Content

I. Maritime Trial Briefs

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

Increase of cases of dispute over liability for ship collision damage

Unchanged frequent occurrence of cases of dispute over seafarer service contract

Gradual increase of maritime administrative cases

Decrease of ship arrest cases

Increase of cases for registration of maritime claim

 

II. Producing Electronic Evidence According to Law

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

Collection and preparation of electronic evidence

Notarization of electronic evidence preservation

Determination and enhancement of electronic evidence’s probative force

 

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

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

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

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

Litigation filed by the alleged B/L pledgee

 

IV. Filing Claims for Cargo Loss According to Law

-- Problems and advices on ascertainment of cargo loss

Ascertainment of cargo loss subject to “estoppel”

Ascertainment of cargo loss subject to “actual loss”

Ascertainment of cargo loss subject to allocation of burden of proof

 

V. Regulating Shipping Safety Order by Law

--Problems and advices on disputes arising from ship collisions

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

Ship collisions due to pilots’ negligence

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

 

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

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

Objections beyond the examination scope for limitation fund cases

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

Establishment of limitation fund of liability for barges

 

VII. Filing Maritime Administrative Litigations According to Law

-- Problems and advices on filing a maritime administrative litigation

Fishermen’s application for inland fishing license

Scope of administrative litigations

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

 

VIII.Exercise of Rights of Actions

-- Problems and advices on false litigation

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

Malicious collusion between litigants to confirm ownership through litigation

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

 

I. Maritime Trial Briefs

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

II. Producing Electronic Evidence According to Law

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

 

(I)    Collection and preparation of electronic evidence

 

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

 

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

 

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

 

(II)  Notarization of electronic evidence preservation

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

IV. Filing Claims for Cargo Loss According to Law

-- Problems and advices on ascertainment of cargo loss

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

V. Regulating Shipping Safety Order by Law

--Problems and advices on disputes arising from ship collisions

 

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

 

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

 

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

 

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

 

(II)  Ship collisions due to pilots’ negligence

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(III)      Establishment of limitation fund of liability for barges

 

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

 

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

 

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

 

VII. Filing Maritime Administrative Litigations According to Law

-- Problems and advices on filing a maritime administrative litigation

 

(I)    Fishermen’s application for inland fishing license

 

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

 

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

 

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

 

