation did not constitute maritime salvage. Furthermore, the defendants claimed that YUAN JING had repeatedly and safely navigated between the plaintiff's construction site and the designated cargo handover location both before and after the grounding and that the vessel only ran aground on June 26, 2021, due to a deviation from its original navigational course. They argued that, since the vessel was in a less hazardous state while navigating within its designated route and near the plaintiff's construction site, and since the plaintiff had already completed the salvage operation by the time YUAN JING deviated from its course and ran aground, subsequent events should not negate the fact that a salvage operation took place. The court held that the post hoc statements made by YUAN JING's master and the defendants regarding the nature of the plaintiff's assistance did not affect the legal determination of whether the refloating operation constituted maritime salvage. II. Plaintiff's Right to Claim Salvage Reward and the Determination of the Salvage Reward Although YUAN JING was carrying both materials required for the plaintiff's construction and cargo entrusted for transportation at the time of the incident, and the plaintiff's salvage efforts objectively reduced construction delays, the fact that the plaintiff benefited from the salvage operation does not alter the legal nature of the act as salvage. Therefore, it does not negate the plaintiff's right to claim a salvage reward. Article 186 of the Maritime Code provides that: "The following salvage operations shall not be entitled to remuneration: (1) The salvage operation is carried out as a duty to normally perform a towage contract or other service contract, with the exception, however, of providing special services beyond the performance of the above-said duty. (2) The salvage operation is carried out in spite of the express and reasonable prohibition on the part of the Master of the ship in distress, the owner of the ship in question and the owner of the other property." In this case, there is no evidence to suggest that YUAN JING or any of the three defendants explicitly refused the plaintiff's salvage assistance. On the contrary, YUAN JING actively cooperated with the plaintiff in order to refloat the vessel. Additionally, Company A explicitly requested the plaintiff's assistance via email, and the master of YUAN JING remained in direct communication with the plaintiff's personnel throughout the operation. YUAN JING did not exercise its right to refuse salvage; rather, through its actions, it clearly sought and accepted the plaintiff's assistance. Therefore, the defendants' claim that the plaintiff is not entitled to a salvage reward is not upheld by the court. Article 179 of the Maritime Code provides that: "Where the salvage operations rendered to the distressed ship and other property have had a useful result, the salvor shall be entitled to a reward. Except as otherwise provided for by Article 182 of this Code or by other laws or the salvage contract, the salvor shall not be entitled to the payment if the salvage operations have had no useful result." In this case, YUAN JING and its cargo were successfully removed from peril through the plaintiff's salvage operation, and neither the vessel nor the cargo sustained any damage. The plaintiff's salvage operation achieved a successful outcome, and none of the circumstances stipulated in Article 182 of the Maritime Code apply. Furthermore, the plaintiff did not waive its right to claim a salvage reward. Additionally, Article 191 of the Maritime Code states: "The provisions of this Chapter shall apply to the salvor's right to the payment for the salvage operations carried out between the ships of the same owner." By analogy, although the cargo on board YUAN JING was intended for the plaintiff's construction project, the plaintiff is still entitled to claim a salvage reward. Beyond the ten factors prescribed under Article 180 of the Maritime Code, the court also considered additional circumstances specific to this case. At the time of YUAN JING's grounding, the vessel was carrying materials essential to the plaintiff's construction project. Had the vessel remained stranded, the delay in cargo delivery could have postponed the plaintiff's construction schedule or even resulted in cargo damage due to potential structural harm to the vessel. By successfully salving YUAN JING, the plaintiff helped minimize delays in cargo delivery and reduced the risk of cargo damage. Thus, the plaintiff derived benefits from its own salvage operation, warranting an appropriate reduction in the salvage reward. Taking into account the value of the salved vessel and other property, the costs incurred by the salvor, as well as the nature and severity of the peril at the time of the salvage operation, the court determined that the plaintiff is entitled to a salvage reward of RMB 3,000,000. The salvage reward shall not exceed the total value of the salved vessel and property, and its calculation must reflect the principle of encouraging salvage operations. III. The Liable Parties for the Payment of the Salvage Reward Paragraph 2, Article 13 of the Convention provides that: "Payment of a reward fixed according to paragraph 1 shall be made by all of the vessel and other property interests in proportion to their respective salved values. However, a State Party may in its national law provide that the payment of a reward has to be made by one of these interests, subject to a right of recourse of this interest against the other interests for their respective shares. Nothing in this article shall prevent any right of defense." Additionally, Article 183 of the Maritime Code stipulates that: "The salvage reward shall be paid by the owners of the salved ship and other property in accordance with the respective proportions which the salved values of the ship and other property bear to the total salved value." The Convention establishes that the responsibility for paying the salvage reward lies with the vessel and other property interests, without restricting liability solely to the owner of the ship. Therefore, under both the Convention and the Maritime Code, the obligation to pay the salvage reward rests with the owners or other interested parties of the salved vessel and property. In this case, during the relevant voyage, Company C was the registered owner of YUAN JING, while Company B was the bareboat charterer. YUAN JING was operated and managed by Company B, and its master and crew were also employed by Company B. Thus, both Company C and Company B qualify as interested parties of YUAN JING, and as such, they are both jointly liable for the payment of the salvage reward. Consequently, Company C and Company B shall pay the plaintiff RMB 1,662,000 in salvage reward, apportioned based on the vessel's salved value relative to the total salved value. Additionally, Company A was the carrier of the cargo in question and, as such, is classified as the party benefiting from the salvage of the freight charges for the voyage. Therefore, Company A shall pay the plaintiff RMB 138,000 in salvage reward, in proportion to the freight charges as part of the total salved value. The plaintiff did not claim a salvage reward from the owner of the cargo, i.e., the third party in this case, which constitutes a disposition of its own civil rights and interests. The court respects this exercise of discretion. The plaintiff's claim that all three defendants should bear joint and several liability for the full salvage reward lacks a legal basis and is therefore not supported by the court. IV. Interest on the Salvage Reward Article 577 of the Civil Code stipulates: "Where a party fails to perform his contractual obligation or his performance does not conform to the agreement, he shall bear default liability such as continuing to perform his obligations, taking remedial measures, or compensating for losses." The plaintiff's claim for interest on the salvage reward calculated based on the LPR published by the National Interbank Funding Center is supported by both factual and legal grounds and is therefore upheld by the court. However, as the parties did not reach a consensus on the amount or the payment date of the salvage reward, the plaintiff's request for interest to accrue from June 26, 2021, the date of the salvage operation's completion, lacks a legal basis and is therefore not upheld by the court. Paragraph 4, Article 511 of the Civil Code provides: "Where the period of performance is not clearly stipulated, the debtor may perform his obligations at any time, and the creditor may request the debtor to perform at any time, provided that he shall give the debtor necessary time for preparation." Considering the circumstances of this case, the court determined that the three defendants should have paid the salvage reward within three months of the case being filed, i.e., by September 13, 2022. Therefore, interest on overdue payments shall accrue from the following day, i.e., September 14, 2022. Key Points of Judgment  1. The requirements for constituting a salvage operation include the following four elements: the subject of salvage must be legally recognized; the salvor must have no pre-existing duty to conduct the salvage operation; the subject of salvage must be in actual and unavoidable danger; and the salvage operation must achieve a successful outcome. 2. The determination of the salvage reward should take into account the ten factors set out in Article 180 of the Maritime Code, while also considering other relevant factors based on the specific circumstances of the case. 3. The parties liable for paying the salvage reward are the vessel or other property interests that have benefited from the salvage operation. Related Legal Provisions Article 179 of Maritime Code of the People's Republic of China Article 180 of Maritime Code of the People's Republic of China Article 183 of Maritime Code of the People's Republic of China Paragraph 1 of Article 268 of Maritime Code of the People's Republic of China Paragraph 2 of Article 13 of International Convention on Salvage, 1989