(II)  Scope of administrative litigations

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

VIII. Exercise of Rights of Actions

--Problems and advices on false litigation

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Foreword   With the international shipping industry in the midst of a financial crisis, the maritime market in 2013 has been sluggish.   As a trough in the shipping market is prone to maritime disputes, Guangzhou Maritime Court, since early 2013 has made every effort to gain objectives put forward by General Secretary Xi Jinping that, “the people should be able to enjoy justice and fairness in every legal case”. This Court has adopted a proactive approach to the administration of justice. At the stage of case filing, we offer clearer litigation instructions and pre-litigation mediation to guide litigants to agreements on dispute resolution; this helps to resolve disputes, cut court costs, and reduce effort of the litigants. At the stage of trial, we summarize trial patterns, regulating trials of disputes arising from forwarding contracts and contracts for carriage of goods by sea, disputes over container demurrages, constitution of limitation funds for maritime claims, objection to enforcement, and other cases. We take measures to ensure open justice, regularly broadcast court trials live, and publish some judgments on our website in both Chinese and English, which help to gain judicial credibility. At the stage of enforcement, we strive for consistency between legal and social impacts, help litigants realize lawful claims, and protect the benefits of vulnerable groups. We pioneer the constitution of a fund for stability maintenance, and initiate new ways of thinking on compensation for labor claims.   Over the year, we have offered judicial suggestions about risks for financial institutions in ship building, operations and transfers, protection of seafarers’ rights and about acts interrupting the market, such as selling the same ship to two buyers. Based on case-by-case analysis, we put forward countermeasures against problems with export trade, jurisdiction over maritime cases, carriage of goods by sea, and other matters. This report is thus drawn up as a reference for competent authorities in decision-making and for companies in their operations, and to promote the sound development of the marine economy.   Table of Contents   I General Information on Maritime Trials Large number of cases. Substantial growth in subject matter of new cases. Large increase in number of cases involving containers. Shorter average processing period of new cases of first instance. Smaller number of enforcement cases. Smaller numbers of ships put up for and sold by auction.   II Exercise of Right of Action —Problems with and guidance on filing a case Problems with incomplete documents and information required for filing a case. Problems with pre-litigation mediation. Problems of agents forging signatures of litigants. Problems with bringing a related case.   III Exercise of Jurisdiction —Problems with and guidance on exclusive jurisdiction of maritime courts Problems with jurisdiction clause on the reverse of bills of lading. Problems with jurisdiction after pre-litigation maritime attachment. Problems with the relation between insurance subrogation and the jurisdiction clause in contracts for carriage of goods by sea. Problems with scope of cases accepted by maritime courts.   IV Regulating the Fishing Boat Market —Problems with and guidance on the purchase and sale of fishing boats Problems with sale of fishing boats under no written contract. Problems with sale of fishing boats without registration of transfer. Problems with the sale of one fishing boat to two buyers.   V Regulating the Export Market —Problems with and guidance on export trade Problems with tax refund failure after export declaration made on purchased documents. Problems with payment for exported goods.   VI Regulating the Freight Market —Problems with and guidance on carriage of goods by sea Claim rights enjoyed by the shipper against the carrier after the B/L has been negotiated. Problems with period of carrier’s responsibility for containerized goods. Problems with the legal responsibilities after devanning.   I. General Information on Maritime Trials   Throughout 2013, we accepted 2,409 cases (including 311 cases carried over from the previous year); 2,089 cases were newly entertained, down 16.91% YOY; 2,102 cases were closed, down 18.59% YOY; the closing ratio was 87.26%, down 1.99% YOY; 307 cases were unclosed, down 1.2% YOY. Subject matter of filed cases valued RMB 6,689 million, up 153.18% YOY; subject matter of closed cases valued RMB 6,636 million, up 12.17% YOY.   Among the new cases, 1,159 were cases of first instance, 246 were enforcement cases, and 693 were cases subject to maritime special procedures. Among the cases of first instance, 1,154 were ordinary maritime cases, and 5 were maritime administrative cases; 374 cases involved foreign, Hong Kong, Macao, or Taiwan parties, accounting for 32.4% of the maritime cases of first instance.   Fig 1: Comparison of numbers of cases entertained over the past three years Unit: case Among the maritime cases of first instance, 257 were of disputes arising out of carriage of goods by sea, accounting for 22.27% of all maritime cases of first instance; 156 were of disputes arising out of container leases, accounting for 13.52%; 143 were of disputes arising out of seafarers labor contracts, accounting for 12.39%; 103 were of disputes over illegal retention of goods, accounting for 8.93%; 103 were of disputes over port operations, accounting for 8.93%; 95 were of disputes arising out of freight forwarding contracts, accounting for 8.23%; 76 were of disputes arising out of ship contracts (for sale, financing, repairs, shipbuilding, chartering, agency, mortgage, management, and operating loan etc.), accounting for 6.59%; 39 were of disputes arising out of time or voyage charters, accounting for 3.38%; 34 were of disputes over the supply of stores and spares, accounting for 2.95%; 28 were of disputes over damages for ship collision, accounting for 2.43%; 18 were of disputes over channel and port dredging contracts, accounting for 1.56%; 14 were of disputes over ship ownership or co-ownership, accounting for 1.21%; 10 were of disputes arising out of marine insurance contracts, accounting for 0.87%; 10 were of disputes arising out of multimodal transport contracts, accounting for 0.87%; 8 were of disputes arising out of salvage contracts, accounting for 0.69%; 7 were applications for constituting a limitation fund for maritime claims, accounting for 0.61%; 35 were other maritime disputes, accounting for 3.03%.   Among the maritime administrative cases of first instance, there was 1 application for determining the government’s decision to cancel a Certificate of Right to Use Sea Area illegal, 2 applications for deciding that the Ocean and Fisheries Bureau’s refusal to grant fishing vessel certificates was illegal, 1 application for annulling maritime accident investigation conclusions, and 1 application for annulling damage survey conclusions.   Among cases subject to maritime special procedures, 438 were applications for auctioning off cargoes, accounting for 63.2% of all cases subject to maritime special procedures; 136 were applications for arresting vessels, accounting for 19.62%; 47 were applications for property attachment before litigation, accounting for 6.78%; 32 were applications for registration and recovery of claims, accounting for 4.62%; 8 were applications for maritime attachment, accounting for 1.15%; 6 were applications for public summons, accounting for 0.87%; 6 were applications for declaring the death of citizens, accounting for 0.87%; 3 were applications for maritime injunctions, accounting for 0.43%; 4 were assistance to Taiwan courts with civil investigation and evidence collection, accounting for 0.58%; 3 were judicial reviews of arbitration, accounting for 0.43%; 2 were applications for evidence preservation, accounting for 0.29%; 8 were other cases subject to special procedures, accounting for 1.15%.   1,177 cases were closed at first instance, including 420 closed by judgments, accounting for 35.69% of all cases closed at first instance; 385 were closed by claimants’ withdrawal, accounting for 32.71%; 305 were closed in mediation, accounting for 25.91%; 67 were closed by dismissal of action, referral of jurisdiction and other means, accounting for 5.69%.                           Fig 2: Means of closing cases of first instance Unit: case Through analysis, we find that the cases handled by this court in 2013 have the following characteristics:   -- Large number of cases. In 2013, under the impact of growth slowdown, considerable overcapacity and high costs, the shipping industry had hard times and both upstream and downstream enterprises in the chain had sharply declining business, weaker ability to resist risks, and frequent disputes. The number of maritime cases remained large. Throughout the year we entertained 2,409 cases, the second largest number since the establishment of this court, outranked only by the year 2012 in which we entertained 2,893 cases.   -- Substantial growth in subject matter of new cases. Subject matter of new cases valued RMB 6,600 million, up 153.18% YOY, reaching a new high since our establishment. We entertained many important cases, including 12 with subject matter valued more than RMB 100 million, among which a case of dispute arising out of ship mortgage contract had subject matter valued over RMB 500 million.   -- Large increase in number of cases involving containers. As many ship owners made a loss or had cash flow problems, the number of cases with applications for arrest of ships or cargoes remained large, and number of cases involving containers increased substantially compared to the previous year. In 2013, we entertained 156 cases of disputes arising out of marine container leases, 103 cases of disputes over damages for illegal retention of containerized cargoes, and 438 applications for auctioning off containerized cargoes, which altogether accounted for 60% of new maritime cases we entertained.   -- Shorter average processing period of new cases of first instance. In 2013, we applied small claims procedure and thus shortened the average processing period of first-instance cases. In particular, since the issuance of our “pre-registration” filing guidelines in August, 381 out of 475 filed cases of first instance had been closed, featuring an average processing period 36 days shorter than the previous year.   -- Smaller number of enforcement cases. We entertained 246 new enforcement cases, down 34.92% YOY. The number of enforcement cases is closely linked to the number of first-instance cases closed by judgments. If the number of actions withdrawn by mediation at first instance increases, the number of cases closed by judgments will decrease and the number of enforcement cases in turn decreases. In 2013, the ratio of first-instance cases withdrawn by mediation was 58.62%, up 4.31% YOY; this was a significant reason for the reduced number of enforcement cases. Furthermore, our post-judgment answering system promoted real settlement of closed cases; as more litigants voluntarily fulfilled judgments, enforcement by the court was not necessary in these cases.   -- Smaller numbers of ships put up for and sold by auction. In 2013, we arrested 89 ships, handled 9 applications for the auction of 13 ships, which were 81.69% less than the previous year, and auctioned off 4 ships for aggregately RMB 19.21 million. The completion rate of auctions was merely 31%. One of the reasons for such a rate was that the shipping market was slack and bids were few and low, and the other reason was that claimants of ship-related contracts were more cautious about choosing ways of compensation. Throughout the year, we had 20 cases brought by banks for disputes arising out of ship mortgage contracts and 10 applications for arrest of ships, but in none of these cases application was made for the auction of ships.   II. Exercise of Right of Action -- Problems with and guidance on filing a case   (I)      Problems with incomplete documents and information required for filing a case   Two ships collided resulting in the sinking of one; the owner of the sunken ship brought an action to our court and claimed for damages. Nonetheless, as salvage, repairs and other costs had not been incurred and the MSA had not issued an investigation report on the accident, the claimant only submitted a statement of claim without attachment of evidence, claiming for an estimated amount.   There were two problems with this litigation: first, the claim was not factual. The claimant claimed against the other ship’s owner for an estimated amount without a breakdown, such as salvages and repair costs. The litigation was not in compliance with Article 119 of the Civil Procedure Law, which provides that an action shall be supported by specific claims, facts and grounds, and thus was not accepted by the court. Second, the claimant did not submit evidence and thus would not be able to receive compensation even if the case was accepted. There is a common misconception that the sooner you bring an action to the court, the sooner a judgment can be made. In fact, evidence is the basis for trial and therefore only early and full production of evidence helps to close a case. If claimants merely submit a statement of claim and delay in collecting evidence, the evidence may disappear over time and may in turn result in the dismissal of the claims due to insufficiency of evidence.   To solve these problems, our case filing chamber has issued pre-registration filing guidelines to guide litigants to gather and complete required documents and information before formally filing a case. We put forward the following suggestions: 1, litigants should prepare required documents and gather evidence before bringing an action strictly pursuant to the Civil Procedure Law. 2, litigants should produce evidence supporting their claims and make supplements as instructed by the filing judge and as per the Notice of Supplementing Documents issued by our case filing chamber; as for evidence to which the litigants have no access, litigants may apply to the chamber for investigation and gathering for evidence. The court and litigants will work together to prepare for filing cases, which help facilitate trials, save legal costs, solve disputes, and better protect litigants’ lawful rights and interest.   (II)   Problems with pre-litigation mediation   A fuel company brought an action to our court against a ship management company for arrears of fuel payment of RMB 600,000. Our clerk found a letter of guarantee among the submitted documents, in which the ship management company undertook to pay off the arrears by the end of 2013. We then learned that the two parties had been negotiating about the matter, but the claimant brought the action to be on the safe side, as it had financial troubles and was afraid that the defendant might not make the payment as agreed.   The claimant filed the case in compliance with the requirements and we could have accepted the case. However, the defendant had guaranteed in writing to pay off the arrears in the near future and the parties had had good communication; direct commencement of the action would not only hinder the resolution of the dispute but also waste judicial resources. To promote dispute resolution, the clerk did not accept the case right away; instead, a judge contacted the defendant for mediation with the claimant’s consent. Three days later, the claimant received the payment and withdrew the action.   As part of our case filing system, we provide pre-litigation mediation for quicker and easier resolution of disputes. We thus put forward the following suggestions: 1, when bringing an action, litigants may inform the case-filing judge of their intention of reconciliation and provide information to facilitate the reconciliation. 2, as it is not certain whether a reconciliation will be achieved, litigants should prepare documents under the guidance of the case-filing judge for filing a case when preparing for the reconciliation. 3, if an agreement is reached by pre-litigation mediation, the claimant may apply for withdrawing the action or we can issue a civil mediation agreement. The agreement may be issued by the judge and signed for by the litigants on the spot, which saves court costs.   (III)              Problems of agents forging signatures of litigants   A lawyer submitted to our case filing chamber a statement of claim and a power of attorney, which stated that the claimant, Mr Chen, authorized the lawyer to bring a case on his behalf against a shipping company for disputes over damages for a ship collision. The next day, Mr Chen turned up and declared that the lawyer had submitted the documents without his consent and that his signature on both documents was forged. Afterwards the lawyer admitted having forged the signature, and our clerk admonished the lawyer and had him withdraw the documents.   The lawyer brought the action without the consent of Mr Chen and forged the signature, which not only harmed Mr Chen’s right of action and the defendant’s lawful rights and interest, but also severely disturbed judicial trial. The court reprimands any lawyer so disturbing civil actions, and we also advise anyone bringing a case to take effective measures to protect their right of action and preclude such violation.   We put forward the following suggestions: 1, to bring an action, a natural person should personally come to our case filing chamber and, by a filing judge’s witness, sign a statement of claim and power of attorney (where an agent ad litem is needed) and leave a thumbprint, which prevents the misuse of right of action by anyone else. 2, a claimant not able to come to us in person should have his signature and thumbprint on the statement of claim and POA notarized by a public notary office located at his residence, and then the documents may be submitted to us by an agent ad litem to bring an action on behalf of the claimant. If the claimant is outside China, the signed and thumbprinted statement of claim and POA should be legalized and notarized as required.   (IV) Problems with bringing a related case   Mr Fan had repaired a ship for a shipping company under no written contract, and the shipping company was in arrears of repair costs of RMB 40,000. Mr Fan was from Fujian, the shipping company domiciled at Jiangsu, and the ship was repaired in a port in Jiangsu. Mr Fan now worked in Guangzhou and for convenience brought an action to us against the shipping company.   The case was a dispute arising out of a ship repair contract and thus came within the jurisdiction of maritime courts at the defendant’s residence, or place where the contract had been signed, or place where the contract had been performed. As none of these locations were under this court’s jurisdiction, Mr Chen could not bring the case to us. For reasons of economy, he pleaded with us to entertain the case and informed us that the ship had been arrested by this court. The filing clerk looked up related cases involving the shipping company, and found that the ship had indeed been arrested by us and would likely be put up for auction soon. The clerk then gave Mr Chen two options: to bring a case to a court with jurisdiction, or to wait till the ship is put up for auction and then, pursuant to Articles 111 and 116 of the Special Maritime Procedure Law, come to us to register his claims and bring an action to have the claims confirmed.   Our standardized case filing system incorporates guidelines provided by filing judges. When there are related cases, our judges will offer guidelines for efficient and convenient litigation after taking consideration of all aspects of the case. We put forward the following suggestions: 1, litigants may factually inform us of any related case in trial by this court, and may request the judges for an inquiry if not sure. 2, litigants may select a most convenient and suitable way of litigation based on the judges’ advice.     III. Exercise of Jurisdiction -- Problems with and guidance on exclusive jurisdiction of maritime courts   (I)      Problems with jurisdiction clause on the reverse side of bills of lading   In a dispute arising out of a contract for carriage of goods by sea, the Hong Kong shipper brought an action to this court against the Mainland Chinese carrier for delivery of goods without the presentation of the B/L. The port of departure was Shenzhen, China, the port of destination was a Spanish port, and the B/L was issued in Shenzhen. The carrier objected to our jurisdiction on the grounds that the terms on the reverse side of the B/L had agreed on the applicable law and the jurisdiction of courts in Hong Kong SAR, and accordingly disputes under the contract should be referred to a court in Hong Kong.   In cases of disputes arising out of contracts for carriage of goods by sea, the B/Ls based on which the cases are brought usually have a clause on contentious or arbitration jurisdiction written in small fonts without any special mark (in recent years CMA CGM Shipping Co. Ltd. has put boldface type on the face of its B/Ls), agreeing on competent courts outside the country or arbitration in London or Hong Kong. In such cases, the carrier as defendant would usually raise an objection to jurisdiction to stall for time or for other reasons.   The above case involved a contentious jurisdiction clause on the reverse side of the B/L, for which the maritime legal professionals have had long debates. We don’t think there is a single solution to the issue of validity of a B/L clause on jurisdiction of foreign courts. Long arm jurisdiction can be exercised on a case-by-case basis subject to Article 34 (provisions on agreement jurisdiction) of the Civil Procedure Law, after taking into account equality, mutual benefit, parallel jurisdiction, convenience and other factors.   Carriers may take into account the following factors when drafting a B/L clause on foreign court jurisdiction: 1. the contentious jurisdiction clause may be printed on the face of the B/L in distinctive bold type, and the other party may be reminded of the clause and requested to sign in confirmation of the clause when proofreading the B/L draft, so as to ensure the validity of the clause. 2. the contentious jurisdiction clause does not eliminate or mitigate the carrier’s responsibilities or unilaterally increase the responsibilities of the shipper or the B/L holder. 3. except as provided in Article 8[1] of the Special Maritime Procedure Law, the agreed court of jurisdiction should be actually related to the dispute.   (II)   Problems with jurisdiction after pre-litigation maritime preservation   In a dispute over insurance subrogation to a voyage charter, the shipowner and the charterer (the insured) had entered into a voyage charter under which goods were carried from an Indonesian port to Lanshan Port, China. The ship sank during the subject voyage and the goods on board were lost. It was agreed in the charter party that any dispute arising therefrom should be referred to China Maritime Arbitration Commission for arbitration pursuant to the rules then in effect. The insurer had issued a policy for the goods and paid the insurance indemnity to the insured. The insurer then applied to this court for pre-litigation maritime preservation and requested to freeze the shipowner’s account in a Shenzhen bank; we approved the application. The insurer subrogated to the charterer’s rights and brought an action against the shipowner. The shipowner then filed an objection to jurisdiction on the grounds that we did not have the jurisdiction over the substantive hearing of the case, and requested for the referral of the case to a court which had jurisdiction.   We held that although the request for freezing the respondents’ bank account was an application for maritime preservation, the provisions on property preservation in the Civil Procedure Law were applicable. Pursuant to the Supreme People’s Court’s Reply to Queries about Understanding Clause 31(2) of the “Opinions on Some Issues Concerning the Application of the Civil Procedure Law of the People’s Republic of China”, substantive hearing shall be conducted by a court with jurisdiction; pre-litigation property preservation does not naturally lead to the jurisdiction over substantive hearing, and the court granting the preservation should, if it has no jurisdiction, refer the case to a competent court with jurisdiction. Accordingly we sustained the shipowner’s objection.   In practice, if a maritime court adopts measures for pre-litigation preservation of the maritime claims against ships, cargo, fuel and stores carried by ships etc. subject to applicable provisions in the Special Maritime Procedure Law, the court may obtain jurisdiction over the substantive hearing of the case as per Article 19 of the law; if the court adopts measures for pre-litigation preservation of the maritime claims against properties other than ships, cargo, fuel and stores carried by ships subject to the Civil Procedure Law, the court will not naturally obtain jurisdiction over the substantive hearing, and the litigants should bring the case to a maritime court with jurisdiction. Litigants are thus advised to, based on the attachment object, determine whether a maritime court has jurisdiction over the substantive hearing of the dispute after the pre-litigation maritime preservation, and then carefully select a suitable maritime court to file the preservation application so as to save legal costs.   (III)              Problems with the relation between insurance subrogation and the jurisdiction clause in contracts for carriage of goods by sea   In a dispute over insurance subrogation under a contract for carriage of goods by sea, the shipper (the insured) and the carrier had entered into a contract for carriage of goods to Guangzhou; the contract was signed in Xiamen, and it had been agreed that any dispute arising therefrom should be referred to a competent court located in the place of signing. The cargo was lost during the carriage. The insurer paid the insurance indemnity to the insured and thus subrogated to the insured’s right of action. The carrier objected to this court’s jurisdiction and alleged that the dispute should be referred to Xiamen Maritime Court as agreed in the contract. We held that the insurer was not a party to the jurisdiction clause in the contract and therefore not bound by the clause unless the insurer had expressly accepted the clause. For this reason we dismissed the objection.   We advised carriers (shipowners) to carefully select the ways to resolve disputes. As insurers will subrogate to the insured’s claims after paying the indemnity, shipowners should negotiate with and seek the insurers’ express consent if they want to refer the disputes to a court agreed in the carriage contract.   (IV) Problems with scope of cases accepted by maritime courts   In a dispute arising from a ship sale contract, the defendant raised an objection to jurisdiction alleging that the case did not fall within the jurisdiction of maritime courts as the parties only had a dispute over the transfer of the ship’s ownership. In a dispute over the co-ownership of a ship, the defendant objected to the maritime court’s jurisdiction on the grounds that the parties only had a dispute over the payment.   Pursuant to the Provisions of the Supreme People’s Court on Scope of Cases Accepted by Maritime Courts, “cases of disputes arising out of contracts for ship building, sales, repairs, construction and breaking” set forth in Article 14, and “cases of disputes between co-owners of ships engaged in marine transport and fishing over operations, profits, allocation and property division” set forth in Article 37, were within the scope; accordingly disputes arising out of ship sale contracts and disputes over co-ownership of ships are within the exclusive jurisdiction of maritime courts.   We advise litigants and agents ad litem to pay due attention to the scope of cases within the exclusive jurisdiction of maritime courts, and not to knowingly refer such cases to a local court, which would not only cause unwarranted delay in the litigation, disturb the administration of justice, hinder the efficiency of proceedings, but also cause troubles to the other party and waste limited judicial resources.   IV. Regulating the Fishing Boat Market -- Problems with and guidance on the purchase and sale of fishing boats   (I)      Problems with sale of fishing boats under no written contract   We have tried a number of disputes over the sale of fishing boats in which the buyer and the seller had not signed a written contract for sale. They usually settled the transaction (payment and delivery) witnessed by their village committee. As no written contract was signed and no written proof of the settlement was kept, it would be difficult for the buyer to put to the proof to protect his lawful rights and interest when years later there arose a dispute over the ownership of the boat.   By analyzing the cases, we conclude that sellers and buyers do not sign contracts for the sale of fishing boats mainly for the reasons below: fishermen’s legal illiteracy, the closed peasant economy, as well as low costs and simple formalities of direct transaction without a contract.   We suggest that fishing boat administration study the purchase and sale of fishing boats within their jurisdiction, make fishing boat sale contract samples accessible to the public, and provide guidelines and regulations on the transactions. These efforts will help preclude disputes arising from no written contract.   (II)   Problems with sale of fishing boats without registration of transfer   In many disputes over the ownership of fishing boats sold, the buyer did not have the ownership transfer registered promptly after the actual delivery, and when they did request for the registration, the seller out of his own interest declined such request. In judicial practice, such sale of fishing boats without registration of certificate alteration not only hinders competent authorities’ supervision but also poses risks to both buyers and sellers. For one thing, a fishing boat sales contract is not fully performed if the transfer is not registered, and the buyer may request to continue the contract; and for another, if the buyer wants to transfer the boat, he would need the former owner’s assistance and cooperation to register the ownership transfer to the new buyer, which causes unnecessary troubles and may give rise to disputes. Furthermore, as the boat is still registered under the name of the seller, there are risks of the seller reselling or mortgaging the boat, and of the boat being arrested or put up for auction due to the seller’s debts.   The transfer of ownership is not registered mainly for two reasons. First, some buyers and sellers do not know the legal effect of ownership registration and believe that actual possession and use of the boats are sufficient. Second, to carry out offshore fishing, a fishing boat buyer has to obtain a fishing boat inspection certificate, a fishing boat, net and tackle index ratification, a fishing licence, a fishing main engine power certificate, a fishing boat ownership certificate, and a nationality certificate. These certificates are under the authority of the administrations of ocean and fisheries, the supervision authorities of fishery ports, and the registry of fishing vessels. Complicated and costly formalities are required for alterations to such certificates. Some buyers exploit the ineffective supervision of local fisheries authorities and, without being inspected or interfered with by these authorities, engage in fishing using boats without ownership transfer registration and a fishing license. When the fisheries authorities do conduct an inspection, these buyers would request the former owner’s help by creating a false impression that the boat has not been transferred.   We put forward the following suggestions: 1, the registration of fishing boats should seek better publicity of the Measures of the People's Republic of China for the Registration of Fishing Vessels amended by the Ministry of Agriculture on 22 October 2012 and, in particular, Article 14 thereof “the acquisition, transfer and loss of ownership of a fishing boat shall be registered as provided herein; unregistered ownership is not effective against bona fides third parties”, so as to urge registration of ownership transfer after the sale of fishing boats; 2, buyers who have not registered the ownership transfer promptly after the sale of fishing boats should go through the registration formalities at their earliest convenience subject to the Measures, so as to protect their lawful rights and interest.   (III)              Problems with the sale of one fishing boat to two buyers   We handled a dispute over the ownership of a fishing boat which was sold to two buyers. The claimant signed a sales contract with defendant A in 2007, defendant A then delivered the fishing boat along with her certificates to the claimant, but the ownership transfer was not registered. In 2010, defendant A sold the boat to defendant B who, knowing that the boat had been delivered to the claimant, requested defendant A to register the transfer. Considering the serious inconsistency between the delivery and registration of the boat and the fuel subsidies at hundreds of thousands of RMB per year, the claimant brought an action to this court on 12 July 2012 and requested the defendants to cooperate in the registration of ownership transfer. We supported the claimant’s claims.   Disputes over the sale of one boat to two buyers are common. In most of these cases, after the boat is delivered but the buyer has not registered the ownership transfer, the seller resells the boat to a third party and goes through all formalities for the registration. Such acts disturb normal registration and management of fishing boats, and hinder the boat owners from fishing and production. In judicial practice, we usually require all parties to appear in court for examination; we assess evidence in strict accordance with the rules of evidence in civil procedure, and render judgments pursuant to law and based on facts.   There are several reasons for the above disputes. Sellers do not register the ownership transfer promptly after the sale of fishing boats, and the registration authorities do not verify actual delivery of boats when registering ownership transfer to third parties. Furthermore, some interest-driven persons make false registration for unjust benefit from fuel subsidies which they believe belong to registered owners of fishing boats.   We suggest that fishing boat registration authorities carry out better supervision and management of fishing boat registration and strictly verify each applicant’s proof of acquisition of ownership. In addition to the sales contract and delivery certificate submitted as provided in Clause 15(2) of the Measures of the People’s Republic of China for Registration of Fishing Vessels, they should to the best of their ability verify the actual delivery and possession of each boat, and make a registration announcement pursuant to Article 38 of the Measures to satisfy the requirement for property announcement; owners and buyers should not file false lawsuit or commit any other act that disturbs civil procedure, and any violator will be legally liable as provided in Article 112 of the Civil Procedure Law. To be specific, the court will dismiss any false claim and impose a fine and/or detention, and even hold the violator criminally liable if the violation constitutes a crime.     V. Regulating the Export Market -- Problems with and guidance on export trade   (I)      Problems with tax refund failure after export declaration made on purchased documents   Company A was a private and limited liability company with a foreign trade license. It commissioned Company B to transport a cargo by sea from China to a foreign port and make an export declaration. Company B charged the freight including RMB 500 named Purchased Documents Price, which Company A paid without objection. Company B made an export declaration in the name of another company, issued a bill of lading with Company A as the shipper, and completed the carriage. Afterwards, Company A inquired about the tax refund on the goods, but Company B answered that they could not file a tax refund as the declaration had been made in the name of another company. Subsequently Company A brought an action to this court against Company B for losses of tax refund in the amount of RMB 110,000. Although Company B’s charges breakdown included an item specified as “Purchased Documents Price RMB 500”, the breakdown did not detail the nature or purpose of such price. Therefore, the court held that the two parties had not expressly agreed on the way of export declaration. Company A had a foreign trade license, but there was no evidence shows that it had been registered in the administration of foreign exchange at the time of the declaration or that it had obtained an export earnings verification sheet and handed over it to Company B. Company A did not perform due diligence or notification obligation, and should therefore assume 40% liability for the failure to acquire a tax refund. Company B accepted Company’s commission but made the declaration in the name of a third party, which was beyond its authority, and should therefore assume 60% liability for the loss of tax refund sustained by Company A. To be specific, Company B should pay RMB 66,000 to Company A for the loss of tax refund.   In foreign trade practice, “declarations made on purchased documents” refer to situations in which a company, which has no import/export licence or has a licence but doesn’t want to declare in its own name, purchases an export contract, a verification sheet and other required documents from a licensed company and make a declaration in this company’s name after paying the company certain fees. Under China’s foreign exchange control, the exporter, foreign exchange receiver and verification applicant should be the same entity. Declarations made on purchased documents are against relevant laws, and therefore companies exporting in this way are not qualified for tax refunds. As it is quick and convenient compared to regular export through foreign trade agents and in this way exporters can receive foreign exchange with their own accounts at lower costs, many companies without an import/export licence prefer this way to export goods. On the other hand, they would risk the failure to obtain tax refunds and may suffer losses greater than gains.   To avoid these problems, we put forward the following suggestions: companies without an import/export licence should export goods via qualified agents so as to secure their tax refunds; agents should perform due diligence for the sake of their principals, specify a way of declaration, explain to the principals the meaning and risks of declaring on purchased documents, and preserve evidence in case of future disputes.   (II)   Problems with payment for exported goods   In a dispute under a contract for carriage of goods by sea, the claimants brought the action against the defendant for delivering the goods without the presentation of the bill of lading at the destination. The defendant alleged that the claimants had fully received the payment from the consignee, and provided evidence of remittance made by the consignee to the account A of claimant. By request of the defendant, the court of first instance obtained the transaction records of claimant’s account A during that period, but found no credit of the payment alleged by the defendant. Accordingly, the court of first instance determined that the claimants had not received the payment and the defendant’s allegation was unfounded, and thus adjudged the defendant to compensate the claimants for the loss of goods and the interest thereon. The defendant then lodged an appeal. The court of second instance obtained the transaction records of claimant’s account B by request of the defendant, and found a credit on the day and in the amount alleged by the defendant and that claimant’s account B showed a debit matching a credit on claimant’s account A. The court of second instance held that the evidence submitted by the defendant during the first instance proved the consignee had remitted the payment to claimant’s account A, and the new evidence obtained by the court of second instance proved that claimant’s account B received the payment and then transferred it to claimant’s account A with some other amounts; it could thus be determined that the remittance was truly the payment alleged by the defendant. Such evidence was sufficient to prove that the claimants had received the payment from the consignee and had not suffered any actual loss. Accordingly, their claims were factually and legally groundless and thus should not be supported. The court of second instance revised the judgment and dismissed the claimants’ claims based on the new evidence.   In recent years, under the impact of the international economic trends, there have been an increasing number of disputes over delivery of goods without the presentation of a bill of lading, and most of such cases are brought by shippers (exporters) against carriers. The most common defence produced by carriers is that the shippers have received the payment and thus not suffered actual losses. We are of the opinion that in these disputes the carrier should be liable for damages, but the actual losses suffered by the shipper or B/L holder should be a precondition for such liability; thus it should be examined whether the shipper or B/L holder has received all or part of the payment for goods. If there is evidence that the shipper or B/L holder has received all or part of the payment, the same amount should be deducted from the compensation.   Disputes over delivery of goods without the presentation of a bill of lading involve foreign trade and payments are usually made in foreign currencies. As China implements foreign exchange control, a full understanding of the country’s exchange control measures is necessary to ensure correct fact-finding. For instance, under China’s exchange control, a foreign exchange payment made by the consignee cannot be directly transferred to the exporter’s account; instead, the payment should be made to the exporter’s account-to-be-verified, and after verification may be debited by the exporter in the amount, at the time and to the account preferred by the exporter. It would not be difficult for exporters to confirm whether they have received a certain payment as long as they make some efforts to go through the transaction records. We suggest that before bringing an action for damages for delivery of goods without the presentation of a bill of lading, exporters should carefully examine relevant accounts to make sure whether they have received the payments, so as not to waste both parties’ time and money or to risk failing the suit.   VI. Regulating the Freight Market -- Problems with and guidance on carriage of goods by sea   (I)                Claim rights enjoyed by the shipper against the carrier after the B/L has been negotiated   In a dispute arising out of a contract for carriage of goods by sea, after the ship arrived at the port of destination, a container unloaded from the ship fell off the upper layer during shifting operations in the port yard and the goods inside were damaged. The corresponding B/L had been endorsed by the consignee and given back to the carrier. After indemnifying the shipper for its losses, the insurer subrogated to the shipper’s claim against the carrier. The court held that although the goods had been taken by the consignee at the port of destination, the position of the shipper to a contract for carriage of goods would not be changed due to the fulfillment of the contract. The shipper was still a party to the contract for carriage of goods and should, in accordance with the principle of privity of contract, be entitled to claim against the carrier for the losses arising due to the improper performance of such contract by the carrier.   Although China is a big exporter, the domestic exporters are always in an inferior position when doing export trading. Once damage occurs to the goods during transportation, most foreign buyers may request the domestic exporters to replace or take back the damaged goods or to cut the price, and sometimes they may directly reject the goods. Due to the fierce competition in freight market, domestic exporters may, in order to keep their customers, satisfy the demands of the foreign buyers. After paying indemnifications, most of the domestic exporters would claim as a shipper against the carrier.   In accordance with Article 71 of China’s Maritime Law, a B/L is a document which serves as an evidence of the carriage contract, but not in itself a carriage contract. Negotiating a B/L does not mean assigning the rights and obligations under the carriage contract in whole. Therefore, as a party to the carriage contract, the shipper would not lose all of its contractual rights and obligations due to the negotiation of B/L. According to Clause 78(1) of the Maritime Law, after the B/L has been negotiated, the relationship between the carrier and the consignee and that between the carrier and the B/L holder with respect to their rights and obligations shall be defined by the B/L. Therefore, if the B/L has been negotiated, the legal relation under the B/L between the carrier and the B/L holder is coexisting with that under the carriage contract between the carrier and the shipper. Although some of the shipper’s rights and obligations under the carriage contract (such as the right to take delivery of goods and the obligation to pay the freight) have been assigned to the B/L holder, the B/L holder cannot completely take the place of the shipper as a party to the carriage contract. The shipper still has some rights and obligations under the carriage contract, including the right to claim against the carrier for any cargo loss caused by the carrier’s failure to perform the carriage contract properly.   Due to the existence of the above two legal relations, the rights of action enjoyed by the shipper and the B/L holder are two independent rights which coexist with each other. The shipper and the B/L holder separately claim against the carrier for the cargo loss occurred in the course of carriage of goods. However, actual cargo loss only occurred to one party, thus the party who could prove the existence of actual loss may get compensation from the carrier through proceedings. Only in this way the carrier could be protected from giving double indemnifications. In addition, we recommend that the carrier shall, in case of any disputes, collect evidence relating to the payment for goods and plead promptly. The B/L holder shall also preserve evidence relating to the cargo loss, payment for goods, endorsement and negotiation of the B/L so as to support future claims in case of disputes.   (II)             Problems with period of carrier’s responsibility for containerized goods   In a foreign-related dispute arising out of a contract for carriage of goods by sea, after the containerized goods arrived at the port of destination, the consignee exchanged the original B/L for the delivery order held by the carrier. Damage occurred before the goods were actually taken by the consignee. The consignee requested the carrier to compensate for the damage to the goods, but the carrier claimed that since it had taken back the original B/L from the consignee, the goods were not under its control and thus it was not liable for compensation. The court held that the damage to the goods occurred before they were taken by the consignee, which means during the period of the carrier’s responsibility. Failing to prove that it had legal or agreed causa excusationis, the carrier was liable for compensation.   Article 46 of the Maritime Law provides that “the responsibility of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge.” Under China’s foreign trade control, the carrier does not deliver the imported goods to the domestic consignee on the principle of “B/L on delivery of goods”, but through the port operator. The specific process goes as follows: the consignee first exchanges the B/L for delivery order from the carrier or its agents, accomplishing the constructive delivery of goods. Secondly, the carrier actually delivers the goods to the port operator. Finally, the consignee takes delivery of the goods from the port operator by presenting the delivery order sealed by the customs for approving the imported goods. At this point, the delivery of goods is completed. In the above case, although the carrier had taken back the original B/L, the period of carrier’s responsibility did not end “until the goods had been delivered at the port of destination”, which should be construed as “until the goods had been actually delivered”, i.e. when the consignee had actually taken delivery of the goods rather than just exchanging the B/L for the delivery order or completing constructive delivery. In addition, the goods were still under the carrier’s control, and the port operator was merely entrusted by the carrier to keep the goods. Before the consignee actually took delivery of the goods, the carrier should bear the risks of loss of or damage to the goods. Therefore, we recommend that carriers should prudently supervise containerized goods stored at the port yard. In respect of loss caused by port operators, carriers should promptly seek compensation from the port operator after indemnifying the consignees according to law. Additionally, the specific provisions in different ports shall be taken into account in ascertaining the carrier’s responsibility for delivery of goods. According to the laws of some countries, such as Mexico and some countries in South America, goods shipped to their ports shall be delivered to the local customs or port authorities. The consignee may take delivery of the goods by presenting the bill of lading to the local customs or port authorities. After delivering the goods to local customs or port authorities, the carrier has fulfilled its responsibility for delivery of goods and is not liable for any damage to the goods afterwards.   (III)          Problems with the legal responsibilities after devanning   In a case, the carrier, when shipping exported containerized goods for a shipper, issued a B/L specifying that the goods would be delivered FCL CY/CY. Upon the arrival of the goods at the port of destination, the carrier moved, relabeled and re-packed the goods according to the consignee’s instructions when the shipper still held the original B/L. The shipper claimed for losses of RMB 540,000 against the carrier on the grounds of delivery of goods without the production of B/L. The carrier defended that the goods were still under its control and had not been delivered to the consignee. Upon examining the evidence provided by both parties, the court ascertained that, although the containers had been disassembled, the goods were still in the carrier’s charge and had not been delivered to the consignee, thus the claim of delivery of goods without B/L filed by the shipper could not be sustained. However, the act that the carrier changed the packaging and labeling of the goods without authorization did infringe upon the shipper’s ownership to the goods and was in breach of the carrier’s responsibility. Therefore, the court exercised its discretion to adjudge that the carrier should indemnify the shipper for its loss in an amount of RMB 270,000.   For the carriage of containerized goods, if the shipper ships the goods in a way of full container load, it will come to an agreement with the carrier applying the term of “FCL on delivery”. It’s for the convenience of carriage and division of responsibility. At the current stage, domestic companies are mainly engaging in export trade. It’s inconvenient for the shipper to collect evidence at foreign ports relating to non-delivery, thus the shipper usually presents the devanning fact as the prima facie evidence for claims against the carrier in respect of the delivery of goods without B/L. The devanning at the port of destination by the carrier could be for the purpose of delivering goods without B/L, but there may be some other reasons. Below are some of the reasons: to dispose of the containerized goods subject to the mandatory requirements of the customs of the port of destination, or to take out the goods and put them in warehouses for the purpose of accelerating the turnover of containers or reducing the economic losses since no one takes delivery of the goods for a long time after the goods have arrived at the port of destination. In any case, the fact of devanning only serves as prima facie evidence that the carrier delivers the goods without B/L. If the carrier could prove that the goods are still under its control, it would not bear the blame for delivery of goods without B/L. Therefore, in cases where the carrier denies the fact of delivery of goods without B/L, we recommend that the shipper may personally or via its agent visit the port of destination to verify the situation of the goods, otherwise it may lose the case because of failure to adduce evidence.   In the above case, although the carrier’s act did not constitute delivery of goods without B/L, it was a serious breach of the contract that the carrier disassembled the container and re-packed the goods as instructed by the consignee when the shipper still held the B/L. this is not uncommon in cases we have handled in recent years. Under the impact of the global financial crisis, some foreign consignees may first present a letter of guarantee to take the delivery of goods without B/L, and then retire the B/L after selling or reselling the goods, thus shifting the risk of trading to the domestic companies. Some consignees even return unmarketable goods to the carrier when the B/L holder claims against the carrier for delivering the goods without B/L. Under this circumstance, even if the domestic companies could take back the goods, they may sustain losses arising out from revanning, repacking and re-transporting the goods. In addition, due to the market volatility, it may be impossible for the exporters to sell the goods at the original prices, which makes them unable to collect the payments. Therefore, we recommend that the domestic exporters should, upon booking shipping space, clearly instruct the carrier not to disassemble the containers for any reason unless as required by the local laws of the port of destination or by the instructions of the B/L holder, or else the carrier shall bear corresponding responsibilities. [1] Article 8 of the Special Maritime Procedure Law provides that “where the parties to a maritime dispute are foreign nationals, stateless persons, foreign enterprises or organizations and the parties, under a written agreement, choose a maritime court in the People's Republic of China to exercise jurisdiction, such court has jurisdiction over the dispute even if the places with practical connections to the dispute are not within the territory of China.”