Case of Company A v. Company B Regarding a Dispute over Ship Collision Liability  – Determining Damages from Ship Collision In maritime navigation, vigilance towards the surrounding environment and proper vessel maneuvering are crucial. A sudden collision left three ships damaged, though fortunately causing no casualties or water pollution. During the trial, the court clarified that neither party applied for an assessment of the losses caused by the collision. How, then, should liability and compensation be attributed? Case Review On August 31, 2023, under overcast skies, an accident loomed. At approximately 4:30 PM, Company B's vessel JIA HANG 003 departed from Guangzhou Yihai Wharf toward the Shajiao Anchorage in the Pearl River Estuary to evade an approaching typhoon for the safety of both the crew and cargo. However, the voyage took an unexpected turn. While entering the 39SJ Anchorage in the Pearl River Estuary, JIA HANG 003 collided with the anchored vessel SHENG YOU 226 owned by Company A. Its propeller became entangled with the right anchor chain of SHENG YOU 226. The huge impact caused JIA HANG 003 to drift uncontrollably southwestward to the 38SJ Anchorage. The incident escalated when JIA HANG 003, still adrift, struck another anchored vessel, QI DE LONG 968 owned by Company C. In the wake of the two collisions, ripples continued to spread across the surface of the sea. The collisions left JIA HANG 003 with a dented portside bulwark on the main deck and a fractured lifeboat pillar. SHENG YOU 226 suffered deformed bow railings, cracked hull plates, and the loss of its right anchor and seven sections of anchor chain. QI DE LONG 968 sustained multiple scratches on its starboard midship hull. Thankfully, no casualties or environmental contamination occurred as a result. The maritime authority sent staff to investigate the incident and issued a maritime traffic accident liability determination report on November 28, 2023. To recover losses, Company A filed a lawsuit with the Guangzhou Maritime Court (GZMC), demanding that Company B compensate RMB 721,761 in total, covering SHENG YOU 226 repair costs (RMB 222,000), replacement of anchor and chain (RMB 81,270), inspection fees (RMB 2,380), travel expenses (RMB 6,180), vessel maintenance costs during repairs (RMB 245,642.20, from September 2, 2023 to September 20, 2023), loss of hire (RMB 164,288.80) plus interest (calculated based on RMB 721,761 from September 1, 2023 until the date of actual compensation payment, at the LPR published by the National Interbank Funding Center). Company B contested the reasonableness of the amounts and liability for interest claimed by Company A. After court clarification, both parties waived their right to apply for assessment of the loss arising from the collision and agreed to let the court determine damages based on submitted evidence in accordance with relevant laws and regulations. The court established the facts as follows: Around 16:33 on August 31, 2023, the vessel JIA HANG 003 owned by Company B collided with the bow of the anchored vessel SHENG YOU 226 owned by Company A, resulting in the entanglement of JIA HANG 003's propeller with the right anchor chain of SHENG YOU 226. At 16:45, the port bow of JIA HANG 003 collided with the starboard midship of the anchored vessel QI DE LONG 968 owned by Company C. On November 28, the maritime authority issued a maritime traffic accident liability determination report, which concluded that JIA HANG 003 failed to adequately consider the impact of the surrounding environment on vessel navigation, lacked proper vigilance during anchoring and turning maneuvers, and mishandled emergency procedures, thereby bearing full responsibility for the accident. SHENG YOU 226 and QI DE LONG 968 were deemed free of liability. During the repair period of SHENG YOU 226, vessel repair costs, auxiliary costs, maintenance costs, and corresponding loss of hire were incurred. Court Decision GZMC rendered a civil judgment on June 20, 2024, as follows: 1. Company B (the defendant) shall compensate Company A (the plaintiff) RMB 500,483.80 plus interest (calculated from September 1, 2023 to the 10th day after the judgment takes effect, at the one-year LPR published by the National Interbank Funding Center). 2. All other claims of Company A are dismissed. Neither party appealed the first-instance judgment, and it has since taken legal effect. Rationale of Judgment The court's effective judgment holds that the accident caused partial damages to SHENG YOU 226, entitling Company A, to claim compensation for the following items:  I. Vessel Repair and Auxiliary Costs 1. The "Special Service Fee" of RMB 114,068, as set forth in the repair settlement statement provided by the plaintiff, constitutes auxiliary costs necessarily incurred during vessel repairs. The "Bow Structural Repair Costs" of RMB 90,682 pertain to damages caused by the collision, as evidenced by the repair locations and items. The plaintiff has actually paid the total repair costs of RMB 222,000, which represent economic losses directly resulting from the vessel repairs and causally linked to the collision. The plaintiff's claim for compensation of these costs from the defendant is supported by factual and legal grounds, and the court hereby upholds it. 2. The anchor chain replacement cost of RMB 81,270 arose from the loss of the right anchor chain of SHENG YOU 226 due to the collision. This expense constitutes part of the vessel damage, and the plaintiff's claim for this loss is legally justified. The court therefore supports this claim. 3. The vessel inspection fee of RMB 2,380, incurred by the completion of repairs, falls within the scope of auxiliary expenses as defined by the court. Since this expense was actually incurred, the plaintiff's claim for this cost is upheld by the court. 4. The plaintiff failed to provide evidence establishing a causal connection between the claimed travel expenses and the collision. Thus, its claim for travel expenses is dismissed by the court for a lack of legal basis. II. Maintenance Costs Based on the established facts, the repair period for SHENG YOU 226 at the shipyard spanned September 9 to September 20, 2023, with dry-docking from September 10 to September 16, 2023. The plaintiff's claim to calculate the repair period from September 2 due to typhoon impacts and the maritime restrictions imposed by the maritime authority lacks evidentiary support and is dismissed by the court. The plaintiff entered into a repair contract with Company D on September 8, 2023, to prepare for the repair of SHENG YOU 226. The court deems it fair to calculate the repair period for the ship from September 8 to September 20, 2023 (13 days). Maintenance costs during the repair period included: 1. Freshwater and Fuel Expenses According to SHENG YOU 226's logs, during the repair period from September 8 to September 20, 2023, SHENG YOU 226 consumed 4.48 tons of light oil and 41 tons of freshwater. The cost of light oil during the repair period amounted to RMB 31,808. Based on the freshwater replenishment record of 42 tons on August 22 and the plaintiff's water supply invoice for that day, the freshwater price was calculated at RMB 16.67 per ton, resulting in freshwater expenses of RMB 683.38 during the repair period. The total combined costs for light oil and freshwater are RMB 32,491.38, which the court confirms. 2. Crew Wages The court found that the plaintiff failed to submit evidence of actual payments for the September crew wages as reflected in salary receipts. Consequently, the plaintiff's claim for compensation of these wages lacks factual and legal basis and is therefore dismissed by the court. However, based on the plaintiff's submitted bank transfer records for wages paid to crew members Zheng, Chen, Gao, and Huang (totaling RMB 71,044.87), the court confirms that the plaintiff incurred crew wage expenses of RMB 30,786.11 during the repair period. III. Loss of Hire At the time of the collision, SHENG YOU 226 was operating Voyage 2358, which was unloaded. After the vessel was repaired, the plaintiff did not resume operations. Hence, the court deems it fair to calculate the loss of hire based on the average net profit of the four voyages preceding the collision. As shown in the ship's logs, the previous four voyages were Voyages 2354, 2355, 2356, and 2357. Although the plaintiff submitted August crew wage records, it failed to prove that the crew members worked on Voyages 2352 to 2357 from July 20 to August 21, 2023. The data provided by the plaintiff could not accurately reflect the crew wages for the corresponding voyages of SHENG YOU 226. According to the required minimum crew specified in the certification for continuous 16-hour navigation (14 crew members), an additional cook was required, bringing the minimum crew per voyage to 15. The plaintiff claimed that 18 crew members were onboard in August, leading to increased costs and reduced profits. The court thus calculates the loss of hire based on 18 crew members. Referring to the actual daily wage expenditure of RMB 10,213.52 in August, and factoring in social security, housing fund contributions, and tax deductions for each crew member as reflected in the September payroll of SHENG YOU 226, the plaintiff agreed to a daily wage and meal allowance expenditure of RMB 12,000. The court confirms this calculation. Based on the fuel supply contract dated July 13, the price of light oil was RMB 7,050 per ton. For voyages after July 31, the price was adjusted to RMB 7,100 per ton. The court recognizes these. Considering all relevant factors, the plaintiff's claimed freshwater price of RMB 22.71 per ton and daily crew wage of RMB 12,000 are accepted by the court, as the defendant failed to provide counter-evidence. The plaintiff's calculation of daily insurance allocation at RMB 329.48 based on the insurance premiums it paid for the ship is also confirmed by the court. Regarding the disputed duration of Voyage 2357, the court determines a 10-day period based on the vessel log's recorded departure time on August 12. Accordingly, the net profit per voyage was calculated as freight income minus operational costs, including port fees (berthing and agency fees), towage fees, crew wages and meals, fuel, freshwater, and insurance expenses. The court thus deems it fair to calculate the loss of hire based on the average net profit of the four consecutive voyages (2354, 2355, 2356, and 2357) prior to the collision. The average daily net profit of SHENG YOU 226 across these four voyages was calculated at RMB 10,119.72. Therefore, the loss of hire during the 13-day repair period amounted to RMB 131,556.36. IV. Interest All compensation claims made by the plaintiff pertain to property damages caused by the collision on August 31, 2023. The court recognizes this date as the commencement of damages. The plaintiff's claim to calculate interest from September 1, 2023, at the one-year LPR published by the National Interbank Funding Center is supported by factual and legal grounds. The court supports this claim. The interest shall accrue from September 1, 2023, until the date specified in this judgment for debt fulfillment. Key Points of Judgment 1. The liability attribution between the plaintiff and defendant shall adhere to the maritime traffic accident liability determination report mutually recognized by both parties, which serves as the basis for calculating their respective losses. 2. When the parties, after court clarification, waive their right to apply for loss assessment and consent to the court's determination of collision-induced losses based on existing evidence, the court may adjudicate such losses in accordance with legal provisions and the evidence received. 3. If, in the absence of consecutive voyages for reference, the loss of hire is to be calculated based on the average net profit of other corresponding voyages, the court may calculate the loss of hire by reasonably adopting the average net profit of at least four comparable voyages after reviewing their average net profit. Related Legal Provisions Article 168 of Maritime Code of the People's Republic of China Article 4 of Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Cases of Disputes over Ship Collision Article 3 of Provisions of the Supreme People's Court on the Trial of the Cases of Property Damage Compensation Arising from Ship Collision and Allision