Foreword   In 2012, the international shipping market suffered a continued downturn due to the subsequent impact of the global financial crisis. From January to August 2012, the average Baltic Dry Index number (BDI) was 934, which fell about 3 percent compared with 2011. In order to cope with the instabilities of the shipping market, the Ministry of Transport of the People’s Republic of China promulgated the Circular on Promoting the Smooth and Orderly Development of the International Ocean Shipping Industry in China in August 2011. The Circular puts emphasis upon responding to the challenge and seizing the opportunity and highlights the importance of implementing effective policies aimed at the troughs of the shipping industry so as to support the development of the ocean shipping industry from the following aspects; promotion of the adjustment of the industrial structure of international shipping industry, establishment of favorable administrative service environment, strengthening of honest operation of the enterprises and the maintenance of fair and orderly competition, to further strengthen the management of the international ocean shipping market and to guide the smooth and orderly development of the shipping industry.   A rapid increase of admiralty and maritime disputes is the first reflection of the downturn of shipping industry in the maritime judicial field. Throughout 2012, the number of new cases heard by this Court totaled 2525, which was an all-time high, and the number of various types of cases increased substantially. The second reflection lies in the arrears of loans and wages of crew members together with a number of cases relating to ship arrest and auction. Such cases are mixtures of maritime disputes and livelihood issues, the existence and development of the enterprises and the interests and rights of laborers. Therefore, unstable factors, even if mass disturbance, may arise due to slight careless in dealing with such cases.   In coping with the new situation and problems relating to the shipping economy and admiralty and maritime cases, this Court adopted monitored the situation closely by streamlining the adjudicatory forces, handling cases in a similar manner and strengthening mediation so as to complete the judicial work effectively and efficiently. As a result, the growth rate of closed cases was higher than that of accepted cases and unsolved cases. In addition, this Court maintained a sound momentum with the rate of changing the original sentence being kept at a low level. In the mean time, this Court exercises judicial power in a flexible manner so as to protect the people’s livelihood and to protect the rights enjoyed by the disadvantaged groups, such as the crew members and employees and the legal interests and rights of the creditors such as banks. When resolving the disputes properly, this Court maintained an open, fair and just judicial reputation.   During 2012, this Court, in light of the legal issues found in the course of trials, provided the relevant authorities with judicial suggestions for improving their work in the form of written judicial suggestions. With regard to some typical and universal legal issues, such as the legal issues relating to the exploitation and management of the sea, and the loan on mortgage of a ship, we have made evaluations and provided corresponding guidance. Especially for the sectors where the shipping and trading disputes are likely to arise, we provide some focused suggestions for relevant enterprises to take precautions against the prevailing risks. Such suggestions are compiled in this Report and we hope that it may serve as a guidance for relevant enterprises to conduct their business according to law and to promote the healthy development of shipping industry.   Table of Contents   I      Basic Information on Maritime Trials        The Number of new cases increases substantially The Number of cases of disputes over damages for pollution decreases substantially        Acceptance and hearing of maritime administrative cases        Foreign interested party voluntarily submits relevant disputes to this Court   II    Regulating the use and administration of sea areas according to law        —Problems relating to the administration of sea areas and solutions we propose        Issues of administration according to law in the course of the administration of the right to use sea areas Matters relating to the disqualification of relevant administration staff in the course of the examination and approval of the right to the use of sea areas        Strengthen the costal residents’ awareness of use the sea areas according to law        Issues of dumping sludge and garbage in the course of ocean engineering   III   Regulating the shipping financial service according to law        —Problems pertaining to loan on mortgage of ships and solutions we propose               Issues of exorbitant valuation of the ships for mortgage        Issues that financial institution neglects the maritime lien Matters relating to the protection of financial claim in the course of the implementation of preferential policy for fishing industry   IV   Regulating the Freight Market        —Problems   in carriage of goods by sea and solutions we propose   Domestic importers shall be prudent in signing trade contract and be cautious of frauds Attention required of sea carriers in the transport of ferrosilicon Problems in the inspection of damaged goods by the carrier and the consignee   V    Regulating the Forwarding Business — Problems in the forwarding business and solutions we propose               Problems regarding cargo damage where container seals are intact        Problems regarding the reimbursement of expenses paid by forwarders        Actual shipper has the right to obtain shipping documents   VI   Regulating the Seafarer Labour Market — Problems in seafarers’ contracts of service and solutions we propose   Some seafarers still work without a labour contract Collusion in seafarers’ claims for wages Disputes arising out of seafarers’ contracts of service may be brought to court without first being referred to arbitration     I.         Basic Information on Maritime Trials   In 2012, we implemented sound strategy for maritime trials so as to secure our status as a nation-wide pioneer court and a world-renowned court. Through bringing the judicial function into full play, the trials have shown a good momentum of “three increases and one decrease”: 2525 new cases were heard by this Court in 2012, which is a 79.08% increase over last year. The number of cases closed increased 111.12%, totaling 2582. The case settlement rate is 89.25%, which is a 12.38% increase over last year. The number of the unsettled cases total 311, which is a 15.48% decrease over last year.   Among new cases, 1235 were lawsuits at the first instance, 378 were cases on maritime enforcement, and other types of cases total 912. Lawsuits at the first instance included: 368 cases of disputes over labor contract of the crewmembers, comprising 29.80% of the cases at the first instance, 241 contract disputes dealing with carriage of goods by sea, comprising 19.51%, 146 cases regarding contracts related to the leasing of containers, comprising 11.82%, 105 cases of disputes over shipping agent contract, comprising 8.50%, 206 cases regarding contracts related to ships (including sale and purchase, financing, building, charter, agent, mortgage, operation management and operation loan), comprising 16.68%, 39 cases of disputes over the provision of marine stores and spare parts, comprising 3.16%, 28 cases regarding ship collisions comprising 2.27%, 15 cases regarding maritime personal injury, comprising 1.21%, 10 cases of disputes over contract of channel and port dredging, comprising 0.81%, 9 cases of disputes over insurance contract, comprising 0.73%, and 68 cases of other types of disputes, comprising 5.51%. Among the 1235 cases at the first instance, 402 concerned foreign, Hong Kong, Macau or Taiwan interests, comprising 32.6% of the cases at the first instance.       Chart No.1: cases heard in 2012 which were at the first instance       Other types of cases mainly concerned disputes over maritime special procedure and total 912, including: 346 cases of application for maritime injunction, comprising 37.94% of total number of the procedural cases, 250 cases of application for registration of maritime claims, comprising 27.41%, 177 cases of application for ship arrest, comprising 19.41%, 64 cases of application for auction of the goods carried by the ship, comprising 7.02%, 31 cases of application for preservation of property before the institution of an action, comprising 3.40%, 9 cases of declaration of death in maritime casualty, comprising 0.99%, 7 cases of application for maritime evidence preservation, comprising 0.77%, 5 cases of application for ship arrest and auction, comprising 0.55%, 4 cases of application for service by publication, comprising 0.44%, and 19 other procedural cases, comprising 2.08%.     Chart No.2: procedural cases heard in 2012       Chart No.3: Comparison of cases heard from 2010 to 2012       Chart No.4: Comparison of cases heard in each month of 2010 to 2012   Through analysis, the cases heard by this Court in 2012 were found to have the following characteristics:   —The Number of new cases increased substantially. The new cases heard by this Court in 2012 witnessed an increase of 79.08%, which hits the historical high since the foundation of this Court in 1984. Among these cases, lawsuits at the first instance witnessed an increase of 61% over last year, procedural cases increased by 165.88% over last year and the cases of enforcement increased by 26% over last year. Cases that increase substantially include: disputes over labor contract of the crewmembers (an increase of 27 times), disputes over contract of leasing containers (an increase of 20 times), disputes over contracts related to ships (an increase of 1.6 times) and the cases of application for registration of maritime claims witness an increase of 5.5 times.   —The Number of cases of disputes over damages for pollution decreased substantially. While other types of cases witnessed an increase to a certain degree, the cases of disputes over damage for pollution decreased substantially. Throughout 2012, new cases for dispute over damage for pollution heard by this Court totaled 3, which is a decrease of 93%. In this Court’s opinion, this type of cases may have decreased substantially due to the fact that the laws and regulations pertaining to ocean pollution improve gradually and the punishment intensity has been strengthened which deters the illegal pollution discharge. In addition,  a number of cases for disputes over damages for marine pollution were successfully settled through administrative mediation and pre-pleading mediation and were not submitted to the court for trial.   —Acceptance and hearing of maritime administrative cases. In December 2011, Guangdong Higher People’s Court issued a circular designating that this Court shall have jurisdiction over the maritime administrative cases, cases of maritime administrative compensation, cases of disputes over pollution to the sea areas and seaward inland river areas resulting from land-sourced pollutants and cases of disputes over ocean exploitation. In 2012, we have heard 5 maritime administrative cases with 2 of them closed, where respectively the interested party refused to accept the decision made by the governmental authority on revoking the certificate of the right to use sea areas and dissatisfaction on the governmental act to issue the certificate of the right to use sea areas to a third party.   —Foreign interested parties voluntarily submitted relevant disputes to this Court. From hearing cases involving foreign, Hong Kong, Macau and Taiwan interests, we have earned the trust of the litigants both at home and abroad through fair trials and by providing a first-rate service. At the time when large enterprises of port and shipping are concluding a contract and foreign enterprises are carrying out maritime business, they voluntarily choose this Court to have jurisdiction over their disputes. In respect of the cases at the first instance heard by this Court over 2012, the litigants choosing this Court to have jurisdiction over the disputes through agreement totaled 15, among which there were 4 cases in which one or both of the parties concerned were foreign enterprises. We heard and settled the cases in a timely manner, and the litigants submitted themselves to the judgment and resolved the matters accordingly. In addition, we have concluded a case where the litigants filed a parallel proceeding to this Court and the court in the Netherland due to that agreement that this Court has jurisdiction over the disputes has been made in the clause on the back of the bill of lading. Thanks to the great effort of this Court for mediation, the plaintiff withdrew the action filed with this Court and eventually the court in the Netherlands, and the case was settled through mediation.   II.      Regulating the use and administration of sea areas according to law —Problems relating to the administration of sea areas and solutions we propose   (1)   Issues of administration according to law in the course of the administration of the right to use sea areas   A maritime administrative case involved the holder of the right to the use of sea areas being dissatisfied with the government decision to revoke the certificate. Mr. Chen obtained the certificate of the right to the use of sea areas in 2003 and built shrimp pond in such sea areas for marine aquiculture for many years. In 2011, part of the shrimp pond was occupied for the reinforcement project of the sea wall and the bureau of water resources destroyed the shrimp pond by force without reaching agreement on the compensation for such occupation with Mr. Chen. The river basin administrative bureau applied to the competent government authority for revoking the certificate of the right to use sea areas on the ground that the government authority has not notified it when issuing such certificate. The government authority determined that the issuance of such certificate is illegal on the ground of the existence of defect in the course of the application for such certificate filed by Mr. Chen and decided to revoke the certificate according to the provisions as stipulated by the Regulations of Guangdong Province on the Supervision of Administrative Law Enforcement of the People’s Government at all levels and the Regulations of Guangdong Province on the Accountability System for Administrative Law Enforcement. Mr. Chen was dissatisfied with the decision and filed an administrative litigation to the court. After hearing the case, the court held that the facts found are unclear, the evidence is insufficient and there existed a lack of legal ground for the government to make such a decision to revoke the certificate, and thus rendered a judgment to rescind the decision made by the government.   The issuance of certificate of the right to the use of sea areas falls into the category of administrative license, and the implementation procedure of administrative license shall be subject to the provisions stipulated by the Administrative License Law of the People’s Republic of China. Administrative license is administrative actions which the licensee could benefit from. The administrative license obtained by citizen, legal person or other organizations according to law is under the protection of law. Therefore the revocation of the administrative license, which could have great influence on the interests enjoyed by the licensee based on such license, shall strictly abide by the provisions provided by relevant laws and regulations. The administrative authority may, only under circumstances provided in Article 69 of the Administrative License Law of the People’s Republic of China, annul an administrative license according to the request of the interested party or according to its functions, or according to the provisions as stipulated in Paragraph 2 of Article 8 of the Administrative License Law of the People’s Republic of China, providing “in case the objective circumstances that the administrative license rests on change greatly, and in order to meet the demand of public interests, the administrative organ may modify or withdraw the effective administrative license. The damage caused to the properties of citizens, legal person or other institutions accordingly shall be compensated for by the administrative organ in accordance with the law.” There is a lack of legal ground for the government authority to revoke the certificate of the right to the use of sea areas which has become effective for several years, merely on the ground that there are some defects to the documents submitted by Mr. Chen for the application for such certificate, thus it is in violation of the credit benefit protection principle. What’s more, the Regulations of Guangdong Province on the Supervision of Administrative Law Enforcement of the People’s Government at all levels and the Regulations of Guangdong Province on the Accountability System for Administrative Law Enforcement, based on which the revocation was made, are the internal supervising regulations of administrative organs. These regulations are made for the purpose of punishing and limiting the illegal acts of the public servants when discharging their duties, but not the administrative counterpart. Therefore, it is improper for the government to adopt such regulations to annul the administrative license.   Following the development of marine economy of Guangdong Province, cases that the right of marine aquiculture or the right of the use of sea areas is revoked ahead of time due to the occupation of the sea areas resulting from the aquiculture planning, adjustment of marine functional zone, construction project and valley development, which causes the aquatic product farmers unable to continue their business, may emerge constantly. In case the interest of the fishermen and aquatic product raisers could not be protected and the government authority or the organization in charge of the construction project remove or occupy the culture facilities without paying corresponding compensation, antagonism between the aggrieved masses and the government may easily be triggered, and mass disturbance may even arise therefrom.   We recommend as follows: (1) the local government and the maritime administrative department shall perform the official duties in strict compliance with law. Since a number of laws and regulations are involved in marine administrative management, great attention shall be paid to the scope of validity of such laws and regulations in order to adopt the laws correctly. (2) Government authorities shall strengthen the protection of the right to the use of sea areas obtained according to law. Government authorities and the administrative departments have responsibility for protecting the right to the use of sea areas legally obtained by citizens. Protection of the right obtained by citizens according to law shall be strengthened and the effective administrative license shall not be modified without reasonable grounds. (3) Article 30 of the Law of People’s Republic of China on the Administration of Sea Areas provides that “in case the right to the use of sea areas is withdrawn prior to the expiration of the term of use for the purpose of public interest or the security of the state, appropriate compensations shall be made to the right holder.” Paragraph 2 of Article 26 of the Regulations of Guangdong Province on the Management to the Use of Sea Areas provides that “where the right to the use of sea areas is withdrawn prior to the expiration of the term of use, corresponding compensation shall be made to the right holder pursuant to the tenure of use and the situation of the exploitation of such sea areas”. Therefore, in case the right to the use of sea areas is withdrawn prior to the expiration of the term of use for the purpose of public interests and security of the state, the government shall properly deal with the issues by means of making compensation for the right holder according to relevant laws and regulations.   (2)   Matters relating to the disqualification of relevant administration staff in the course of the examination and approval of the right to the use of sea areas   An administrative case involved a villager being dissatisfied with the issuance of certificate of the right to the use of sea areas to a third party by the government authority. In the case, the third party and the staff member of the maritime administrative department who was in charge of the application for such certificate are in a conjugal relationship, and such staff member signed on behalf of the said department for the approval of the registration and the approval of the change of right holder of the sea areas. The plaintiff has conducted petition activities for 3 years prior to filing litigation to this Court. After visiting the maritime administrative department, discipline inspection department and people’s government at the local level and the above one, the conflict was escalating continuously instead of being settled.   Paragraph 2 of Article 38 of the Law of the People’s Republic of China on the Administration of Sea Areas provides that “the maritime administrative department and the staff members thereof shall not engage in the production or management relating to the use of sea areas”. According to such provision, no limitation has been made to the near-relatives of the staff members, and no clear provisions could be found on the disqualification of the manager who has an interest with the applicant in the course of the examining and approving of the right to the use of sea areas. However, in accordance with paragraph 2 of Article 70 of the Civil Servant Law of the People’s Republic of China, when a civil servant performs his duty in case any of the interests of his near-relatives or husband/wife is involved, he shall withdraw. Therefore, the said staff member did not withdraw from handling the administrative examination and approval which is in violation of the provision as stipulated in the Civil Servant Law of the People’s Republic of China. Thus the villager was challenging the fairness of the administrative examination and approval.   Fairness and justness are the basic principles for civil servant to perform the official duties lawfully. Where a staff member has an interest in the matter, the fairness and justice of the administrative action would be questioned by the administrative counterparts, which may cause the administrative counterparts to appeal to the central authorities for help. We recommend that: (1) the local maritime administrative department shall study the Civil Law in more detail, and the discipline inspection department shall strengthen the supervision on the law enforcement. (2) The provincial maritime administrative department may establish a withdrawal system in the examination and approval of the right to the use of sea areas so as to regulate the maritime administration and to build up the public credibility.   (3)   Strengthen the costal residents’ awareness of use the sea areas according to law   An administrative case involved a villager who was dissatisfied with the issuance of certificate of the right to the use of sea areas to a third party by the government authority, the villager leased the “ancestral sea areas” without obtaining the right to the use of sea areas. He occupied such sea areas after the user obtained the right to the use of sea areas and leased to other person separately. Upon examination, the court held that the plaintiff is neither the owner nor user of the sea areas involved in the case and he is not the holder of the contract for the managerial right to such sea areas. Therefore his legal interests have not been affected by the issuance of certificate of the right to the use of sea areas to a third party and he shall not be deemed as proper plaintiff. The court overruled the claims filed by the plaintiff. From this case we may learn that some of the coastal residents in Guangdong province are ignorant of the law and the traditional concepts of “one owns the sea areas in front of his door” and “ancestral sea areas” are deep-rooted.   The Law of the People’s Republic of China on the Administration of Sea Areas provides the basic system of state-owned sea areas, paid utilization of sea areas and the examination and approval of the right to the use of sea areas. According to this law, any entities or individuals have the right to apply for the utilization of the sea areas, and have an obligation not to usurp on, buy or sell or by any other means transfer sea areas. Prior to the use of sea areas, one shall apply for the right to the use of sea areas according to law. The right to the use of sea areas legally registered shall be under the protection of laws and may not be infringed upon by any entities or individuals. The villager in the aforesaid case is obviously in violation of the laws and regulations. The right to the use of sea areas held by the village collective is involved in the subject case as well. In accordance with Article 22 of the Law of the People’s Republic of China on the Administration of Sea Areas, if any sea areas have already used for aquatic breeding under the management and administration of rural collective economic organizations or villagers’ committee prior to the implementation of this Law, and if it is in conformity with the functional divisions of the sea and approval of the local people’s government on the county level has been obtained, the right to the use of sea areas may remain with the rural collective economic organization or villagers’ committee, so that the sea areas may be contracted by the members of the collective economic organizations for aquatic breeding. Time limit has been prescribed by law for the village collective to apply for the confirmation on the right to the use of sea areas which has already been used. According to Article 40 of the Regulations of Guangdong Province on the Management of the Use of Sea Areas, which has become effective on 1st March 2007, for the projects in the sea areas without obtaining the certificate of the right to the use of sea areas prior to the implementation of this Regulations, relevant interested party shall go through the formalities of the certificate within 6 months after this Regulations becomes effective.   Therefore, we recommend that: 1. villagers’ committee or rural collective economic organization that is qualified for the use of sea areas shall actively exercise its rights and take the initiative to apply for the approval of the right to the use of sea areas to the local people’s government; 2. Provincial maritime administrative departments shall arrange the local people’s government and the maritime administrative department to carry out general survey on the use of sea areas by villager collective in order to solve the issue left over from the past; 3. The people’s government at all levels, especially the local government in the coastal regions, shall strengthen the legal promulgation and education on the management of the use of sea areas, so as to guide the coastal residents to use the sea areas according to law and to solve the disputes through legal means.   (4)   Issues of dumping sludge and garbage in the course of ocean engineering   In a case of dispute related to building contract of wharf, the plaintiff, which is not a qualified construction company, but one affiliating to a qualified construction company, is the subcontractor to the transportation of waste materials generated from the excavation project which is part of the building project of the wharf. However, it subcontracted part of the project to the defendant at a later stage. During the construction project, the cutter suction dredger owned by the defendant failed to satisfy the construction requirements, and cannot transfer the sludge to the dredging reclamation area as agreed by the contract. Consequently, the defendant employed another party to dump the sludge to the anchorage by ships, which resulted in fines imposed by maritime safety administration. With regard to the offshore engineering construction, the phenomenon of multi-level contracting and illegal subcontracting exist ubiquitously and the problems of marine environment pollution arising due to the illegal execution of work by the actual constructor emerged as major issues.   The Administrative Regulation on the Prevention and Treatment of the Pollution and Damage to the Marine Environment by Marine engineering Construction Projects prescribe strict obligations on pollution prevention borne by the construction entity. For example, the construction entity shall, when applying for the construction project, submit an environment impact report, follow-up environment impact assessment shall be carried out where violation to the laws and regulations is found during the construction and corrective measures shall be adopted accordingly, corresponding fines would be imposed on the constructor who violates the laws and regulations, and in case of any pollution damage the polluter would be required to eliminate the hazard of the pollution and compensate the losses arising therefrom. Regardless of the relationship of contracting, multi-level contracting and subcontracting, the construction entity shall be responsible for the prevention of pollution to the marine environment caused by the marine engineering projects. According to Article 49 of the aforementioned Regulations, in case the construction entity cause erosion, siltation or damage to the territorial sea base points and their surroundings, the marine administrative department of the people’s government at or above the county level shall order it to stop the construction and operation, and to make restitution; if the construction entity fails to make restitution within the time limit, the marine administrative department may designate an entity with corresponding qualification for restitution, and the construction entity shall assume the fees incurred therefrom, as well as a fine of up to double the fees for restitution.   We recommend that: 1. the construction entity of the marine engineering project shall be the party which is directly responsible for the engineering project, and no matter how many times the construction project has been subcontracted, it shall be responsible for the supervision on the construction of the project being subcontracted. In case of any conduct of dumping the sludge and garbage freely by the actual constructor, it shall timely stop. 2. The marine administrative department shall strengthen relevant supervision on the marine engineering project construction. In case of any conduct of dumping the sludge and garbage freely by the construction entity, it shall take legal actions against the party who is directly responsible for the construction project so as to protect the marine environment.   III.   Regulating the shipping financial service according to law —Problems pertaining to loan on mortgage of ships and solutions we propose        (1)   Issues of exorbitant valuation of the ships for mortgage   In a case of dispute over a loan on the mortgage of ships, with the bank as the plaintiff, the borrower, a shipping service company, obtained a loan in an amount of 100 million RMB from the bank with 27 ships owned by it as the pledge. The value of the ships was assessed by a property assessment institute and the estimated value of the 27 ships was 200 million RMB. Due to poor management of the shipping service company, the 27 ships were sold by the court through judicial sale to repay the loans. After going through the auction procedures, the aforesaid ships were sold only at the price of 40 million RMB.   With regard to the cases of disputes over loans on mortgage of ships which were entertained by this Court, we noticed that the estimated value of the ships served as pledge was too high on the whole, and after entering into the judicial auction procedures the price of the ships was on the low side. Many factors contribute to the phenomenon that the auction price of the ships is much lower than the estimated value. In addition to the objective cause of the downturn of the freight market, the following factors gave rise to the failure of the estimated value of the ships to truly reflect the change of the market price: firstly, the mortgagors intentionally raise the estimated value of the ships so as to get high loans. Secondly, the property assessment institute participating in the assessment of the ships is not good at the assessment of the value of ships, but only adopted the traditional assessment method for asset price to assess the value of the ships and failed to take into consideration the factors that could have influence on the price of the ships. Thirdly, due to the professional nature of the assessment of the value of ships, there are just few professional institutions engaging in the assessment of the value of ships in Guangdong province. Further, most of these institutions are not qualified for the assessment of asset price and could not meet the demand of the financial institutions for the assessment of the price of ships.   We recommend that: 1. the bank’s supervising department shall strengthen the supervision on the mortgagors so as to plug up loopholes and to avoid non-performing loans. 2. The financial institution shall employ qualified ship assessment institution for the value assessment of the ships served as pledge. Under the circumstance that most of the ship assessment institution is not qualified for asset price assessment, it may entrust professional ship assessment institution and asset price assessment institution to jointly carry out the assessment, so as to ensure that the estimated value of the ship can basically match up to the market price. 3. Ship assessment institutions should, pursuant to business development, hire and train some qualified personnel for asset price assessment and to obtain the qualification for asset assessment so as to meet the market demands.   (2)   Issues that financial institution neglects the maritime lien   In respect of a case that the ship owned by a shipping service company was sold by this court through auction procedure, the auction price of the ship is more than 500 thousand RMB, but the crew’s wages which are entitled to the maritime lien reached to more than 300 thousand RMB. Therefore, deducting the auction fees and other maritime liens, the bank, as the mortgagee, only got indemnification for tens of thousands RMB.   In recent years, in dealing with the auction of some ships involved in the loan on mortgage of ships, we noticed that after paying the auction fees and relevant claims entitled to the maritime liens, there is very little auction sale of the ships left for indemnifying the credit of the financial institution. In addition to the above-mentioned analysis that the auction price of the ship is much lower than the estimated price, the reason lies in that the financial institution fails to take the maritime liens into consideration when lending money. The regulations on maritime liens are prescribed in Article 21 to 30 of the Maritime Code of the People’s Republic of China, i.e. a maritime lien shall have priority over ship mortgage. The establishment and existence of the ordering of such claims are not essentially based on any possession, registration or agreement; therefore it has the so-called secretive nature. Once the ship under mortgage is arrested and sold by the court through auction due to maritime disputes, the maritime liens, such as the crew’s wages and the tonnage dues, would have the priority of compensation, thus the credit of the financial institution, as the mortgagee, would possibly not be completely indemnified.   We recommend that, financial institutions, when engaging in business of ship mortgage, give adequate consideration to the unpredictable risks which may be generated from the maritime liens and request the debtor to provide other securities for the performance of debt other than the ship mortgage. In addition, financial institutions should also supervise all the aspects concerned, including the status of vessel insurance, ship survey and operation of the ship ,so as to timely discern any problems and to take safeguards measures in respect of maritime liens.   (3)   Matters relating to the protection of financial claim in the course of the implementation of preferential policy for fishing industry   In a case of dispute over loans of mortgage on ships where the rural credit cooperatives filed a lawsuit against the ship owner, due to the fact that the rural credit cooperatives, as the mortgagee, failed to accurately provide relevant documents proving the qualification of the shipowner, the judicial proceeding could not be started and the financial creditor’s right could not be fulfilled by means of judicial proceeding.   For the purpose of the implementation of preferential policy for the fishing industry, the rural credit cooperatives provide small loans to a great number of local fishermen, which made great contribution to the development of the local fishing industry. However, in the course of hearing such type of cases, we noticed that the qualification of the borrower has not been strictly examined by the rural credit cooperatives, fishing boat serving as a pledge without a full set of license, and the value of the fishing boat is too low and no adequate security has been provided for the performance of debt, which left many loans unable to be recovered and harmed to the financial creditor’s right.   We recommend that, financial institutions, when implement the preferential policy for fishing industry, strictly examine the qualification of the borrower and the fishing boat on mortgage, so as to take precautions against relevant risks on the loans and to bring forth new ideas on the security pattern according to law. For example, the pattern of “diesel fuel subsidies + fishing boat mortgage + commercial loan” could be adopted, where the borrower may, of its own accord, open an account at the credit cooperative which provides the loan for the special fund of diesel fuel subsidies. Prior to paying off the loans, the special fund of diesel fuel subsidies shall only be used to repay the loans, which may reduce the risk of mortgage on ships to a certain degree.   IV.    Regulating the Freight Market —    Problems in carriage of goods by sea and solutions we propose   (1) Domestic importers should be prudent in signing trade contracts and be cautious of fraud   In a dispute arising out of a contract for carriage of goods by sea, a large Chinese state-owned enterprise engaged in import and export had entered into a contract with an American trading company for the sale of copper scrap at the amount of over 2 million USD through letter of credit. When entering into the sales contract, the state-owned enterprise was aware that the American company as exporter of the solid waste did not have a registration certificate issued by the General Administration of Quality Supervision, Inspection and Quarantine under the State Council of China. When the subject container arrived in the port of destination, the contents were found to be earth and rocks etc. rather than the goods. Consequently the state-owned enterprise as consignee suffered total loss. Then it claimed against the carrier on the grounds that the carrier had issued an incorrect bill of lading which resulted in the cargo loss. The court tried the case and held that the goods at issue had not been inside the container before loading in the port of departure, and accordingly the cargo loss did not take place during the period of responsibility of the carrier; the carrier’s issuance of the incorrect bill of lading, which was a tort, was not the cause of the consignee’s payment of the letter of credit. The court accordingly dismissed the state-owned enterprise’s claims.   International trade involves a number of elements, such as buying, selling, payment and transport, and features many legal complexities. However, contracts of sale and contracts of carriage are independent of each other. If a fraud happens in the buying and selling, the liability may not be shifted onto the carrier and the victim of such fraud may only claim against the other party to the contract of sale. Nevertheless, it is difficult to claim against an overseas seller. Furthermore, with respect to international trade where solid waste and other special subject matters are imported, Article 16 of China’s Administrative Measures for the Import of Solid Waste says “the State requires for the registration of overseas suppliers of solid waste that can be used as raw materials. Overseas suppliers exporting such solid waste to China shall obtain the registration certificate issued by the General Administration of Quality Supervision, Inspection and Quarantine under the State Council.” In the above case, the state-owned enterprise as importer should have carefully examined the registration certificate of the overseas supplier; however, it entered into the sales contract with the overseas seller although it was fully aware that the seller did not have the required certificate, which gave rise to a hidden danger.   Our suggestions are: 1, before signing a contract of sale with large value of subject matter, the domestic buyer as importer should investigate the credit of the overseas seller to avoid trade fraud; 2, with respect to international trade of special subject matters such as solid waste, importers should get familiar with applicable laws, rules and regulations of China and the exporting country so as to reduce disputes and avoid losses.   (2) Attention required of sea carriers in the transport of ferrosilicon   In a case of cargo damage under a contract of carriage of goods by sea, the carrier accepted booking to transport ferrosilicon and a batch of compartments of intercity train with internal combustion engines to Europe from a port in North China. The compartments were loaded on the upper tweendeck space, while the ferrosilicon was loaded on the lower tweendeck space. There were chinks in the partition between the upper and lower spaces. As there was no continuous ventilation on the carrying vessal during the transport, the ferrosilicon loaded on the lower tweendeck space, which produced phosphine in suitable temperature and humidity; the gas then expanded to the upper tweendeck space through the chinks in the partition and reacted with the copper or copper alloy parts of the train compartments. The compartments were only covered in a film on the top; the phosphine entered the carriage from the lower space and was prevented by the film which formed a relatively enclosed environment. As a result the phosphine concentration increased and the reaction intensified, eventually leading to the damage of the compartments. Subsequently the consignee claimed against the carrier for the loss of the train at an amount over RMB100 million.   China is a big exporter of ferrosilicon, and exported ferrosilicon is mainly carried by sea. Ferrosilicon is classed as dangerous goods and is subject to the special conditions set forth in the International Maritime Dangerous Goods Code (hereinafter referred to as the IMDG Code). After the 29th amendment to the IMDG Code came into force, China’s Ministry of Transport issued the Notice on Specifying the Requirements for Ferrosilicon and Other Dangerous Goods in International Shipping (No. [1999] 154) 1999, providing that IMDG Code“relaxes the requirements for the shipping of ferrosilicon and other dangerous goods. In order to facilitate marine transport and promote China’s foreign trade, we hereby state the provisions and detailed requirements of the 29th amendment to IMDG Code with respect to ferrosilicon and other dangerous goods as follows: 1, when ferrosilicon (silicon ≥ 30%-90%) or ferrosilicon UN No. 1408 on page 4343 of IMDG Code is shipped in packing (including intermediate bulk containers and containers) and if the foreign trade authorities are provided with a certificate showing that the ferrosilicon has passed the Type 4.3 test set forth in Clause 33.4.1.4, Part III of the UN Recommendations on the Transport of Dangerous Goods, Manual of Tests and Criteria, it can be shipped as general goods.”   Although ferrosilicon may be shipped as general goods after a test certificate is obtained, during prolonged sea transport it is prone to produce phosphine and other toxic, corrosive gases in humidity; such gases corrode copper and copper alloy parts and may result in poisoning and explosion. For these reasons, we suggest that sea carriers should prudently stow and store ferrosilicon, with particular attention to avoid mixing with incompatible goods. Ferrosilicon should be stowed away from copper or copper alloy goods or equipment containing such metals. Furthermore, when stowing and carrying ferrosilicon, carriers should ensure the watertight integrity of the hold and maintain proper ventilation.   (3) Problems in the inspection of damaged goods by the carrier and the consignee   In a dispute arising out of a contract for carriage of goods by sea, the subject container was shipped from Malaysia, transhipped in Hong Kong and arrived in Guangzhou. The consignee took delivery of and transported the goods to its own warehouse, then opened the container and found the goods damaged. The consignee subsequently claimed damages against the carrier; whereas the carrier defended that the damage of the goods was found in the warehouse but not during the period of its responsibility and therefore it was not liable for compensation. As the consignee could not prove any evidence that the damage had occurred during the period of responsibility of the carrier, the court dismissed its claims. In another dispute arising out of a contract of carriage of goods by sea, the container arrived in Guangzhou and damage of the goods was found during port tallying. The consignee then requested the carrier to conduct a joint inspection, but the latter ignored such request. Later the consignee and the shipper reached consensus on the disposal of the goods, namely by returning the goods to set off the residual value. After the consignee had claimed damages against the carrier, the carrier alleged that the goods did not suffer total loss and there was residual value, and it did not agree with the way the consignee disposed of the goods. As the consignee provided sufficient evidence to prove the amount of the damage of the goods, the court supported the claims filed by the consignee.     In similar disputes, carriers usually defend by alleging that the damage of goods did not occur during the period of their responsibility. Article 46 of the Maritime code provides that “the carrier is responsible for goods carried in containers throughout the period during which it is in charge of the goods, starting from the time it has taken over the goods in the port of loading till the goods have been delivered in the port of discharge. The carrier is responsible for non-containerized goods throughout the period during which it is in charge of the goods, starting from the time the goods are loaded on board till the goods are discharged. During the period the carrier is responsible for the goods, the carrier shall be liable for any loss of or damage to the goods, except as otherwise provided for in this Section.” The claimant needs to prove that the damage occurred during the period of responsibility of the carrier, and counterevidence is required if the carrier denies such allegation. Accordingly, we suggest that consignees should, when finding any damage to the goods when taking delivery, send a written Notice of Loss or propose a joint inspection in accordance with Section 5 (Delivery of Goods) of Chapter IV (Contract for Carriage of Goods by Sea) of the Maritime Code. The carrier and the consignee should each reasonably facilitate the cargo damage inspection. If one party proposes an inspection but the other party refuses to cooperate, the proposing party should commission a qualified inspection agency to identify the damage and the amount thereof to facilitate future claims. V.       Regulating the Forwarding Business — Problems in the forwarding business and solutions we propose   (1) Problems regarding cargo damage where container seals are intact   Nowadays, containerization plays a significant role in the carriage of goods by sea. Containers have become a major vehicle for the carriage of internationally traded goods by sea except for bulk oil and bulk cargo, such as crude oil, coal, mineral sand and grain. Nonetheless, containers induce increasing legal issues and disputes. A typical problem is cargo damage where container seals are intact. In such case, the shipper or consignee alleges cargo shortage or damage found in the port of destination, whereas the carrier states that it accepted a sealed container, was unclear of the condition of the cargo inside and has put a notation on the bill of lading declaring that the carrier would be exempted from any liability as long as the container is delivered with the seal intact.   As goods are invisibly loaded in closed containers, carriers often put notations on bills of lading so as to avoid possible future liability. Such notations include SLAC — Shipper’s Load and Count, SLCAS — Shipper’s Load, Count and Seal, STC — Said to Contain, SBS — Say by Shipper, and FCL — Full Container Load. In trial practice, there is a general consensus on the validity of such notations: with respect to full container load (FCL) and sealed by shippers, the validity of such notations is supported. As container ships are highly mechanized, the loading time is short in each port and it is thus difficult for carriers to exactly identify the marks, number, volume, weight and condition of the goods inside containers with an intact seal; therefore carriers are allowed to have reservations about the condition of the goods. With respect to less-than-container load (LCL), the validity of such notations will be determined depending on whether the container freight station loads on behalf of the carrier or the shipper. Containers loaded by the container freight station for and on behalf of the shipper will be deemed as loaded by the shipper, and the added “Unknown Clause” is valid; if the container freight station loads for and on behalf of the carrier, the “Unknown Clause” added by the carrier would be inconsistent with the fact and therefore such clause shall be found invalid. Thus it can be seen that where containers are loaded by the shipper, the shipper or consignee cannot prove the condition of goods merely by the descriptions on the bill of lading. Moreover, from the factory to theport of loading and to theport of discharge, container cargoes are transported by at least two modes, namely road and sea transport. Where the shipper commissions a road carrier and a sea carrier respectively for each section of transport, the shipper will be faced with great difficulties in claims if it is impossible to determine the section where the cargo damage occurred.   We advise the shipper, when delivering the goods to the carrier, to try to collect other evidence to prove the condition of goods , such as the weight of goods and the apparent condition of the container. A sea carrier is generally liable for FCL from yard to yard. We advise the shipper to load the goods in the factory, seal the container, and then weigh the container in the presence of a third party witness; to record whether the container is in apparent good condition and whether there is any damage to or dent in the container. When the container arrives in the port of loading, the shipper should weigh the container again with the weighing equipment of the port, and keep the equipment interchange receipt (EIR) from the port as evidence for the apparent condition of the cargo container upon delivery to the sea carrier. When the container arrives in the port of destination, the shipper should weigh it again before discharging and taking delivery of the goods, and should carefully inspect the apparent condition of the container as well as the goods inside. In case of any shortage of, or damage to the goods, the shipper can compare each record taken and it will then be easier to identify the section where such shortage or damage occurs and the fault of the carrier.   (2) Problems regarding the reimbursement of expenses paid by forwarders   In a dispute arising out of a forwarding contract, the forwarder arranged for the transport of goods as required by the principal and on behalf of the principal paid the freight to the carrier, as well as the detention and demurrage after the arrival of goods in the port of destination. However, the principal refused to reimburse the forwarder on the grounds that the forwarder paid the expenses without first obtaining its consent and that the expenses were unreasonable. Subsequently the forwarder brought an action to the court, and the court found that such expenses were necessary expenses incurred by the forwarder for fulfilling the commission and therefore should be reimbursed by the principal; eventually the court supported the claims filed by the forwarder.   The legal relationship between the forwarder and the principal is an agency relationship created under a contract. Although Article 398 of the Contract Law of   People’s Republic of China provides that the principal shall prepay all expenses to be incurred in completing the commission, in actual forwarding practice prepayment by the principal is rare. In most cases the forwarder has to pay such expenses on behalf of the principal. The forwarder is entitled to recover such expenses from the principal only when the following three conditions are met: 1.the expenses are necessary for completing the commission and paid by the forwarder for the benefit of the principal and for the purpose of the forwarding contract. Specific considerations include: whether the expenses are incurred in relation to the commission; whether the expenses are inevitable in completing the commission; whether the principal’s interests will be affected if the expenses are not paid in time; whether the forwarder is at fault for the incurrence of the expenses. 2. The expenses so paid shall be reasonable and not in breach of the agreement between the forwarder and the principal, and shall not be excessively higher than the market standard or the losses foreseeable by the principal upon commissioning the transport. The forwarder may seek recovery of freight so paid from the principal subject to the amount they previously agreed upon. With respect to detention and demurrage, where the principal has not determined the rates in advance or afterwards, consideration should be given to whether the rates accord to general market standards and whether the charge collector has taken proper measures to prevent any further losses. 3. Such expenses may only be paid to bodies entitled to such charges. The forwarder usually pays the expenses as per the carrier’s bills, but the carrier is not entitled to all charges. For example, demurrage should be paid to the port but not to the carrier. If the carrier claims for such charge, it must prove that it has paid the charge to the port.   We advise forwarders to observe the following principles before paying expenses on behalf of the principle: 1. to carefully examine the expenses against the above three conditions. As agents, forwarders are obliged to exercise due diligence instead of merely paying the expenses as per the carriers’ bills. 2. to request charge collectors for proof of expenses. For instance, before paying destination charges to the carrier, the forwarder should request the carrier to provide proof of charges incurred due to the retention of the goods in the port of destination as well as the local charging rates. 3. Before paying the expenses, the forwarder should try its best to inform the principal. It is the obligation of a qualified forwarder to promptly inform the principal of any expenses incurred in relation to the goods, which enables the principal to take timely measures to reduce losses; otherwise the forwarder might not be able to recover the expenses incurred due to further losses.   (3) Actual shipper has the right to obtain shipping documents   In a case of dispute arising from a forwarding contract, the plaintiff claimed that it was the seller under an international trade contract, and as agreed had delivered the goods to the carrier via the forwarder designated by the buyer. However, the forwarder had not handed over the bill of lading to the plaintiff, as a result, the consignee was not able to take delivery of the goods in the port of destination and eventually expenses were incurred as the goods were detained in the port. The plaintiff requested the court to order the forwarder to compensate it for all economic losses incurred due to the forwarder’s failure to hand over the bill of lading in time. On the other hand, the forwarder alleged that it was commissioned by the foreign buyer to arrange for the transport and not in any contractual relationship with the plaintiff, and therefore was not obliged to hand over the bill of lading to the plaintiff or to compensate for any losses incurred in relation to the goods under the contract. In accordance with applicable laws, the court held that the plaintiff as actual shipper had control over the goods. However, as the plaintiff did not provide any evidence to prove that it had instructed the forwarder to hand over the bill of lading or telex release the goods, its claims were eventually dismissed.   The above case involves a basic issue in FOB-based international trade contracts and the resulting carriage of goods by sea. Generally speaking, under the FOB condition in international trade, the foreign buyer is responsible for booking space while the domestic seller is responsible for delivering the goods as required to the vessel designated by the buyer. In accordance with Article 42(3) of the Maritime Code, the seller is the actual shipper whereas the buyer is the contractual shipper. In practice, the foreign buyer usually commissions a domestic forwarder to book space on its behalf. For convenience, the domestic seller often commissions the forwarder to deliver the goods to the carrier. Upon completing such commissions, the forwarder receives the bill of lading or other documents from the carrier. Should the forwarder hand over such shipping documents to the contractual shipper or to the actual shipper when it has received a commission from both parties respectively? As regards this issue, Article 8(1) of the Regulations of the Supreme People’s Court on Trials of Disputes Arising from Sea Freight Forwarding clearly provides as follows: “where the forwarding enterprise is commissioned by the contractual shipper to book space and by the actual shipper to deliver the goods to the carrier, the people’s court shall support the actual shipper’s request that the forwarding enterprise hand over the bill of lading, sea waybill or any other shipping documents obtained to it We advise the actual shippers to actively exercise their rights endowed by the law by requesting the forwarder to provide the shipping documents promptly after the goods are loaded on board, so as to have control over the goods and get the payment smoothly. If the forwarder refuses to hand over the shipping documents, the actual shipper should collect and preserve relevant evidence to facilitate future claims.     VI.    Regulating the Seafarer Labour Market — Problems in seafarers’ contracts of service and solutions we propose     (1)  Some seafarers still work without a labour contract   In hearing a series of cases of disputes arising out of the seafarers’ service contracts of a shipping company in Guangzhou, the court found that hundreds of seafarers employed by the company did not sign a written labour contract and their wages were long overdue, mostly for years. Consequently, the series of cases featured the following problems: 1. the rights and obligations of the shipping company and the seafarers, in particular the payment terms of the seafarers’ wages and other remuneration, were unclear so that the seafarers’ legitimate rights and interests cannot be effectively protected. 2. the longstanding arrears of wages not only resulted in the meagre living of some seafarers, but also led to mass hostility. We have found similar situations when trying disputes arising out of the seafarers’ service contracts of other small and medium shipping companies. Some seafarers still work without a labour contract.   From our trials of such disputes, we learn that some small and medium shipping companies do not sign labour contracts with the seafarers they employ and fall in arrears of wages to these seafarers mainly for the following reasons: seafarers in these companies are legally illiterate as they mostly come from poverty-stricken and underdeveloped regions. Moreover, they are at a disadvantage in the labour relation as a result of the supply and demand in the labour market. Their claims are hence not fully and clearly established. On the other hand, some small and medium shipping companies for their own benefit are reluctant to sign labour contracts with seafarers and frequently fail to pay the wages fully and on schedule. In particular, when faced with operational difficulties, they often try to protect their own interests and ignore the seafarers’ interests.   We propose that labour authorities should strengthen the supervision and inspection of small and medium shipping companies within their jurisdiction with respect to the signing of labour contracts and payment of wages and remuneration, urge these companies to sign a written labour contract with each seafarer and fully pay the wages and remuneration on schedule, and legally punish any acts impairing the legitimate rights and interests of seafarers.   (2) Collusion in seafarers’ claims for wages   When a shipping company is in hard time and has its ship legally auctioned off by the court to pay off its debts, wages of the ship’s crew and other certain claims have a maritime lien on the ship and rank first in priority. The court’s determination of crew wages and other remuneration mainly relies on the plaintiffs’ requests and the defendants’ recognition. In trial practice, we find that some ship owners collude with their seafarers by offering to satisfy certain needs of such seafarers. In such cases, the seafarers falsely apply for registration of their claims of arrears of wages to the court and request the court to support their maritime lien and order the payment of the crew wages. Such practice seriously prejudices the interests of other creditors.                                                   In trying cases involving suspected collusion, we strictly apply the rules of evidence in civil actions and render judgments based on clear facts and ample evidence. With respect to evidence review, we require evidence of the existence of maritime lien in addition to evidence of debtor-creditor relationship. With respect to court hearings, all litigant parties shall appear in court except in special circumstances.   We suggest that ship owners and seafarers should be honest and law-abiding, and refrain from false action or any other acts that impair civil litigation; any violator will be held legally liable in accordance with Article 112 of the Civil Procedure Law.   (3) Disputes arising out of seafarers’ service contracts may be brought to court without first being referred to arbitration   In a case of dispute arising out of a seafarer’s service contract, the plaintiff first referred the dispute to Shenzhen Labour Dispute Arbitration Committee in September 2010. Later he disagreed with the arbitral award made by the Committee and brought an action to this court in February 2011. The court entertained the case in compliance with the law.   In some similar cases, the plaintiffs first referred the disputes to arbitration and then filed a case to the courts when they disagreed with the arbitral award. This resulted in a prolonged period of dispute resolution and hindered the protection of the legitimate rights and interests of the seafarers. As provided in Article 8 of the Interpretation of the Supreme People’s Court on Several Issues Regarding the Application of the Special Maritime Procedure Law of the People's Republic of China and the Reply of the Supreme People’s Court to the Query Whether Domestic Cases of Disputes Arising out of Seafarer Labour Contracts Should be Referred to Arbitration before Litigation ([2002]MSTZ NO. 16), arbitration is not a necessary procedure before litigation for disputes arising out of seafarers’ service contracts (including seafarers’ labour contracts) and such disputes may be directly brought to a maritime court. The latter economizes on arbitral resources, shortens the time it takes to resolve a dispute, and more effectively protects the legitimate rights and interests of seafarers.   We suggest that labour arbitration authorities should, when accepting labour disputes in relation to seafarers’ work on ships, explain to the seafarers that they may directly bring an action to a maritime court or apply for arbitration if the dispute falls within the jurisdiction of the maritime court; if the litigant files a claim after he disagrees with the arbitral award, the maritime court has jurisdiction over the dispute.