Case of Company A v. Company B and XX Insurance Company Regarding Dispute over Liability for Ship Collision Damage  –Determining the Limitation of Liability for Maritime Claims for Fishing Vessels Engaged in Operations in Unrestricted Area In the context of an expanding world economy, the marine economy grows rapidly alongside the shipping industry.  Safety of navigation is of paramount importance to ships, especially to ships navigating at night, which must always stay alert and prudent. In this case, two ships failed to keep a proper look-out during night navigation, resulting in a collision. One of the ships sank and suffered a total loss. How should the court rule on the attribution of the liability and the amount of compensation? Case Review At noon on August 31, 2019, the ship YUAN HANG 286, registered under the name of Company A, departed from Wenzhou City, Zhejiang Province, toward Dongfang City, Hainan Province. In the early morning of September 5, when many people were asleep, the intercom suddenly sent out a sound signal from YUAN HANG 286 in the waters near Xiachuan Island in Taishan, Jiangmen. "The fishing vessel ahead! The fishing vessel ahead! Please give way to us." It was an avoiding signal sent out by the crew on duty when they spotted the approaching fishing vessel YUE TAI YU 11838 owned by Company B, only to go unanswered. The crew directed the beam of the searchlight toward the bridge of the approaching vessel. Yet the vessel still did not respond and continued steady course. At this moment, YUAN HANG 286 was unable to avoid it, and it took the wrong avoiding action of turning left. Eventually, the two ships collided. Upon the collision, YUE TAI YU 11838 moved astern and disengaged itself from YUAN HANG 286, and then it came to a halt and drifted. Soon, it made a turn near the collision location and left. Due to low awareness of safety, the crew of YUAN HANG 286 left the watertight doors of the cabins under the deck open. As a consequence, water entered the ship through all cabins. What's worse, the watertight doors, which failed to be properly maintained, could not be closed and locked promptly, allowing a large amount of water to enter multiple cabins. In the end, the ship capsized 180 degrees and sank. The Taishan Maritime Safety Administration investigated the accident and concluded that both YUAN HANG 286 and YUE TAI YU 11838 were liable for this collision and shall assume the liability equally. It was found that during the night navigation, the crew of YUAN HANG 286 was unable to make a full appraisal of the situation and the risk of collision due to its look-out failure. As the give-way ship, it did not maintain a safe speed and failed to take avoiding action early. The captain of YUE TAI YU 11838 also failed to maintain a proper look-out and steered the ship while fatigued. He failed to detect the approaching ship in time and make a full appraisal of the situation and the risk of collision. At the time he found the approaching ship, a collision was inevitable. Company A was dissatisfied with the investigation conclusion, stating that the collision accident resulted in the total loss of YUAN HANG 286, with a loss amounting to RMB 6,858,748.08, and therefore claimed that Company B should bear 70% of the liability. It also claimed that as Company B had purchased relevant insurance from XX Insurance Company and the collision occurred during the insurance liability period, XX Insurance Company should, within the scope of insurance liability, bear the joint and several liability for compensation together with Company B. Company A filed a lawsuit with the Guangzhou Maritime Court (GZMC), requiring that (1) Company B should compensate for its collision-induced loss of RMB 4,801,123.65 plus interest (calculated from September 5, 2019 to the date of payment as determined by the court judgment based on LPR announced by the National Interbank Funding Center); (2) XX Insurance Company should, within the scope of insurance liability, bear the joint and several liability for the settlement of the compensation payable by Company B; (3) Company B and XX Insurance Company should jointly bear the litigation costs. Upon hearing the case, GZMC ascertained facts as follows: YUAN HANG 286 was a steel dry cargo ship, with the permit to navigate the Coastal Service Area, and Company A was its registered owner and operator. On March 1, 2014, Lin signed a contract on entrusted operations and management of cargo carrier with Company A, by which he entrusted Company A with the operations and management of YUAN HANG 286. On August 27, 2019, Lin Long sold the ship to Wang for RMB 3.65 million. The ship was handed over between the parties in the Wuniu waters, Yongjia County. During the first-instance proceedings, Wang issued a statement, saying that he was the actual owner and operator of YUAN HANG 286, and YUAN HANG 286 was registered under the name of Company A under a sales contract he entered into with Lin Long. YUE TAI YU 11838 was a steel trawling ocean fishing vessel with a gross tonnage of 561. It was permitted to be engaged in operations in the C3 (South China Sea) fishing area and navigate the Unrestricted Area. Its registered owner was Company B. In June 2019, Company B purchased coastal and inland waters insurance for the vessel with XX Insurance Company, under which XX Insurance Company agreed to cover the total loss and all risks. On September 5, 2019, YUAN HANG 286 collided with YUE TAI YU 11838 about 22 nautical miles southwest of Litouzui, Xiachuan Island in the Taishan waters of Jiangmen, and the former sank. After the collision, Wang engaged Company C to conduct underwater exploration and other work on the sunken ship, and paid Company C RMB 60,000 for that. On October 30, 2019, Wang signed a wreck removal contract with Company D regarding the sunken YUAN HANG 286. Company D failed to remove the shipwreck; thereafter, a dispute arose between Wang and Company D. Wang applied for arbitration with the China Maritime Arbitration Commission with Company D as the respondent, requiring Company D to pay him liquidated damages of RMB 537,130 and compensate him for various losses of RMB 5.51 million. During the arbitration process, Company D filed a counterclaim that Wang should compensate Company D for economic losses of RMB 1,506,010.85. The arbitral tribunal rendered an arbitral award based on a majority opinion, ruling that Wang shall compensate Company D for economic losses of RMB 1,204,808.68. Company B argued that Company A should bear 70% of the liability for the collision, that Company B enjoyed the right to limitation of liability for maritime claims under the law, and that its liability for compensation should be capped at RMB 815,905. XX Insurance Company argued that it was not the defendant in this case, that the circumstances of "determination of liability" and "the insured's negligence in making a request" as stipulated in Article 65 of the Insurance Law of the People's Republic of China (the "Insurance Law") did not exist in this case, and that Company A had no legal basis to sue XX Insurance Company. Court Decision GZMC rendered a first-instance judgment on October 28, 2022 as follows: Company B shall compensate Company A for the loss of RMB 814,563.19 plus interest calculated from September 5, 2019 to October 18, 2022 based on LPR announced by the National Interbank Funding Center during the period, while Company A's other claims were dismissed. Company A was not satisfied with the first-instance judgment and filed an appeal with Guangdong High People’s Court. On May 28, 2024, Guangdong High People's Court rendered the second-instance judgment, dismissing the appeal and upholding the first-instance judgment. Key Points of Judgment The effective judgment sets out the rationale as follows: Both YUAN HANG 286 and YUE TAI YU 11838 violated the relevant provisions of the International Regulations for Preventing Collisions at Sea, 1972. It was determined, based on the causal force for the formation of the collision, duty of care, the ability to avoid risks, and the avoiding actions taken, that YUAN HANG 286 and YUE TAI YU 11838 were equally liable for the collision accident. According to Article 4 of the Supreme People's Court Rules on Some Issues about the Trial of Cases Related to Ships Collision Disputes, Company A shall have the right to institute a tort action. XX Insurance Company was merely the insurer of the total loss insurance and additional rescue and salvage insurance of coastal and inland waters for YUE TAI YU 11838 owned by Company B. It was neither the tort subject of the collision nor the insurer of liability insurance. It therefore shall not be required to bear compensation liability to Company A. Among the various losses claimed by Company A, the loss of hull value and the cost of wreck exploration totaling RMB 3.68 million were reasonable losses. Other losses lacked factual basis and were therefore not supported by the Court. After the collision, YUE TAI YU 11838 failed to use good seamanship to push YUAN HANG 286 at a slow speed to slow down the ship's water intake. Instead, it moved astern and disengaged itself from YUAN HANG 286, and then left the scene. As a result, a large amount of water entered YUAN HANG 286 quickly, leading to its sinking. This was an important reason for the expanded loss to YUAN HANG 286. However, the aforesaid damage was caused by the negligence of the crew of YUE TAI YU 11838, rather than the intentional or reckless inaction of the person responsible for the vessel. Therefore, according to Articles 204, 207, and 209 of the Maritime Code of the People's Republic of China (the "Maritime Code") and Article 15 of the Supreme People's Court Rules on the Trial of Compensation Disputes over Property Damages Occurred in Ships Collision and Touch Cases, Company B, as the registered owner of YUE TAI YU 11838, shall have the right to claim the limitation of the tort liability that Company B should bear to Company A. YUE TAI YU 11838 was a fishing vessel engaged in operations in the C3 fishing area, with the Unrestricted Area as its approved navigation area. The collision occurred in the sea area within China's jurisdiction. YUE TAI YU 11838 was a "ship engaged in coastal operations"; hence, Article 4 of the Provisions of on the Limitation of Liability for Maritime Claims for Vessels with a Gross Tonnage of Less than 300 and Vessels Engaged in Coastal Transport or Coastal Operations applies to the calculation of its limitation of liability for maritime claims. Pursuant to Articles 210 and 277 of the Maritime Code, Company B shall bear the liability amounting to RMB 814,563.19 plus interest calculated from September 5, 2019 to October 18, 2022 based on LPR announced by the National Interbank Funding Center during the period. Related Legal Provisions Paragraphs 1 and 3, Article 50 of Maritime Traffic Safety Law of the People's Republic of China (2016 Amendment) "Coastal waters" mean the harbors, inland waters, territorial waters and all other sea areas under the jurisdiction of the State, along the sea coast of the People's Republic of China. "Operations" mean investigations, exploration, exploitation, survey, construction, dredging, demolition, rescue, salvage, towing, fishing, aquatic breeding, loading and unloading, scientific experimentation and other surface and underwater operations. Article 4 of the Provisions Concerning the Limitation of Liability for Maritime Claims for Ships With a Gross Tonnage Not Exceeding 300 Tons and Those Engaged in Coastal Transport Services As Well As Those for Other Coastal Operations, promulgated by the former Ministry of Transport For vessels engaged in cargo transport between ports of the People's Republic of China or in coastal operations, if they have a gross tonnage not exceeding 300, the liability for maritime claims shall be limited to 50% of the limit liability stipulated in Article 3 of these Provisions; if they have a gross tonnage exceeding 300, the liability for maritime claims shall be limited to 50% of the limit liability stipulated in Paragraph 1, Article 210 of the Maritime Code of the People's Republic of China.