Foreword   The year 2011 marked the beginning of China’s implementation of the 12th Five-Year Plan for Economic and Social Development, and was a milestone year for the development of the marine economy in Guangdong Province. On 5th July 2011, the State Council approved the Development Plan for the Integrated Test Area of Marine Economy in Guangdong (hereinafter referred to as the “Plan”), which is another regional plan in support of national strategy, after the establishment of the Plan outline for the Reform and Development of the Pearl River Delta. The Plan puts forward the idea of constructing a new pattern for comprehensive marine development in Guangdong, named “three districts, three zones and three areas”[1], and gives Guangdong the role of a bridge connecting Hong Kong and Macau, Fujian Haixi, Guangxi Beibu Gulf and Hainan international tourism island via construction of the three Marine Economic Cooperation Zones.  These zones are the Marine Economic Cooperation Zone among Guangdong, Hong Kong and Macau, the Marine Economic Cooperation Zone between Guangdong and Fujian, and the Marine Economic Cooperation Zone among Guangdong, Guangxi and Hainan. This will increasingly upgrade regional cooperation and improve the ability of resource sharing. The implementation of the Plan demonstrates the progress made by the government toward constructing a province with a powerful marine economy and international shipping and logistics center in the Pearl River Delta.   The modern international shipping center refers to the junction between an international port and international shipping, combining the resources of the shipping industry, shipping services industry and shipping logistics, with the facilities and soft environment which are necessary to a pivotal shipping port. The shipping services industry encompasses finance, insurance, legal services and policy. Specifically, regarding the industrial composition of the modern international shipping center, dispute resolutions such as maritime trials and arbitrations fall within the scope of the shipping services industry. Therefore, maritime trials play a role in protecting and promoting the development of the marine economy and shipping industry, and also contribute to the construction of a modern international shipping center.   Over the last year, this court contributed to the implementation of national marine development strategy and social stability by increasing the role of the judiciary in overseeing maritime trials and issuing just and effective decisions. This report is a selection of typical cases heard by this court in 2011.  The cases include analysis, corresponding measures and proposed advice to serve as a reference for port and shipping enterprises and a guide for the promotion and development of the marine economy. Any comments regarding the issues discussed in this report would be most welcome.   Guangzhou Maritime Court January 2012   Table of contents   I.         General Information on Maritime Trials ----Number of new cases increases substantially The value of the subject matter at issue in the case increases substantially Number of foreign-related cases and those relating to HK, Macau and Taiwan increases substantially Number of cases regarding disputes over freight forwarding contract decreases substantially Cases regarding disputes over pollution damage compensation occur from time to time Number of cases regarding applications to arrest and auction ships increases substantially II.      Promoting sound development of marine economy ---- Issues and recommendations surrounding the exploitation and utilization of marine resources Legal issues on marine underwater engineering Safety management on the extraction of offshore oil and gas Determination of rights to use sea area III.   Exercise of relevant rights related to carriage of goods by sea ----Issues and recommendations related to non-taking delivery of goods at the port of destination Ascertainment of the party who should be liable for the non-taking delivery of goods at the port of destination Legal consequences of non-delivery by carrier Carrier’s remedies Legal issues related to the shipper’s exercise of the right to control goods IV.     Governing the arbitration agreement according to law and application for recognition and enforcement of arbitration award ----Issues and recommendations related to judicial examination of arbitration Issues related to the conclusion of the arbitration agreement Issues related to the performance of the arbitration agreement Issues related to an arbitration agreement included in an insurance contract Issues related to the application for recognition and enforcement of an arbitration award Issues related to the selection of an arbitration organization in China V.       Safety management on marine operations ----Issues and recommendations related to personal safety during marine operations Tragedies caused by negligent failure to take preventive measures Operations in violation of regulations does harm to both operator and others Failure of injured party to claim compensation due to the responsible party’s failure to inform VI.    Exercise of the right to sue according to law ----Issues and recommendations related to the right of action and the right to defense Filing suits in a timely manner to avoid expiration of the applicable statute of limitations Legal issues related to the exercise of the right of action Legal issues related to the exercise of the right to defense VII. Cases on claims for damage arising out of pollution in the ocean and water areas leading to the sea ----Guidance for the aquaculture farmers on commencing a suit for damages Definition of damage arising out of pollution in the ocean and water areas leading to the sea Selection of the proper court for farmers to initiate a suit Facts necessary to an aquaculture farmer’s case on claims for damages arising out of pollution in the ocean and water areas leading to the sea Evidence necessary to a farmer’s case on claims for damages arising out of marine pollution and pollution in the waters areas leading to the sea Period for adducing evidence VIII.        Conclusion of a labor contract with crewman according to law ----Issues and recommendations related to the conclusion of a labor contract with crewman When no written labor contract is concluded with the senior crewmen Reasons why the senior crewmen refuse to conclude written labor contracts Recommendations for the conclusion of a written labor contract with the senior crew IX.    Application for ship arrest according to law ----Issues and recommendations related to the application for ship arrest before the institution of an action Reasonable selection of the location for ship arrest Observance of 30-day time limit stipulated by law prior to institution of an action Requirement of reasonable guarantee     I.         General Information on Maritime Trials   In 2011, under the leadership of the Guangdong Provincial Party Committee and the supervision and guidance of the Standing Committee of Guangzhou Municipal People’s Congress and superior court, this court applied the scientific approach for development and focused on the implementation of the national marine development strategy. With these factors in mind, we implemented sound strategy for maritime trials in order to secure our status as a nation-wide pioneer court. Through bringing the judicial function into full play, the trials shown a good momentum of “five increases and one decrease”: 1410 new cases were heard by this court in 2011, a 6.41% increase over last year. The value of the subject matter of newly heard cases totaled RMB4,249,000,000, a 68% increase. The number of cases closed increased by 2.3%, totaling 1437. The case settlement rate increased by 1.74% at 90.32%, the rate of mediation and withdrawal showed a 5.1% increase at70.23%, and 177 cases remain unsettled, a 2.2% decrease over last year.   Among new cases, 767 were lawsuits at the first instance and 300 of them were cases on maritime enforcement. Cases heard by this court included: 285 contract disputes dealing with carriage of goods by sea, comprising 37.2% of the cases at first instance, 114 cases regarding freight forwarding contracts, comprising 14.9% of total cases, 61 cases regarding contracts related to ships (including sale and purchase, financing, building, charter and mortgage related to ships) comprising 8% of total cases, 53 cases regarding pollution compensation arising from ship and port operation, comprising 6.9% of total cases, 26 cases regarding ship collisions comprising 3.4% of total cases, 17 cases regarding marine insurance contracts comprising 2.2% of total cases, 32 cases regarding maritime personal injury, comprising 4.2% of total cases, and 23 cases regarding port operation, comprising 3% of total cases.     Chart No.1: cases heard in 2011 which were at the first instance     Chart No.2: Number of cases heard in 2011 compared with 2010     The above charts demonstrate the following: -         The number of new cases increases substantially. The court heard a total of 1410 new cases in 2011, a 6.41% increase over last year. The single largest area of increase involved cases of enforcement, which comprised 300 of the total cases, and showed a 28% increase over last year. , Among lawsuits at the first instance, 285 involved contract disputes over carriage of goods by sea, an increase of 34.4%, and among the cases related to maritime special procedure 28 of them dealt with maritime evidence preservation, an increase of 300%. -         The value of the subject matter at issue in the case increases substantially. The total value of the subject matter at issue in new cases was more than 4.2 billion RMB, an increase of 68% over last year, and the total value of settled cases was more than 3.9 billion RMB, an increase of 25.8%. These are the highest values recorded since this court has been in existence. The main reason for such increase lies in the fact that the cases newly heard by this court were substantial. Among such cases, 60 had a value that exceeded RMB50,000,000 (including serial cases), an increase of 500% over last year. There were 3 cases with a value that exceeded RMB100,000,000. One example of such a case was the application filed by HSH Nordbank for the arrest of M/V “First Ocean,” which was owned by a shipping company registered in Iran. The value at of the subject matter at issue in that case exceeded 1.7 billion RMB. -         The number of foreign-related cases and those related to HK, Macau and Taiwan increases substantially. Among new cases, 489 of them were foreign-related cases or related to HK, Macau and Taiwan, comprising 63.8% of cases at the first instance and show a 79.8% increase over last year. Within this category, the following types of cases showed substantial increase: 53 cases of dispute over pollution compensation arising from ship and port operation, of which 53 were heard showing a 25% increase over last year and  cases of dispute over contract of carriage of goods by sea, of which205 were heard, a14% increase over last year. -         The number of disputes over freight forwarding contracts decreases substantially. In 2011, we heard 114 cases dealing with disputes over freight forwarding contracts, a decrease of 45.97% over last year. The first reason for such decrease lies in the transition of the freight forwarding industry. The profit model of the freight forwarding industry has evolved from earning commission differential to providing comprehensive logistics services, including transportation, warehousing and relevant commercial services. A second reason is the downturn of the international shipping market in 2011, which caused a decline in forwarding and logistics business and as a result the number of related disputes. -         Disputes over pollution damage compensation occur from time to time. In 2011, this court heard 53 cases regarding pollution damage compensation with the total value of the subject matter exceeding RMB170,000,000. Leakage of fuel oil and land-based pollutants were the two main reasons for the occurrence of such pollution. Pollution accidents can result in severe damage to the ecological environment, tourist resources and aquaculture in the nearby sea area. Matters of dispute arising from such an accident can include the amount of an entitlement to compensation for expenses arising from salvage and pollution clean-up carried out by maritime authorities and issues of liability for pollution, appraisal and indemnification. -         The number of cases involving application for the arrest and auction of ships increases substantially. In 2011, this court accepted and heard 140 cases dealing with the pre-litigation arrest of ships, an increase of129.5% over last year. Since some respondents refused to provide security, 30 ships were auctioned by this court according to law, an increase of 400% over last year. The reason for this increase lies in the depression of the shipping market and excessive investment in the shipbuilding industry. In recent years, the freight capacity of the shipping market was oversupplied which lead the freight rate to decline dramatically. Even under such circumstances, some shipping enterprises still increased their investment in shipbuilding business. Some shippers even requested a loan from the bank to build new ships so as to join the price-cutting competition. In cases of default by these borrowers, the bank may apply for arrest and auction of the ships.   II.      Promoting sound development of the marine economy ------Issues and recommendations in the exploitation and utilization of marine resources   (1)   Legal issues on marine underwater engineering   In recent years, the number disputes over marine underwater engineering heard by the court has increased. These disputes involve the exploitation and utilization of the coastline, including the excavation of the harbor basin, waterway dredging, and land reclamation and wharf construction. This type of case involves huge amounts of money and professional knowledge, and a great amount of evidence must be produced. If the party concerned lacks professional knowledge and awareness of potential liability, it may bear unfavorable legal consequences. Take a case of dispute over wharf construction for example, where the written agreement concluded by the parties provides for liquidated damages at a rate of 3% of the overdue engineering payment per day. The legal representative of the construction company testified that the inclusion of such a clause was only for the purpose of allowing the opponent party to satisfy his superior, but was not applicable. The court was clearly not persuaded by such allegations, and therefore the said company paid a great amount in liquidated damages. Another example is a dispute over a waterway dredging operation. The engineering memorandum concluded by the parties concerned provided that one party hire the ship owned by the other party for a dredging operation for a period of 3 months with net proceeds in the amount of RMB2,000,000 per month. Although the agreement terminated after the dredging operation was carried out for only 1 month, the court, after hearing the case, supported the other party’s claim for the monthly net proceeds in the amount of RMB2,000,000. The court held that the memorandum, which was provided as key evidence, lacked detailed provisions on allocation of risk in the case of a breach, and thus the court could only make a judgment based on the net proceeds outlined in the parties’ agreement.   We recommend that parties concerned should be prudent when entering into construction contracts. If necessary, experts should be consulted for the examination and verification of the construction contracts so as to avoid disputes arising from inappropriate clauses. Meanwhile, we recommend that relevant supervision departments should increase supervision for contract regarding marine underwater engineering.   (2)   Safety management on the extraction of offshore oil and gas   Since China is a major consumer of energy, energy shortage has the potential to constrain economic development. Along with the improvement of science and technology on the extraction of offshore oil and gas, great progress has been made in the actual extraction of offshore oil and gas. However, because the extraction of offshore oil and gas involves a high degree of risk, greater safety precautions should be taken. In a case heard by this court, a Chinese offshore oil company and an American company signed a cooperative contract on the exploration and extraction of oil and gas within Chinese seas. According to the contract, the American company was in charge of issues related to the hiring of the drilling ship and the exploration and extraction operation. In the course of the cooperation, a drilling ship was overturned causing great economic losses and personal injuries. Although the insurance company with which the American company had comprehensive general liability insurance indemnified the aggrieved parties, the relevant parties filed claims to the court for compensation. According to statistics, the value of claims brought for disputes over marine exploration and utilization in the past three years amounts to 2 billion RMB.   We recommend that parties involved with the extraction of offshore oil strictly abide by the safe operation regulations, and relevant supervision departments enhance safety supervision so as to avoid personal injuries and economic losses.   (3)   Determination of rights to use sea area   Regarding disputes over rights to use sea area, a coastal village in Guangdong Province signed a contract with a Mr. Mo to lease an offshore fishing farm, providing that the offshore fishing farm with an area of 800 Mu owned by the said village was leased to Mr. Mo for a period of 30 years at the price of RMB90,000. Mr. Mo paid the contract price. The court, after hearing the case, found that the Certificate for the Right to Use Sea Area and the Certification for Aquaculture in Water Area and Intertidal Mudflat involved in the case did not prove that the village was the proper holder of the right to use the said sea area. Therefore, the court ascertained that the village had not obtained the right to use the sea area where the fishing farm was located, and thus it had no right to sublease the said sea area to Mr. Mo for the purpose of aquaculture, making the aforementioned contract invalid.   Since provisions on determining the right to use sea area had been explicitly stipulated by law, such mandatory provisions shall not be violated due to the exploration of marine resources. We recommend that relevant authorities and the local government should enhance their supervision of such issues so as to maintain a good environment for marine exploration.     III.   Exercise of relevant rights related to carriage of goods by sea ------Issues and recommendations related to failure to take delivery of goods at the port of destination   (1)   Ascertainment of the party who should be liable for failure to take delivery of goods at the port of destination   In hearing disputes over carriage of goods by sea we found that the matter of failure to take delivery of goods at the port of destination includes: 1) no consignee to take delivery of the goods after the goods arrived at the port of destination (including the situation that consignee is indefinite, consignee is unable to be contacted to take delivery of goods or the party who attempts to take delivery of the goods fails to present the original bill of lading and could not prove that he is the legal consignee), or 2) the consignee refuses to take the delivery of the goods. Under such circumstances, the carrier, as the aggrieved party, should only deal with the matter according to the contractual relationship of carriage of goods by sea and relevant laws.   There are three parties who are involved in the relationship of carriage of goods by seas, the carrier, the shipper and the consignee. Therefore, in the case of a failure to take delivery of goods at the port of destination, the carrier should first determine the party against whom he may bring a claim for compensation. In judicial practice, the first choice would be for the carrier to bring a claim against the consignee. The determination in this type of case would be whether or not the consignee should be liable for failure to take delivery of the goods. The consignee would argue that that Article 42 of the Maritime Code defines the consignee as the person who is entitled to take delivery of the goods, thus taking delivery is the right but not obligation to of the consignee. Therefore the consignee should not bear the responsibility for failure to take delivery of the goods and the losses arising therefrom. The carrier would counter that Article 86 of the Maritime Code provides “if the goods were not received at the port of discharge or if the consignee delayed or refused to take delivery of the goods, the Master may discharge the goods into warehouses or other appropriate places, and any expenses or risks arising therefrom shall be borne by the consignee”, thus the consignee should have the obligation to promptly take delivery of the goods and should bear the responsibility for failure to take delivery. The carrier’s second option is to bring a claim for compensation against the shipper. In defending such a claim, the shipper would hold that the right and obligation to take delivery of goods is transferred to the consignee with the bill of lading. Therefore the shipper is not responsible for failure to take delivery of goods. However, the carrier would hold that regardless of whether the shipper has transferred the bill of lading, he should bear the responsibility for failure to take delivery of goods at the port of destination.   In light of the above issues, we recommend that, 1) when filing a claim against the consignee the carrier should pay great attention to the identification of the proper consignee. In accordance with the definition of consignee provided in Article 42 of the Maritime Code, the consignee should be the party who legally holds the bill of lading. With regard to the consignee who holds the bill of lading, whether or not he is the proper consignee should depend on the information related to the sales of goods, statements in the bill of lading and the formalities of importing goods. The shipper who still holds the bill of lading after the goods arrived at the port of destination should be defined as the consignee. 