Case of Company A v. Company B and Company C Regarding Dispute over Contract of Carriage of Goods by Sea — Determining Shipper in a Dispute over Contract of Carriage of Goods by Sea The absence of a written contract is not rare in a dispute over contract of carriage of goods by sea. It is essential to employ other evidence to accurately determine the shipper in the absence of a written contract as the basis for adjudication. In this case, a transport company claimed an additional payment of more than USD 100,000 without a contract signed and in the absence of definite evidence to prove the shipper. It was a very difficult situation. Case Review On September 6, 2021, a company called DRE ordered a batch of face masks from Long and Company B. Upon receiving the order, Company B engaged Company C to manufacture the masks, and confirmed that the latter would deliver the goods to the former. Long and Company A communicated on WeChat about the place and date of loading and other information, with a plan to carry the masks in containers from Yantian Port, China to Port of Los Angeles, USA. The two parties did not sign a contract on the matter. When the goods were loaded for carriage, Company A issued a bill of lading (B/L), which set forth "freight prepaid". Company A engaged Company D to actually carry the goods, and Company D issued a B/L. Several months later, the goods arrived and were unloaded at the destination Port of Los Angeles on December 27. Because of the failure to pay the freight in time, the goods were detained at the port, which incurred various expenses. A dispute thus arose over the freight payment for the goods detained at the port. Company A informed on January 6, 2022 that the shipowner required the goods to be picked up before January 8, otherwise the abandonment procedure would be initiated. Upon receiving the message, DRE responded that it had paid USD 34,000 that day and provided a remittance slip, requesting the release of the goods. Company A stated that this payment was for the freight of other container cargo, and the freight of the masks remained unpaid, hence the goods could not be released. The parties were unable to break the deadlock. On January 25, Company A emailed DRE, Long and other related parties, informing DRE to check the updated container list. The container was in the final warning status of forced abandonment or destruction. All demurrage fees were estimated, and the specific amounts were subject to the final bill from the shipping company. A pick-up plan needed to be provided as soon as possible. However, these communication efforts were fruitless. Company A believed that Company B and Company C failed to pay the freight and pick up the goods in time, which led to Company A being responsible for the third party and having to pay additional fees. It therefore claimed that Company B, as the contracted shipper, and Company C, as the actual shipper and manufacturer of the goods, should bear the corresponding liabilities. Company A filed a lawsuit with the Guangzhou Maritime Court (GZMC), requiring Company B and Company C to jointly bear the ocean freight of USD 13,000, demurrage of USD 87,565, destination port congestion surcharge of USD 1,500, administrative surcharge of USD 100, and interest on these amounts. Company B refuted these claims, stating the following: (1) It was not a party to the contract, and the shipper set out in the B/L was JOIN WE, not Company B. (2) Company B was not the contracted shipper. DRE and Company B established a contractual relationship of goods trade, and the shipping terms set out in the trade contract between these two parties were FOB Shanghai/Ningbo, and DRE paid the local costs and trailer costs in China. According to Sub-paragraph 2, Paragraph 3, Article 42 of the Maritime Code of the People's Republic of China and Paragraph 3, Article 8 of the Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Cases Involving Maritime Freight Forwarding Disputes, JOIN WE was the actual shipper and DRE was the contracted shipper. As the actual shipper, JOIN WE was not obligated to guarantee and pay the ocean freight and the expenses incurred by failure to pick up the goods at the destination port. Company C argued that as the manufacturer, it did not conclude a contract of carriage of goods with Company A, deliver the goods to Company A, and participate in the carriage process and customs declaration, and thus it was not the actual shipper. Upon hearing the case, GZMC ascertained facts as follows: As set out in the order, Long and Company B were the sellers, and DRE was the buyer. JOIN WE was a Hong Kong company owned by Company B. Company A failed to provide evidence that Company B booked shipping space for the carriage of the goods, nor did it provide a written contract of carriage of goods by sea. Company A failed to provide evidence to corroborate the negotiation process for forming the draft B/L, and the issuer column in the draft B/L was blank. Therefore, the draft B/L alone was insufficient to prove that the two parties had concluded a contract of carriage of goods by sea. After stating the place of loading, Company A asked Company B for the loading date, and Company B confirmed the loading date with Company A. Furthermore, the two parties negotiated and agreed on the loading date of other container cargoes. The aforesaid facts can substantiate that the two parties negotiated on the delivery of goods, but cannot prove the process of the two parties concluding a contract of carriage of goods by sea. Company B set out JOIN WE as the shipper in the blank telex release, for the purpose of delivering the goods through the carrier Company A since the draft B/L set forth JOIN WE as the shipper. This is insufficient to prove that Company B engaged Company A to carry the goods. On the contrary, Company C confirmed that it delivered the goods to Company B, and Company B delivered the goods to Company A. According to Paragraph 3, Article 42 of the Maritime Code of the People's Republic of China, Company B was the actual shipper. In addition, Company A negotiated with DRE on the date of freight payment. DRE informed Company A that it had paid the freight and provided the payment voucher, and stated that it prioritized payment to Company A. The responses and pictures sent by Company A to DRE showed that the freight of the container cargo had not been paid. Company A urged DRE to pay demurrage and other fees via email. The abovementioned facts—the carrier Company A demanded payment of freight, demurrage and other fees from the buyer DRE and DRE made such payments to Company A—can be mutually corroborated with the characteristics of the buyer DRE being responsible for concluding the contract of carriage of goods and paying the freight under the FOB trade term. Therefore, Company A's claim that Company B was the contractual shipper was not well-founded, and GZMC as the first-instance court did not support it. Court Decision GZMC rendered a civil judgment on November 28, 2022, dismissing Company A's claims. Company A was not satisfied with the first-instance judgment and filed an appeal with Guangdong High People's Court. On December 18, 2023, Guangdong High People's Court rendered a civil judgment, dismissing the appeal and upholding the first-instance judgment. Rationale of Judgment The effective judgment sets out the rationale as follows: Firstly, Company A failed to provide relevant substantive evidence of the contract of carriage of goods by sea concluded with Company B or Company B's booking of shipping space for the carriage of the goods, to prove that Company B engaged it to carry the goods and that there existed an agreement between the two parties on establishing a contract of carriage of goods by sea or that a contractual relationship of carriage of goods by sea had actually been established. Secondly, in a dispute over contract of carriage of goods by sea, if the shipper set out in the B/L or other transport documents is not the entity that books the shipping space for the carrier or its agent, the information in the B/L or other transport documents merely has preliminary evidentiary effect for both the carrier and the shipper, in which case the people's court should accurately determine the shipper by taking into consideration the conclusion and performance of the contract of carriage of goods. The existing evidence fails to show the entity that booked the shipping space for the carriage of the goods for Company A. Although the draft B/L provided by Company A sets out JOIN WE as the shipper and "freight prepaid", there is no corresponding evidence to prove that it had negotiated with Company B on the contents stated in the draft B/L, nor is there any evidence to prove the entity that should prepay the freight to Company A. The draft B/L alone is insufficient to prove that a contractual relationship on the carriage of goods by sea was established between Company A and Company B. As shown by the communications between the relevant parties during the delivery and carriage of the goods, although Company A and Company B had communicated on matters such as the place and date of loading for the delivery and shipment of the goods, Company B, as the exporter of the goods, shall perform the duties of the actual shipper stipulated in Sub-paragraph 2, Paragraph 3, Article 42 of the Maritime Code in accordance with the law. The fact that Company B actually delivered the goods to Company A for carriage is insufficient to prove that a contractual relationship on the carriage of goods by sea was established between the two parties or that Company B was the contracted shipper in the contractual relationship. Lastly, the communications between Company A and relevant parties about freight collection after the goods arrived at the destination port show that Company A negotiated with DRE on the date of freight payment; DRE informed Company A that it had paid part of the freight for the goods, provided the payment voucher and stated that it prioritized payment to Company A. The above facts demonstrate that after the goods arrived at the destination port, Company A also claimed that DRE should pay it the freight, demurrage and other fees and demanded payments from DRE. Related Legal Provisions Maritime Code of the People's Republic of China Article 42 (3) "Shipper" means: a) The person by whom or in whose name or on whose behalf a contract of carriage of goods by sea has been concluded with a carrier; b) The person by whom or in whose name or on whose behalf the goods have been delivered to the carrier involved in the contract of carriage of goods by sea. Civil Code of the People's Republic of China Article 584 Where a party fails to perform his contractual obligation or his performance does not conform to the agreement so that the other party suffers loss, the amount of compensation shall be equivalent to the loss caused by the breach of contract, including the benefits expected to be obtained should the contract had been performed, except that it shall not exceed the loss that may be caused by the breach that the breaching party foresees or should have foreseen at the time of conclusion of the contract. Article 591 After a party defaults, the other party shall take appropriate measures to prevent further loss. Where the loss is aggravated due to the failure of taking appropriate measures, no compensation shall be claimed for the aggravated part of the losses. The reasonable expenses incurred by a party in preventing the aggravation of the loss shall be borne by the breaching party.

ZHANG Jiansheng

[Abstract]
In case collision involved a ship which is on her trial voyage, according to the principle of "Who controls shall assume the risk", since the ship is controlled by the shipbuilder, who shall thus bear the risk accordingly. For collision involved three ships, whether it shall be deemed as one incident or two shall depend on the examination whether there exists a close-quarters situation and whether there is sufficient time for taking avoiding measures.

[Case index]
First instance: Ningbo Maritime Court, (2011)YHFZSCZ No.24 dated 23 December 2011
Second instance: Zhejiang Higher People's Court, (2012)ZHZZ No.31 (16 May 2012)

[Detail of case]
Plaintiff (Appellee): Shao Jun'ou
Defendant (Appellant): Zhoushan Dingheng Shipbuilding Co., Ltd. (hereinafter referred to as "Zhoushan Dingheng")
Defendant: Shanghai Dingheng Shipping Co., Ltd. (hereinafter referred to as "Shanghai Dingheng")

At aournd 1000hrs on 19 April 2010, "Zhe Xiang 988" owned by the Plaintiff departed from Fuzhou after loading with around 5000MT sand, while "Ding Heng 9" was anchored in Fo Du fairway. At 1144hrs, "Zhou Hai You 9", sailed down from Dinghai, passed through the sea area in a distance of 0.5nm west to Yang Xiao Mao. At 1158hrs, the Second Officer of "Ding Heng 9" observed "Zhe Xiang 988" in a distance about 0.3nm who approached to her. Both of the ships had not taken any avoiding measures. At around 1200, the two ships collided. At 1201hrs, "Zhou Hai You 9" detected "Zhe Xiang 988" in a distance shorter than 0.3nm, and order to "hard to port". At around 1201.5hrs, "Zhe Xiang 988" first observed "Zhou Hai You" which was in a distance of tens of meters. At around 1202hrs, the two ships collided. At around 1204hrs, "Zhe Xiang 988" sunk. The Plaintiff paid the wreck removal cost for "Zhe Xiang 988" in an amount of RMB2 million and indemnification to family dependents of the 4 deceased crewmembers in an amount of RMB2.28 million. On 15 June 2011, the MSA issued the Investigation Report of Marine Incident, determining that "Zhe Xiang 988" and "Zhou Hai You 9" shall bear equal liability for the collision between them, while "Zhe Xiang 988" shall bear the major liability for the collision between her and "Ding Heng 9" and "Ding Heng 9" bears the secondary liability. The Plaintiff brought a lawsuit before the court requesting the two Defendants to bear the joint and several liability to indemnify the Plaintiff for RMB4 million and assume the legal costs.
The court found that the registered operator of "Ding Heng 9" is Zhoushan Dingheng during her trial voyage. On 28 April 2011, the Defendant Zhoushan Dingheng completed the building of "Ding Heng 9" and the Defendant Shanghai Dingheng obtained the ownership of the ship the next day, on 29 April 2011.

[Trial]
Upon hearing, Ningbo Maritime court ascertained: around 2 minutes after collided with "Ding Heng 9", "Zhe Xiang 988" collided with "Zhou Hai You 9", which caused "Zhe Xiang 988" sunk. Given the panic of the crewmember and short time between the two collisions, most of the crewmember would not be able, even maneuver the ship with normal seamanship, to avoid the occurrence of the subsequent collision, thus there is causal relationship of the collisions involved the three ships and shall be deemed as a chain collision. In connection with the Investigation Report of Marine Incident, the court ascertained that the proportion of collision liability among "Zhe Xiang 988", "Zhou Hai You 9" and "Ding Heng 9" in this collision incident shall be 45%: 45%: 10%. Taking into consideration of the depreciation of the ship, market condition and the market price of ship of same kind at the time when the incident occurred, the court ascertained that "Zhe Xiang 988" valued RMB12 million and the losses sustained by Plaintiff due to this collision totaled RMB16.28 million.

The Defendant Zhoushan Hengding was the shipbuilder of "Ding Heng 9" and actually controlled the ship during her trial voyage. It was during her trial voyage, "Ding Heng 9" collided with "Zhe Xiang 988", thus Zhoushan Hengding shall indemnify the losses sustained by the Plaintiff due to this collision. The Plaintiff failed to prove that the Defendant Shanghai Hengding has actually controlled "Ding Heng 9" at the time when the collision occurred. Shanghai Hengding obtained the ownership of the ship after the incident. In addition, the Plaintiff has not claimed for maritime lien before the court and thus was not entitled to request the Defendant Shanghai Hengding to indemnify its loss. Taking consideration of the Plaintiff's loss and the liability proportion assumed by "Ding Heng 9", the Defendant Zhoushan Hengding shall indemnity the Plaintiff for RMB1.628 million, which has not exceeded the limitation invoked by the two Defendants. In sum, according to Paragraph 1 of Article 169 of the Maritime Code of the PRC and Paragraph 1 of Article 64 of the Civil Procedure Law of the PRC, the court ruled that 1) the Defendant Zhoushan Hengding shall indemnify the Plaintiff Shao Jun'ou for RMB1.628 million within 10 days after the judgment becomes effective; 2) overrule other claims by the Plaintiff Shao Jun'ou. After the first instance judgment was pronounced, Zhoushan Hengding filed an appeal with dissatisfaction to the first instance judgment, and the appellant court upheld the first instance judgment.

[Analysis]

1. How to determine whether it's one collision or two for collisions involving three ships?

Two factors shall be taken into consideration: 1) whether there is continuity in time; 2) whether there is causal relationship between the two collisions. If the first collision does not cause subsequent close-quarter situation or even it does cause close-quarter situation which could be avoided through good seamanship and cautions but still collided with other ships or terminal, then these collision shall be deemed as two separate collisions. The reason lies in that under such circumstance, there is no causal relationship between the two collisions, the other party has no intervention to or fault at the second collision, thus the chain of causation has been broken and shall not bear relevant indemnification liability. In this case, about 2 minutes after she collided with "Ding Heng 9", "Zhe Xiang 988" collided with "Zhou Hai You 9" which caused "Zhe Xiang 988" sunk, there is continuity in time between the two collision and the second collision could not be avoid even with good seamanship and caution, thus there is causal relationship between the collisions of the three ships which shall be deemed as chain collision.

2. Who shall be held liable if the ship which is on her trial voyage involves a collision?

There are various points of views on who shall be held liable when a collision occurred to the ship which is on her trial voyage. The author holds that according to the theory of cost for risk control, to let the party who is most close to the risk to bear the risk shall encourage the party to try its best to control the risk for its own interests and would also minimize the cost for risk control, otherwise it may cause moral risk, i.e. to leave alone what was under its control but let other parties to bear the risk of loss arising therefrom. In case the aggrieved party claim for maritime lien, which is statutory real security, since the maritime claims arising due to ship collision have recourse effect and could reach to the owner who obtains the ownership of the ship after the collision incident. In this connection, there is risk for the shipowner as the holder of the real security to be held liable for statutory risk.

(By Judge of Ningbo Maritime Court)

Ni Xuewei/Fu Junyang[ Judge of Guangzhou Maritime Court.]

On 9th May 2009, Jiangxi Rare Earth & Rare Metals Tungsten Group (“Rare Earth”) entered into a sales contract with Amaxus International. LLC. (“Amaxus”) under which Rare Earth agreed to buy 500 tons of no.2 scrape copper from Amaxus. Ocean Honour International Limited (“Ocean Honour”) was assigned as the export agent for Amaxus. At the port of loading, SGS, CCIC and other peer survey institutes issued pre-shipment survey reports and conformations of quantity/quality of the scrape copper to be shipped to China. From June 2nd to 6th, 19 containers, which were affixed with the seal of RCL Feeder Pte., Ltd (“RCL Feeder”) but without the seal of CCIC PHILIPPINES.INC (“CCIC Phils”), were carried to Manila. On 9th June, RCL Feeders Phils., INC (“RCL Phils”) issued the bill of lading and provided the attached documents on behalf of RCL Feeder, which indicated: SHIPPER Ocean Honour, C/O Goldsphere Metal Marketing, CONSIGNEE and NOTIFY PARTY Rare Earth, CARRIER “OTANA BHUM”, PORT OF LOADING Port of Mania, PORT OF DISCHARGE Pingzhou Wharf, Nanhai of Guangdong; the 19 40 TEU containers were packed, tallied and sealed by SHIPPER; shipper described the cargo as 503.46 tons of NO.2 SCRAPE RED COPPER; the column of Container no./Seal no. recorded the container numbers of the 19 containers and the seal number of the shipping company; the bill also indicated that a full set of container information, including container number, seal of shipping liner, seal of CCIC Phils and the weight of each container, could refer to the B/L annex.

 “OTANA BHUM” arrived at Hong Kong on 9th June 2009. During transshipment, container REGU4999571 got damaged and the inside cargo was transshipped into container REGU4213152 which was then affixed with a CCIC seal 075153. But in its survey report, Standard Maritime & Cargo Survey described the cargo being transshipped as something like “soil and stones”. On 12th July, the 19 containers were shipped from Hong Kong to Pingzhou, Nanhai of Guangdong Province. The Claimant, CCIC Phils and representative of RCL Feeder carried a joint survey of the cargo. Findings included: each container bore an RCL seal and container REGU4213152 even bore an extra CCIC seal 075153; all the containers were in good appearance and with proper sealing, and the structure and opening of the containers were in good condition; the cargo inside was a mixture of soil, stones, rusted iron chunks and waste iron, far away from the scrape copper as indicated on the bill of lading.

On 19th May 2009, CCB Nanchang Hongdu Branch, upon the instruction of the Claimant, made out an irrevocable Letter of Credit, against which the bank required the Claimant to provide a full set of clean on board B/L (marking freight payable at destination, vessel’s name, and the notify party and consignee as the Claimant), signed commercial invoice, signed packing list, quality/quantity certificates at loading port by SGS, CCIC or other peer survey institutes, and CCIC pre-shipment survey report. On 20th June, the Claimant paid the cargo payment to the bank against which it became the holder of original bill of lading.

On 14th August 2009, RCL Phils requested Philippine National Bureau of Investigation (NBI) to investigate into the containers involved. On 8th February 2010, NBI released its investigation report, concluding that Rare Earth was caught in a fraud jointly contrived by several sides: SHIPPER Goldensphere took the first step to entrust CCIC Phils to survey the 500 tons of scrap copper and the copper was packed into containers at the survey scene but the containers were affixed with unnamed seal rather than the RCL seal and then the CCIC seal; after that, the containers were carried to other place rather than be directly carried to Manila terminal, during which the seals of CCIC Phils and the counterfeited seal were destroyed so as to replace the scrape copper cargo with equal weight of other substances. The containers had been affixed with the RCL seal before they arrived at Manila terminal.

On 3rd August 2009, Rare Earth made a complaint to Guangzhou Maritime Court: the seal number recorded in the bill of lading issued by RCL Phils B/L was false, which resulted in wrongly remittance of the cargo payment upon the maturity of the letter of Credit. The carrier RCL Feeder and the actual carrier Regional Container Lines Pte., Ltd (“RCL”), whose failure in exercising due diligence to attend to the cargo had resulted in the loss of CCIC Phils seals, shall undertake relevant tortuous liabilities.

The Defendants RCL Feeder, RCL Phils, and RCL made defense: the cargo loss was caused by trade fraud. The cargo had been replaced before they arrived at the storage yard of the destination port, namely, the cargo loss did not occur during the period of the carrier’s responsibility. The ship’s seals at the destination port remained the same with that at the loading port, which means the Defendant had fulfilled the obligation of delivery. The Defendants were not obligated to deliver the cargo as per the terms and conditions set forth in the B/L annex.

On hearing the case, Guangzhou Maritime Court held that: this was a case on dispute over liability for property lost at sea. The Claimant might raise a default lawsuit or a tort lawsuit as the B/L holder, but the court would hear the case as a tort lawsuit according to the Claimant’s orientation of complaint.

Investigation revealed that the cargo concerned had been replaced before being consigned to the carrier at the port of departure. During the consignment, the containers were not affixed with the seal of CCIC Phils and the Defendants denied taking any infringement acts to destroy the seals. In the condition that the RCL seals were absent on the containers but RCL Phils still issued the B/L and recorded such information on the B/L, it could be concluded that RCL Phils wrongly issued the bill of lading. The L/C which was used to effect the payment only required the B/L to be a full set of clean on board B/L (marking freight payable at the destination port, vessel’s name, and notify party and consignee as the Claimant) rather than require the B/L to record the number of CCIC Phils seals. That means whether the B/L bore the seal number or not would not affect the effectiveness of the L/C payment. To put differently, RCL’s mistake in issuing the bill of lading had no causal relations with the L/C payment. Therefore, the court overruled Rare Earth’s request against the three Defendants for tortuous liabilities since such requests were not based on factual or legal grounds.

Rare Earth was not satisfied with the first-instance verdict and lodged an appeal to the Higher People’s Court of Guangdong Province. On hearing the case, the Higher People’s Court of Guangdong Province held that RCL Feeder only put the cargo descriptions and particulars of containers on the B/L as instructed by the shipper. RCL Feeder also marked on the B/L annex of the seal numbers but did not indicate that the seal belonged to CCIC Phils. And in the terms of FCL delivery, RCL Feeder was only responsible for the condition of the full container. Now that the containers had been delivered in good appearance and condition and with proper seals, it shall be admitted that RCL Feeder had completed the delivery obligation as set forth in the bill of lading. Therefore, the court upheld the original ruling and rejected Rare Earth’s appeal against RCL for tort upon the ownership of cargo since such appeal were not based on factual or legal grounds.

 

 

Ni Xuewei[ Judge of Guangzhou Maritime Court.]

On 15th April 2004, Guangdong Fuhong Edible Oil Co., Ltd (hereinafter “Fuhong”) purchased 55,000 tons of Brazil soybean from Louis Dreyfus Asia Pte., Ltd at a C&F price of 369.26 USD per ton. On 23rd August, Fuhong made the cargo payment via a letter of credit in the sum of 177,884,911.77 CNY plus interest (currency hereinafter refers to CNY if no special instructions are given). On 27th April, Fuhong insured the cargo concerned against All Risks for 22874197.50 USD with Ping An Insurance Shenzhen Branch (hereinafter “Ping An Shenzhen”).

From 4th May to 7th May 2004 at Santos, Brazil, the soybean involved was loaded onto the Korea-registered vessel “Hanjin Tacoma” which was owned by Hanjin Shipping Co., Ltd. On 7th May, the ship’s agent Transatlantic Carriers (Agenciamentos) Ltd issued the original order bill of lading in triplicate. With shipper’s endorsement, the Bs/L were held by Fuhong.

At 0400hrs of 16th June 2004, “Hanjin Tacoma” arrived at Zhanjiang, China and dropped her anchor awaiting berthing. On 18th June, Fuhong eventually obtained the “Approval on Review of Agricultural Genetically Modified Organism Marks” and the “Safety Certificate for Agricultural Genetically Modified Organism (Import)” which were required of soybean cargo by the Ministry of Agriculture of China. At 1024hrs of 19th June, the Master submitted the Notice of Readiness to advice that the ship was ready for discharge. But it was not until 27th July that Fuhong was granted the AQSIQ “Approval on Quarantine Inspection of Imported Animals and Plants” for the cargo concerned. On 1st August, “Hanjin Tacoma” began to discharge the cargo and finished discharge on the third day of September.

At 1600hrs of 1st August 2004, Fuhong and other surveyors, when carrying sample survey of the cargo concern, found the soybean in moldy and damaged condition. In the next day, Fuhong sent a Notice of Loss to Ping An Shenzhen.

During 2nd August to 10th September 2004, CCIC Guangdong Branch carried out a survey of the soybean concerned at the Port of Zhanjiang. The survey report came out at 11th October with the conclusions as follows: altogether 5868.428 tons of cargo got damaged, which was mainly caused by no ventilation or poor ventilation in the cargo holds. For this reason, the cargo was seriously sweaty during the 86-day voyage and the days waiting for berthing.

In Civil Ruling (2005) GHFCZ No.211 rendered by Guangzhou Maritime Court concerning the action between Fuhong and Ping An Shenzhen for dispute over marine insurance contract, it was concluded that: the presence of heat and sweat resulting from poor ventilation in the cargo holds of “Hanjin Tacoma” was the major cause of damage to the cargo being insured; the loss to the 5868.428 tons of cargo shall be compensated in the sum of 17422973.76 CNY(with 0.3% deductible) and the survey of cargo damage charged 345966.72 CNY. Therefore, the court adjudged Ping An Shenzhen to pay a total sum of 17768940.48 CNY plus interest to Fuhong.

After the said ruling came into effect, Ping An Shenzhen paid a total amount of 19245818 CNY of insurance compensation plus interest to Fuhong on 1st June 2006. After that, Ping An Shenzhen filed the subject case, requesting Hanjin Shipping to compensate 19245818 CNY plus interest calculated till 1st June 2006.

On hearing the case, Guangzhou Maritime Court held that: the subject case concerned the dispute over contract of carriage of goods by sea filed by Ping An Shenzhen who had became subrogated to the right of the insured. Fuhong was the lawful holder of the bill of lading and the lawful party to take delivery of the soybean cargo. The Defendant Hanjing Shipping and Fuhong were bounded by a contract of carriage of goods by sea, which was testified by the bill of lading.

Hanjin Shipping, as the carrier, shall be responsible for the soybean on board from the period of 4th May 2004 to 3rd September 2004. Although the Master submitted the Notice of Readiness early on 19th June, owing to which the time of discharge should have been counted from 0800hrs of the next working day following the submission of the notice, the cargo was not discharged within the time prescribed. Therefore, the submission of the notice did not constitute the end of Hanjin Shipping’s liability for the storage and custody of the cargo on board. Rather, Hanjin Shipping shall be liable for the cargo until the date when the cargo was actually discharged rather than when the vessel became ready for discharge.

“Hanjin Tacoma” sailed from Santos, Brazil, crossed the equator, and arrived at Zhanjiang, China. This was a journey from winter to summer that crossed a wide range of temperatures. When sailing on a scheduled route within a specific period of time, the vessel should have properly controlled the temperature and ventilation of the cargo holds. Failure in temperature control would increase the moisture content of the soybean cargo and damage the cargo because humidity in warm air would condense into liquid when the vessel was sailing from cold waters to tropical seas. But Hanjin Shipping did not take any steps to control the temperature or humidity of the holds and all the air vents were kept closed during the journey from 8th May to 16th June. It was hard to say Hanjin Shipping had exercised due diligence to attend to the cargo.

The Master delivered the Notice of Readiness at 1024hrs of 19th June 2004, notifying that the vessel was well prepared for discharge. So the discharge should have started at 0800hrs of 20th June according to agreements in the sales contract. However, the soybean cargo was a genetically modified product, which was required of special approval by Chinese authorities and Fuhong failed to obtain the AQSIQ “Approval on Quarantine Inspection of imported Animals and Plants” before 20th June. It was not until 27th July that Fuhong got the approval to met the requirements of laws and was able to discharge the cargo. A 38-day delay in the import approval formalities for transgenic soybean directly caused the delay of cargo on board up to 38 days. The increased portion of loss shall be undertaken by Fuhong.

Although Hanjing Shipping was to blame for not exercising due obligation for cargo custody, it had submitted the Notice of Readiness and had made good preparation for discharge. If the cargo could have been discharged in time, the losses to cargo would be less. But since the cargo had been damaged, it was even more crucial to take effective measures to stop the loss. In the event that extra measures were not necessary, the party that had the obligation to take due measures to stop the loss should be more proactive in taking such measures rather than let the loss go unchecked and become heavier. Therefore, according to Article 119 of the Contract Law of the People’s Republic of China, the consignee Fuhong should have made discharge arrangements in time. But Fuhong only obtained the import approval after 38 days of the sending of the Notice of Readiness. As such, Fuhong could not avoid the liability for the increased losses occurred. Both of the parties were to blame for the cargo loss in the subject case. Considering Hanjin Shipping’s failure in cargo custody and Fuhong’s failure to take effective measures to stop loss from increasing, Hanjing Shipping shall be 70% liable for the loss and Fuhong shall be 30% liable for the loss.

Guangzhou Maritime Court adjusted: the Defendant Hanjin Shipping paid 13472072.60 CNY for the cargo loss plus interest to the Claimant Ping An Insurance Shenzhen Branch; the court overrule other claims made by the Claimant.

Neither of the parties was satisfied with the verdict, so they made appeal to the Higher People’s Court of Guangdong Province. In the second-instance hearing, the parties concerned reached an accord under which Hanjin Shipping agreed to compensate 3105000 USD to Ping An Shenzhen before 15th January 2012 as the full and final settlement of the subject case.

 

Foshan Industrial Co., Ltd (hereinafter “Foshan Industrial”) entrusted Global Logistics (Xiamen) Co., Ltd (hereinafter “Global”) for the shipment of the cargo concerned. On 18th August 2012, Global, in the name of the company itself, issued three copies of the original bill of lading titled “Global” to Foshan Industrial, on which indicated: SHIPPER Foshan Industrial; CONSIGNEE/NORTIFY PARTY Model One International S.A; PLACE OF RECEIPT Foshan, China; PORT OF LOADING Hong Kong; CARRIER ocean carrier “CAROLINE MAERS*” shipped and sailed on 18th August 2012; PORT OF DISCHARGE Balboa, Panama; PLACE OF DELIVERY Colón Free Trade Zone; cargo loaded, tallied and sealed by the shipper; cargo packed and loaded in two containers UETU5042783 and PONU7333056; FIRST VESSEL “Fo Hang ” received cargo at Foshan, China; FREIGHT PAYABLE AT DESTINATION.

Global entrusted the cargo concerned to the actual carrier A.P. Moller – Maers* Group, a party not involved in the subject case. On 12th September 2012 in Guangzhou, Maers* Line, on behalf of Maers* Group, issued a sea waybill or a combined transport bill of lading titled “Maers* Line”, on which indicated: SHIPPER World Asia Shipping Ltd; CONSIGNEE/NORTIFY PARTY General Cargo S.A.; CARRIER “CAROLINE MAERS*” loaded on 18th August; PORT OF LOADING Hong Kong; PORT OF DISCHARGE Balboa; PLACE OF DELIVERY Colón Free Trade Zone; CONTAINER No.UETU5042783/No.PONU7333056; FREIGHT PAYABLE AT DESTINATION; FIRST VESSEL “Fo Hang 1003” sailed off Foshan on 13th August.

After the Cargo concerned arrived at Colón Free Trade Zone, the First Civil Court of Colón Circuit of the Republic of Panama sent an Official Note No.1022 to the manager of Maers* Group on 17th September 2012. The Note notified that according to Order No.852 dated 14th September concerning the application of Mauricio Vargas to detain the property of Model One International S.A, the court would formally detain the 647 cases of goods in container UETU5042783 and the 199 cases of goods in container PONU7333056. The goods, covering a variety of goods such as floor board, ceramic tile, corner, corner plate, bathtub and toilet, were in the ownership of Model One International S.A. The goods were carried by Maers* Group and at the moment were detained at Manzanillo international terminal of the Port of Manzanillo.

The Claimant lodged claims with Guangzhou Maritime Court against Global and Global Shantou Branch, alleging that: the Claimant entrusted the Defendant to carry the cargo to Panama, against which the Defendant issued the original B/L on 18th August. On 10th October, the Defendant sent email to the Claimant, notifying that the cargo under the B/L was controlled by Panama authorities. But the Defendant did not provide any effective evidence for such fact. The Claimant considered that the Defendant was releasing cargo without the presentation of the original bill of lading and shall pay compensation to the Claimant for default. The Claimant therefore requested the court to rule: the two Defendants to jointly pay 109,011.15 USD plus interest to the Claimant and to bear the litigation fees of the subject case.

The two Defendants rose to their own defense: the cargoes were detained by the Panama court at Manzanillo international terminal of Colón Free Trade Zone immediately when they had arrived at the destination port, rather than to be released by the Defendant without the presentation of original bill of lading. Maers* Group, the actual carrier of the cargo concerned, had no fault in the case since the cargo was detained by the local court owing to the consignee’s involvement in a local lawsuit. For the moment, the Carrier could do nothing about the cargo being detained and the carrier shall not be liable for such circumstance. Therefore, the Defendants requested the court to overrule the Claimant’s claims.

On hearing the case, Guangzhou Maritime Court judged: the contract of carriage of goods by sea entered and concluded by the Claimant and Global was valid and effective. The two parties shall observe the clauses of the contract by exercising their rights and fulfilling their obligations. Global Shantou Branch, as a branch of Global, had directly contacted the Claimant to address relevant issues when handling the carriage involved. That means, Global Shantou Branch had actually participated in the performance of the carriage contract and therefore shall undertake joint liability of carrier with Global. Since the two Defendants consigned the cargo concerned to the actual carrier Maers* Group, a party not involved in the subject case, the Defendants shall be liable for the actual effect of the carriage performed by Maers* Group. Given that Claimant, who was the shipper indicated on the B/L, still held the full set of the original Bs/L in accordance with the B/L and other evidences, and that the Defendants did not deny the loss of control over the cargo concerned for the moment which was testified by the notified official note of the First Civil Court of Colón Circuit, this court therefore admitted the fact that the cargo concerned had been detained at the destination port.

The dispute of the subject case centered on whether or not the two Defendants had released the cargo without the presentation of the original B/L and whether or not the Defendants shall be, if any, held responsible for such act. The Claimant as the shipper alleged that the cargo concerned had been released by the Defendants without the presentation of original B/L and hence requested the Defendants to jointly undertake compensation liability for default. The Defendants as the carrier defended that they did not release the cargo without the presentation of original B/L and therefore shall not be liable for the cargo detained at the destination port. The Defendant also argued that the cargoes were detained by the local court immediately when they had arrived at Colón Free Trade Zone owing to the designated consignee’s involvement in a local lawsuit, which could be testified by the official note of the First Civil Court of Colón Circuit. Therefore, the Defendants had no fault and shall not be held liable for the cargo detention. According to Article 51 Paragraph 5 of the PRC Maritime Law, the carrier shall not be liable for the loss of or damage to the goods occurred during the period of carrier's responsibility arising or resulting from detention under legal process. Although the detention occurred during the period of the Defendants’ responsibility, the Defendants shall not be held liable for the loss arising from such act. Therefore, based on the facts and legal grounds, the court supported the Defendants’ defense and judged that the Defendants shall not be liable for the cargo loss arising from cargo detention at the destination port. In summary, without being furnished with factual or legal evidence, the court lawfully rejected the Claimant’s allegation that the Defendants released the cargo without the presentation of original B/L and the Claimant’s claim for compensation from the Defendants. The court overruled the claims made by Foshan Industrial.

On 27th September 2009, Zhoushan Shipyard (hereinafter “Shipyard”) and Heng  Shipping Company (hereinafter “Shipping Company”) entered into the Contract on Transformation/Repair of M/V “Heng Yu” under which Shipping Company agreed to entrust Shipyard to repair the vessel as of 26th June 2010 to 10th May 2011 at an engineering cost provisionally set at 57,650,000 CNY. The contract also agreed on the term of payment. After that, the vessel put in the shipyard and Shipyard began the transformation and repair project on the vessel.

On 27th July 2011, ICBC Gulou Branch (hereinafter “Gulou Branch”) lodged a lawsuit with Ningbo Maritime Court, requesting the court to arrest “Heng Yu” so as to be secured by the ship mortgage. Gulou Branch also requested the court to support its application to enjoy the right of mortgage in the sum of 150,000,000 CNY against “Heng Yu” owned by Shipping Company and the right of preferred compensation. On 29th July 2011, Ningbo Maritime Court arrested “Heng Yu” at the dock of Shipping Company. On 21st February 2012, the court rendered a civil ruling, adjudging Gulou Branch to enjoy the right of mortgage against “Heng Yu” owned by Shipping Company within the sum of 150,000,000 CNY.

Considering that Ningbo Maritime Court had issued a notice for the arrest of “Heng Yu”, Shipyard and Shipping Company agreed to suspend the transformation and repair of “Heng Yu” as of 20th August 2011, as was set forth in the Contract on Settlement of Transformation/Repair of “Heng Yu” entered and concluded on 29th October 2011. It was also agreed that the ongoing project shall be deemed terminated on an “as is” basis in the event that Shipping Company failed to set a date to resume the project within six (6) months after signing the settlement contract. Under such circumstance, Shipping Company shall, before 29th April 2012, pay a lump sum of 70.36 million CNY, after being confirmed by both parties, for the project and the costs occurred due to the suspension. After signing the contract, however, Shipping Company did not set a date to resume the project, nor did it pay the due amount for the project and the costs during the suspension in accordance with the contract in spite of calls and urges from Shipyard.

In its claims filed with Ningbo Maritime Court against Shipping Company, Shipyard alleged: the said contracts entered by and between the Claimant and the Defendant were valid and effective under which the Claimant had undertaken the liability to transform and repair “Heng Yu” in accordance with the clauses of the contract but the Defendant defaulted on the contract by not paying the due amount. Therefore, the Claimant requested the court to rule: (1) the Defendant to pay 70.36 million CNY plus interest for the transformation and repair of “Heng Yu”; (2) the Defendant to pay for the port charge and electricity cost of the vessel during the suspension; AND (3) the Claimant to enjoy the possessory liens against “Heng Yu” owned by Shipping Company and the right of preferred compensation from the proceeds of the auction sale.

The Defendant did not make any defense, nor did it provide any supporting evidence against such claims.

The third party Gulou Branch held that: the arrest of ship did not constitute possession of the ship by the Claimant; namely, the arrest was not the constitutative requirement of possessory liens. Therefore, Gulou Branch requested the court not to support the Claimant’s right to possessory liens against “Heng Yu” owned by the Defendant.

On hearing the case, Ningbo Maritime Court judged: the contract concerning the transformation/repair of vessel entered by and between the Claimant and the Defendant was valid and effective, and both of the parties shall lawfully perform their obligations as agreed in the contract. The transformation and repair of the vessel concerned was real and most of the job had been effectively carried out. According to the Contract on Settlement of Transformation/Repair of “Heng Yu” entered and conclude between Shipyard and Shipping Company on 29th October 2011, and considering that the Defendant had failed to set a resumption date or to make due payment according to the contract, the contract for the transformation/repair of the vessel shall be deemed terminated and the Defendant shall be in debt for the transformation/repair of the vessel as of 29th April 2012. Therefore, the court supported the Claimant’s request for the payment of expenses plus interest for the transformation and repair of “Heng Yu” since such claim was valid and grounded.

The third party Gulou Branch was adjudged to enjoy the right of mortgage of “Heng Yu” within the sum of 150,000,000 CNY. According to the principles of the PRC Property Law and relevant provisions of the PRC Maritime Law, this court held that the contract on transformation/repair of ship, which had been established and performed before the third party excised the right of ship mortgage, shall not be affected and excluded by the ship mortgage. Especially, according to Article 11 of PRC Maritime Law, the major function of the right of mortgage of ship (the right of preferred compensation from the proceeds of the auction sale) only enjoys priority in compensation over other creditor’s rights during the allocation of the proceeds of the auction sale. Ship mortgage could not nullify other creditor’s rights. According to Article 25 of PRC Maritime Law, the possessory lien is the natural outcome of default on debts (the building or repairing cost of a ship) rather than a “consensual lien” prescribed in a contract. Ship mortgage and possessory lien only vie for priority with one another in the auction sale of a ship and the allocation of the proceeds of the auction sale, and the possessory lien has priority over ship mortgage. Neither of the rights can nullify the legal effect of the other. According to the legislative intent of the possessory lien (to conditionally and rationally recognize private remedy in a bid to maintain the normal legal order), the third party’s application for ship detention by exercising the right of ship mortgage in order to cause the lien holder’s loss of possession could not be admitted by this court, because such application was not supported by facts or legal grounds. In accordance with the relevant laws and provisions, arrest-auction procedure is a special procedure of the court to tackle all the creditor’s rights concerning a ship in a forced, collective and thorough manner. This special procedure is made to lawfully allocate the ship’s price in a settled, collective, and definite manner, which cannot and will not change the legal status of the creditor’s rights before such settlement. To conclude, the third party’s application for admitting the Claimant’s possessory lien against “Heng Yu” by causing the lien holder’s losing of possession through ship arrest shall not be supported by the court since such application had no factual or legal grounds.

In summary, the court supported the reasonable claims raised by the Claimant and overruled the application and request made by the third party for absence of factual or legal grounds. The court therefore ruled: (1) the Defendant to pay the Claimant 912,525 CNY for port charge, 37,500 CNY for electricity, and 70,360,000 CNY plus interest for the transformation and repair of the ship; AND (2) the Claimant to hold the possessory lien against “Heng Yu” so as to secure the sum of 65,848,633 CNY plus interest for the port charge, electricity fee, transformation and repairing costs (plus the prepaid material costs and others).