2) When filing a claim against the shipper, the carrier should pay attention to the identification of different shippers. In accordance with the Maritime Code of the PRC, there are two kinds of shippers, the contracting shipper and the delivering shipper. Since taking delivery of goods at the port of destination is the right and obligation of the carriage contract, it is the contracting shipper who should bear responsibility for failure to take delivery of goods. In practice, if the delivering shipper books space with the carrier or holds the bill of lading, he can be deemed as the contracting shipper who enters the carriage contract with the carrier.   (2)   Legal consequences of non-delivery by carrier   In an example of a dispute over a contract for carriage of goods by sea, plaintiff is the carrier, defendant is the shipper stated on the bill of lading and the consignee is a Holland company. When the foreign buyer refused to take delivery of goods after their arrival, the plaintiff returned the cargo involved to the loading port. By virtue of the defendant’s refusal to take delivery of goods at the loading port, the plaintiff brought a lawsuit against the defendant requesting the court to order the defendant to indemnify them for the losses they sustained by way of retention and container detention charges incurred at the port of destination, charges arising from the return of the goods, retention charges, port charges, security charges, and container detention charges and terminal handling fees incurred at the loading port. After hearing the case, the court held that in a situation such as this where no one took delivery of the goods at the port of destination when the defendant had clearly requested that the plaintiff handle the goods involved at that port, and the plaintiff, as the carrier, failed to apply to the court for permission to sell the goods by auction at the port of destination according to law but rather returned the goods to the loading port, the plaintiff has breached the contract and failed to take “appropriate measures” as stipulated in Article 119 of the Contract Law. Therefore, the court did not support the plaintiff’s argument that return of the goods was a reasonable measure of mitigation of loss, and renders a judgment ordering defendant to indemnify the plaintiff for the retention charge and container detention charge incurred at the port of destination but overruling other claims filed by the plaintiff.   In cases involving failure to take delivery of goods at the port of destination, the carrier should pay attention to the following legal issues: 1) duration of the carrier’s liability. In contracts for the carriage of goods by sea, the duration of the carrier’s liability means the period when the carrier will bear civil responsibility for its failure to perform its obligations under the carriage contract. Article 46 of the Maritime Code provides that “the responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge.” The term “delivered” means actual delivery of goods, not fictional consignment or putting the goods in escrow. Therefore, in the case of failure to take delivery of goods, the responsibilities of the carrier will extend to the time when the consignee takes delivery of the goods or waives the right to take delivery or the goods are sold by auction according to law. 2) The carrier’s obligation. Article 48 of the Maritime Code provides that “the carrier shall properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried.” Article 86 of the Maritime Code provides that “if the goods were not received at the port of discharge or if the consignee has delayed or refused to take delivery of the goods, the Master may discharge the goods into warehouses or other appropriate places, and any expenses or risks arising therefrom shall be borne by the consignee”. Therefore, even if the goods could not be delivered at the port of destination, the carrier shall not be exempt from the obligations to take care of the goods. Article 119 of the Contract Law provides that “where a party breaches a contract, the other party shall take appropriate measures to prevent losses from increasing; where the other party's failure to take appropriate measures results in additional losses, that party cannot demand compensation for the additional losses.” Therefore, the carrier shall adopt appropriate measures to prevent the losses from increasing and shall take care of the goods in the manner which is favorable to the consignee or shipper for the prevention of additional losses. 3) The carrier should dispose of the goods according to law. Article 88 of the Maritime Code provides that “if the goods under lien in accordance with the provisions of Article 87 of this Code have not been taken delivery of within 60 days from the next day of the ship's arrival at the port of discharge, the carrier may apply to the court for an order on the selling of the goods by auction.” Such provision is the basis for the carrier to dispose of the goods and to prevent additional losses if the goods were received at the port of destination.” If the carrier wishes to adopt other measures to dispose of the goods rather than applying to the court for an order on selling the goods by auction, it shall notify the shipper and get its permission to do so. Otherwise, the carrier will be found to have failed to take the necessary “appropriate measures” provided in Article 119 of the Contract Law.   Therefore, we recommend that if goods are not received at the port of destination, the carrier should keep the goods under lien and take good care of them. At the time when the statutory period expires or the statutory condition appears, the carrier may apply to the court for permission to sell the goods by auction and should be compensated from the proceeds of the auction. Where the goods do not lend themselves to being taken care of or the expenses for keeping such goods would exceed their value, the carrier may apply for an earlier sale by auction. The difference in revenue gained by the earlier auction and what could have been earned at a later auction is borne by the shipper.   (3)   Carrier’s remedies   When goods are not received at the port of destination, retention charges and container detention charges may be sustained by the carrier due to the long-term detention of the goods at the port of destination. Such unnecessary charges may increase day by day. While the carrier bears the relevant responsibility, the shipper has the right to control the goods according to law. Unless the statutory period expires or statutory condition appears, the carrier shall notify the shipper and get its prior permission to dispose of the goods or follow the shipper’s instruction to do so. Returning the goods to the loading port will be deemed a breach of contract, which may keep the carrier in a dilemma. This is a common case in judicial practice.   Although the law provides the carrier with remedies when goods were not received at the port of destination, choosing the remedy that will properly protect its rights and interests and avoid losses from failure to deliver the goods is a matter that should be carefully examined. Accordingly, we recommend that the carrier exercise the following rights according to law and relevant agreement: 1) rights under the contract of carriage of goods by sea. In accordance with the contract for carriage of goods by sea concluded by and between carrier and shipper, the carrier has the right to exercise its rights under the contract according to the agreement reached by the parties concerned. 2) Lien on the goods. Article 87 of the Maritime Code provides that “If the necessary charges paid by the carrier on behalf of the owner of the goods as well as other charges to be paid to the carrier have not been paid in full, nor has appropriate security been given, the carrier may have a lien, to a reasonable extent, on the goods.” Article 315 of the Contract Law provides that “where the shipper or consignee fails to pay the freightage, storage fees and other expenses in connection with the carriage of the goods, the carrier is entitled to a possessory lien on the corresponding portion of the goods.” Therefore, the carrier may seek remedy via putting the goods involved under lien. 3) Right to put the goods in escrow. Article 316 of the Contract Law provides that “where the consignee is unclear or the consignee refuses to claim the goods without justified reasons, the carrier may have the right to place the goods in escrow according to Article 101 of this law.” By virtue of the above provision, the carrier is entitled to place the goods in escrow for the duration of its obligation to deliver the goods under the contract of carriage of goods by sea. 4) Right to claim compensation for the expenses arising from taking care of the goods. In accordance with Article 86 of the Maritime Code, if the goods were not taken delivery of at the port of destination, the Master may discharge the goods into warehouses or other appropriate places, and any expenses or risks arising therefrom shall be borne by the consignee. In light of this provision, the carrier is entitled to claim against the consignee for the expenses arising from taking care of the goods after discharge. 5) Right to apply to the court for selling of the goods according to law. Article 88 of the Maritime Code provides that “if the goods under lien in accordance with the provisions of Article 87 of this Code have not been taken delivery of within 60 days from the next day of the ship's arrival at the port of discharge, the carrier may apply to the court for an order on the selling of the goods by auction; where the goods are perishable or the expenses for keeping such goods would exceed their value, the carrier may apply for an earlier sale by auction.” This provision clearly provides that the carrier is entitled to apply to the court for selling the goods by auction after keeping the goods under lien for a prescribed period.   (4)   Legal issues related to the shipper’s exercise of its right to control goods   In the course of performance of the contract for carriage of goods by sea, the carrier may, prior to delivery of the goods to the consignee, receive a request from the shipper to return the goods, to deliver the goods to another port of destination or to deliver the goods to other consignees, causing the carrier to suffer great economic loss. The shipper shall be responsible for such losses. This type of case involves the shipper’s right to control the goods in transit. Prior to delivery of goods to the consignee and prior to the expiration of the period when the carrier should be responsible for the goods, the shipper has the right to control the goods according to law. The shipper’s right to control the goods in transit is a way for the obligee to request modification of the contract for carriage of goods by sea, which should be deemed a right to lodge obligatory claim Article 308 of the Contract Law provides that “prior to a carrier’s delivery of the goods to the consignee, the shipper may require the carrier suspend the carriage, return the goods, change the destination or deliver the goods to another consignee, provided that it shall indemnify the carrier for any loss it sustains as a result.” Since no provisions exist in the Maritime Code to support the obligee’s right to control the goods, the aforesaid provision in the Contract Law should be construed as filling the gap of regulation on the said matter in Maritime Code, even if the Contract law provision was not specifically targeted at the carriage of goods by sea. Therefore under this application of the law, the shipper’s right to control the goods is founded in the relevant provisions provided in Contract Law. We hereby recommend that the shipper should be prudent in exercising its right to control goods. In case the shipper, prior to delivery of goods by the carrier to the consignee, exercises it’s right to control the goods according to provisions in Contract Law, the shipper shall be responsible for the resulting losses sustained by the carrier.     IV.    Law governing the arbitration agreement and application for recognition and enforcement of arbitration awards ------Issues and recommendations related to the judicial examination of arbitration   (1)   Issues related to the conclusion of the arbitration agreement   Regarding disputes over voyage charter party it was prescribed in the charter party that “any dispute arising from the performance of this agreement should be resolved by the parties concerned through friendly negotiation or submitted to the relevant Chinese arbitration organization for arbitration”. In many arbitration agreements, the parties concerned only agree on the place to carry out the arbitration but not the name of the arbitration organization. After entering into an arbitration agreement, if a dispute arises surrounding the agreement, the parties may also dispute the validity of the arbitration agreement, leading to delays in settlement and unnecessary litigation costs.   Arbitration and judicial proceedings are the two primary mechanisms for dispute resolution. Only a valid arbitration agreement can ensure that the arbitral procedure will go well. In hearing challenges to the effectiveness of arbitration agreements on substantive or jurisdictional grounds, and challenges to the recognition and enforcement of arbitration awards, the court found that ambiguous wording in the arbitration agreement was the main source of disagreement. A valid arbitration agreement should include the expression of the parties’ intention to submit to arbitration, the subject matter of arbitration and the arbitration organization. Therefore, we recommend that arbitration organizations (not only the maritime arbitration organization) should draft some standard arbitration terms for all kinds of maritime disputes that parties concerned could utilize. When arbitration is chosen by shipping enterprises as a means for resolving relevant disputes, the subject matter of arbitration and arbitration organization should be clearly agreed to in the arbitration agreement. In addition, the arbitration clause is independent of other clauses in a contract. Thus harbor-shipping enterprises should pay careful attention to dispute resolutions clauses when entering into a contract and prudently select a proper arbitration organization.   (2)   Issues related to the performance of arbitration agreements   In a case involving a dispute over a ship repair contract, the ship operator signed a repair contract with the shipyard, but the ship owner paid the repair costs and confirmed the work amount as requested by the shipyard. The agreement contained an arbitration clause that provided the dispute should be submitted for arbitration in Hong Kong. After a dispute arose, the entrusting party initiated arbitration in Hong Kong according to the repair contract, while the shipyard filed a lawsuit with this court.   When a dispute arises from one legal relationship and fact, if one party submits it to an arbitration organization outside mainland China for arbitration and the other party applies to a court within mainland China for confirmation of the validity of the arbitration agreement, or if one party applies to the arbitration organization outside mainland China for arbitration and the other party files a lawsuit to a court within mainland China, the outcomes may differ because different laws will be applied by the arbitration organization and court to determine the effectiveness of the arbitration agreement. In such case, the arbitration award made in London or Hong Kong may be different from the judgment rendered by the court within mainland China on the same matter. According to relevant provisions in the New York Convention, China has the state obligation to admit (recognize) and execute arbitration awards made outside mainland China. There would be conflict between the enforcement of judgment rendered by the court within mainland China and the enforcement of arbitration award made outside mainland China. We recommend that harbor-shipping enterprises that have entered into arbitration agreements, should abide by the principle of good faith in submitting disputes to arbitration. In the case of any disputes related to the arbitration clause, the parties concerned should submit to arbitration once the arbitration clause has been modified through friendly negotiation between both parties.   (3)   Issues related to arbitration agreements within insurance contracts   In a dispute over an insurance contract, the arbitration clause was included in the open policy entered into by the insurer and the insured, but a single insurance policy was issued for each shipment of goods. After a dispute arose, the insurer requested that the court find the arbitration clause in the open policy was invalid as applied to the single insurance policy. The court held that an open policy is a long-term insurance contract outlining insurance coverage and covering the goods under such insurance contract. In such case, the open policy serves as the general contract and the insurance policy is the subcontract. In accordance with the Maritime Code, in case of any inconsistency between the single insurance policy issued by the insurer and the open policy, the single insurance policy shall prevail and if there are no inconsistencies between them the open policy shall prevail. Therefore, the court ascertained that the arbitration clause under the open policy would be applied to the single insurance policy. With regard to disputes over marine insurance subrogation, the court does not support the allegation that an arbitration clause included in a carriage contract should be enforced against an insurer entitled to subrogation.   Insurance is the primary source of protection from marine risks and responsibilities in modern society and is involved in all aspects of maritime business. With an increasing number of cases dealing with the insurer’s right to subrogation, the insurer should pay more attention to dispute resolution. When an arbitration agreement is included in the open policy or insurance policy, the insurer is sure to remind the insured of the arbitration agreement. After the insurer satisfies the insured party’s claim, if the harbor-shipping enterprises or insurer wishes to solve the dispute through arbitration, a new arbitration agreement which is independent of the arbitration clause under the original insurance contract, needs to be concluded.   (4)   Issues related to application for recognition and enforcement of arbitration awards   In a dispute over recognition and enforcement of a London arbitration award, the respondent claimed that the statutory period for the applicant to apply for recognition and enforcement had expired. The court held that as per the relevant provisions in the Arbitration Act of UK, under which the arbitration procedure was carried out, service of notification and instruments related to the arbitration procedure should be deemed as effected by any effective means. Therefore, the arbitration award should become legally effective upon the reception of such award by the applicant. In accordance with relevant provisions contained in the judicial interpretation issued by the Supreme People’s Court, the application for enforcement of the foreign arbitration award should be filed within time limit provided by the law of PRC. Prior to the amendment of the Civil Procedure Law of PRC, regarding application for enforcement, if either or both parties concerned are natural persons, the time limit for such application is 1 year, and if both parties concerned are legal person or other organizations, the time limit is 6 months. Since the time limit for the application to apply for enforcement had expired, the court denied enforcement of the arbitration award.   In cases involving recognition and enforcement heard by this court, the arbitration awards at issue were primarily those made by a sole arbiter in Hong Kong or London. The main reason for the court’s refusal to recognize and enforce an arbitration award was either the time limit for such application had expired or the parties that participated in the arbitration procedure were different from the parties to the original arbitration clause on which the award was based.   Procedural laws of two countries or regions are involved in the recognition and enforcement of arbitration awards. With regard to arbitration procedure (including the service of an arbitration award), the law of the country or region where the arbitration takes place shall be applied, but the law of the PRC shall be applied to for matters of enforcement. Article 215 of the existing Procedure Law of the PRC provides that “the time limit for the submission of an application for enforcement shall be two years. The suspension or termination of the time limit for the submission of an application for enforcement shall be governed by the provisions on the suspension or termination of the statute of limitations. The time limit prescribed in the preceding paragraph shall be calculated from the last day of the period specified by a legal document for its performance. If a legal document specifies an installment performance, the time limit shall be calculated from the last day of the period specified for each installment of performance. If a legal document does not specify the period of performance, the time limit shall be calculated from the day when the legal document takes effect.” Therefore, we recommend that the parties to an arbitration agreement precisely understand the law of the country or place where the arbitration takes place and the law of PRC, in order to timely submit the application for recognition and enforcement. The arbitration organizations and arbiters shall pay close attention to the procedural matters related to the arbitration, especially whether or not the parties participating in the arbitration are the original parties to the arbitration agreement.   (5)   Issues related to the selection of an arbitration organization in China   In a case dealing with the effectiveness of an arbitration agreement, the parties concerned are Chinese legal persons and the agreement concluded by parties prescribed that any dispute should be submitted to arbitration in London. In this case, one party submitted the dispute for arbitration in London after submitting an application of property preservation to this court, while the other party applied to this court for confirmation of the effectiveness of the arbitration agreement. In accordance with relevant judicial interpretations for this type of case, English law should be applied to confirm the effectiveness of the arbitration agreement. However, if the party, claiming that English law should be applied fails to provide such law, the court will make a judgment on the principle of proximate connection. In another case involving the recognition and enforcement of an arbitration award from London, a ship repair contracts contained an arbitration clause stating that any dispute should be submitted to arbitration in London. When the shipyard failed to perform under the contract, the foreign entrusting party submitted it to arbitration in London, where the arbitration organization determined the shipyard needed to pay a substantial amount of liquidate damages to the entrusting party.   When a dispute is submitted to a foreign country or region for arbitration, unpredictable legal risks may arise due to the fact that the domestic natural person or enterprise is not familiar with the foreign laws, such as laws regulating liquidated damages. This can result in the relevant party being ordered to pay a substantial amount of liquidated damages. When it comes to foreign arbitration, an application for recognition and enforcement of the arbitration award must be submitted to the domestic court. This can be a complicated procedure leading to unnecessary litigation costs for the party or parties that participate in an arbitration procedure abroad and apply for recognition and enforcement of the arbitration award at home. Although arbitration in China has a short history, well established laws and regulations related to arbitration procedure have been developed in recent years. With more and more expert arbitrators joining us, the country is capable of handling all kinds of arbitration cases. Therefore, the best option is for the domestic legal or natural person to submit the dispute to a Chinese arbitration organization for arbitration, especially when both parties concerned are domestic legal or natural persons.   V.       Safety management on marine operations ------Issues and recommendations related to personal safety during marine operations   In 2011, this court heard and concluded 15 cases related to loss of life and personal injury at sea, in which 23 people died and 7 were gravely injured. In one case of a ship sinking due to a typhoon, the number of dead and missing crewmen reached 11 domestic and foreign crewmen. These painful lessons have drawn out attention to the importance of safety management on marine operations, and the attention of the ship-owners, ship operators, fishermen, maritime authorities, fishery administration departments and supervisory departments on safety management should be drawn to this issue as well.   (1)   Tragedies caused by negligent failure to take preventive measures   The most important step for maintaining personal safety is taking preventative measures, however, in reality many unnecessary injuries are caused by enterprise’s and personnel’s failure to take preventative measures. Here are some examples:   1)      Deciding to go out to sea in spite of bad weather. In one case, a ship took the risk of sailing out to sea when the meteorological department had forecasted that wind gusts would be at a level 7 or 8 and the 01 strong wind signals was in force, resulting in a crew member falling into the sea. In another case, a Panama container vessel ignored the typhoon warning and encountered typhoon “Parma” in the Taiwan Straits, consequently sinking into the rough sea. Rescue teams from both sides of the Taiwan Straits conducted a search.  In all, three crewmen were rescued, one died and 10 were missing (among the missing crewmen, two Chinese crewmen were declared dead by this court).   Loss of life and personal injury at sea arising from typhoons has always been a great threat to crewmen and fishermen but careful attention by relevant authorities can prevent such disasters. Here are some examples: in 2005, when typhoon “Matsa” hit the Zhejiang coastal area, the Maritime Rescue and Salvage Bureau of the Ministry of Communications of the PRC arranged searches for more than 150 ships with more than 608 people in distress. In 2009, when typhoon “Goni” hit Hainan, the number of ships needing to be rescued declined to 22 and the amount of people in distress dropped to 166. In 2011, when typhoon “Meari” hit Guangdong, the number of ships needing to be rescued declined to 4 and only 47 people were in distress. However, there are still some shipping enterprises which do not pay enough attention to the typhoon warning system, which can result in tragic loss of life and personal injury. Therefore we recommend that MSA tighten the management of relevant shipping enterprises and ship owners, and that heavier penalties should be imposed on those who violate relevant laws and regulations. With regard to shipping enterprises and ship owners who do not receive meteorological information as required or who take the risk of sailing out to sea instead of taking shelter from a typhoon as required, responsible parties should have penalties imposed according to the principles of malfeasance. 2) Failure to employ qualified staff. An example of this is a shipyard that employed welding operators who lacked certification of vocational qualifications and provided no professional training for them, which resulted in an explosion accident during a welding operation. One person died and two were severely wounded in this accident. A system of certification for vocational qualifications is used for work which requires special skill. Appraisal of a worker’s occupational technical skills should be carried out by an accrediting organization approved by the Labor and Social Security Administration Department. A worker engaging in this type of work must possess corresponding operational skills and must strictly follow safety production rules. However, for the purpose of immediacy and cost reduction, some enterprises employ workers without occupational qualifications to engage in the dangerous operations, which can lead to unnecessary damages. Therefore we recommend that enterprises should strictly abide by safety production rules, and that qualified workers should be employed for jobs requiring special technical skills or those involving dangerous operations. The Labor and Social Security Administration Department should improve the information and management related to this issue.   3) Failure to inspect the safety status of hazardous sites in advance. A foreign timber carrier, while sailing at Guishan anchorage, allowed three workers who engaged in recovery of waste materials in that sea area to board the ship to recover scrap iron and waste oil. Accompanied by two foreign crewmen, the three workers entered the cargo hold at the bottom of the ship, which was loaded with more than one thousand tons of diesel fuel resulting in the death of all five people. All five people who entered the hold died inside, and the hatch way was wide open after accident occurred. According to the inspection conducted by the center for disease control and prevention, the concentration of carbon monoxide in the said cargo hold exceeded the standard level. With marine operations, close attention should be paid to the safety of certain locations, including the cargo hold loaded with oil, special ships and facilities for the loading of inflammable and explosive chemicals, and the accident scene for the salvage of the wrecking or cargoes. We recommend that relevant enterprises and operators should carry out safety inspections of these locations prior to any relevant operations in order to ensure personal safety.   (2)     Operations in violation of regulations harms both the operator and others 1)      Operations carried out by workers without professional skills. In one case, a shipyard welding operator who did not have relevant certification for vocational qualification violated the basic safety regulations on fire control and prevention when he carried out a hot-machining operation without conducting any inspection on the ship’s oil tank and without taking any fire precaution measures.  This resulted in the explosion of the oil tank and the death of the worker. Another case was of a peasant from Sichuan Province who did not receive any professional training related to marine operation, had no nautical knowledge or seafarer certificate, and yet carried out a fishing operation onboard a fishing vessel which resulted in his death. When employees are engaged in ship repairing and marine operations, the employer should provide basic professional and safety training for them, pointing out matters that need attention. Employees should only start to work after receiving relevant professional and safety trainings. Relevant safety production supervision departments should take measures to ensure workers are qualified. 2)      Operations against safety regulations. The followings are some cases of accidents caused by irregular operations. A drunken seaman sailed a cockboat at night which resulted in his death. A seaman violated the safety regulations by carrying out relevant operations without wearing a life jacket which resulted in his drowning. During a discharging operation, a seaman, ignored another seamen’s advice and stood at the hatch way which caused him to fall to the bottom of the cargo hold resulting in a comminuted fracture to his body. When repairing a transmission belt that broke down during a discharging operation, the repairer paid no attention to other people around the transmission belt. As a result, when the transmission belt ran, a sailor was crushed by a horizontal bar which resulted in paraplegia to both of his legs. Since most of the accidents related to the safety of life at sea are caused when the relevant staff is in violation of basic safety regulations, we recommend that seamen and fishermen abide by regulations related to the safety of production, so as to avoid accidents related to loss of life and personal injury at sea. 3)      Accidents indirectly caused by the senior officer’s failure to perform his duty. An example of this occurred when a master did not sail out with the ship and the chief engineer filled in for him. The chief engineer failed to steer the ship properly due to lack of good seamanship and a collision accident resulted. The master’s certificate of competence was revoked. Therefore, we recommend that seamen abide by relevant regulations. Especially, the performance of senior offers’ duty could not be replaced by seamen of a lower level and the staff should not take the risk of sailing out to sea without adequate and qualified manpower.   (3)   Failure of the injured party to claim compensation due to the responsible party’s failure to inform   In a case involving a collision accident between a ship and a sand carrier, a seaman on a navigation bridge was injured during a collision and his subsequent death was confirmed by a doctor from a medical emergency center. During the collision accident, another seaman was busy rescuing the injured and failed to keep a record of the opponent ship’s name or ship number, resulting in the inability to claim compensation. As a result, a lawsuit was filed by the ship owner against the seamen onboard on the ground of negligence. Among cases related to loss of life and personal injury at sea, some are caused by collision accidents. In some of these collision accidents, no claim for compensation could be filed because of the failure to gather the opponent party’s basic information. This is common when a single fishing boat collides with a big ship at night. Therefore we recommend that seamen and fishermen keep a record of the responsible party’s basic information during an accident and report to the relevant department after being rescued or once they are in a safe state to provide the relevant information that will allow maritime authorities to find out the party who is responsible for the accident.   VI.    Exercising  the right to sue according to law ------Issues and recommendations related to the right of action and the right to defense   (1)   Legal issues related to filing suit prior to the expiration of the statute of limitations   In a dispute over cargo damage related to a contract for carriage of goods by sea, the cargo owned by the mechanical equipment company was carried by the shipping company from Shanghai to Karachi, Pakistan. Because the mechanical equipment company failed to perform its obligation to properly load, discharge, lash and secure the cargo, it shifted  during the voyage and caused damage to cargo owned by a third party. The third party filed a lawsuit against the shipping company in Pakistan seeking compensation for the damage. Not wanting the statute of limitations to expire on their action, the shipping company brought an action for recourse in this court against the mechanical equipment company. Since that case will depend on the outcome of the case heard in Pakistan, the shipping company agreed to file an application of or suspension of hearing. This court dismissed the action filed by the shipping company on the ground that it lacked factual and legal grounds.   Article 257 of the Maritime Code provides that “the Limitation period for claims against the carrier with regard to the carriage of goods by sea is one year. Within the limitation period or after the expiration thereof, if the person allegedly liable has raised a claim of recourse against a third person, that claim is time-barred at the expiration of 90 days, counting from the day on which the person claiming recourse settled the claim, or was served with a copy of the process by the court handling the claim against him.” In judicial practice, many carriers may lodge an action of recourse against a shipper after the consignee files a lawsuit abroad on the ground that they may have a duty to compensate the consignees and the expiration of the statute of limitations on the action may cause them to lose a lawsuit. Whether or not the carrier is liable depends upon the trial result abroad. Therefore, after hearing such a case, the court at home may suspend the hearing as per the provisions stipulated by Paragraph 5 of Article 136 of the Civil Procedure Law of the People's Republic of China. During the suspension of the case, the case is under the supervision of the court and the party concerned must report to the court about the litigation heard abroad.   There is a prescribed time limit for all judicial proceedings.  Legal issues related to the lawsuits filed to prevent expiration of the statute of limitations have drawn the attention of the Supreme People’s Court. In accordance with the Reply of the Supreme People’s Court (2002) Min Si Ta Zi No.21, “regarding actions of recourse related to cargo damage during the carriage of goods by sea, if the original claim was filed with the court, the statute of limitations on an action by the party allegedly liable to seek contribution from a third party should be calculated, as per the provisions stipulated by the Maritime Code and the Civil Procedure Law, from the day on which the party filing a claim for contribution was served with the judgment by the court handling the claim against him. Therefore, according to the Supreme People’s Court’s instruction, the statute of limitations on an action for contribution shall be calculated from the day on which the party filing a claim for recourse received the judgment in which they were found liable for compensation. It is meaningless for the carrier to file a claim for contribution against the shipper when their own liability has not yet been determined. Moreover, once judicial proceedings commence, related litigation expenses also begin accruing.  Therefore, when a carrier seeks contribution for cargo damage under a contract for carriage of goods by sea, it is unnecessary for the shipping company to lodge an action to ensure that it will not lose the right to win the lawsuit due to the expiration of the statute of limitations. One exception is in cases related to ship collisions, where it is necessary for the interested party to lodge an action before the collision case has been concluded and the statute of limitations is about to expire in order to protect its right to win the lawsuit. The reason for this exception is that the limitations period to bring a claim in the case of a ship collision is two years whereas the limitation period for disputes over carriage of goods by sea is one year.   (2)   Legal issues related to the right to bring a lawsuit   In a dispute over delivery under the contract of carriage of goods by sea, the shipper entrusted a forwarding company (A) to handle issues related to customs clearance taking delivery of goods, and transportation, and a subcontracted with another company (B) to handle the transportation of the goods after obtaining the shipper’s approval. B in turn subcontracted company C and natural person D to handle the land transportation. In a dispute over cargo shortage, the shipper lodged a lawsuit against A, B C and D and requested that the court hold them joint and severally liable under their subcontract agreements. After hearing the case, this court held that: 1)A legally entrusted B to handle the matters under a subcontract and were therefore was not liable for the cargo shortage, 2) C and D had no contractual relationship with the plaintiff, and 3) B should bear the liability and plaintiff’s claims against A, C and D should be overruled.   With regard to maritime trials in recent years, we have found that plaintiffs often file their lawsuits against an improper defendant. The first situation where this arises is when it is unclear who the proper defendant is, so the plaintiff simply sues someone in order not to miss the opportunity to bring suit. This leads to two categories of error. The first is that of the nonexistent defendant, where the defendant against who the suit is filed has either died or the organization has been dissolved. In this instance, the defendant cannot be sued. The second category is where the plaintiff fails to provide sufficient information to identify the defendant, such as the information related to the business registration and the accurate address for the service of relevant legal instruments. Since a lawsuit that does not clearly identify the defendant violates relevant provisions of the Civil Procedure Law on the requirements to commence an action, the court may dismiss the action. The second case of a claim brought against an improper defendant arises when the incorrect defendant is listed by the plaintiff due to the misjudgment of the legal relationship. If the defendant against whom the plaintiff files a lawsuit is not the appropriate party, and the plaintiff refuses to substitute a different party after requested to do so by the court, the claim filed by the plaintiff may be overruled by the court. In this case, the party who was incorrectly sued may sustain unnecessary losses. In addition to the waste of judicial resources and time and increased litigation costs, no benefit can be gained by the plaintiff seeking compensation.   By virtue of the above analysis, we recommend that the plaintiff provide evidence to prove that the defendant is the appropriate party to the dispute who infringed upon the plaintiff’s rights and interests. The name, title, addresses and telephone number of the defendant should be provided as well, so as to shorten the time for service of the legal instrument. Additionally, the plaintiff should be exercise greater care to select the proper defendant. Last but not least, when the judge exercises his right to interpret the rights of the litigants, the plaintiff should abide by the judge’s instructions to file a lawsuit on the proper grounds and against the proper defendant.   (3)   Legal issues related to the exercise of the right to defense   In a case of application for an injunction, a logistics company entrusted a forwarding company to book shipping space and paid relevant expenses to the forwarding company. The forwarding company went through the shipping procedures as entrusted but withheld the bill of lading, claiming that expenditures had not been paid by the logistics company for the last transaction. The logistics company applied to this court for an injunction ordering the forwarding company to hand over the bill of lading. After hearing the case, this court held that the logistics company, as the shipper, entrusted the forwarding company to book shipping space and paid relevant expenses, thus the forwarding company was in violation of laws and regulations by withholding the bill of lading. Therefore this court granted the injunction requested by the logistics company and ordered the forwarding company to hand over the bill of lading.   During the business activities of carriage of goods by sea, the shipper and forwarder usually agree on a clause stating the “bill of lading should be handed over upon the payment of relevant expenses.” Such a clause should be deemed as standard industry practice in the forwarding market. Article 67 of the Contract Law of the PRC provides that “where both parties have obligations toward each other and there is an order of priority in respect of the performance, and the party who is to perform first fails to perform, the party who is to perform later has the right to reject the other party's demand for performance. If the performance of the obligations of the party who is to perform first is not in conformity with the agreement, the party who is to perform later has the right to reject the other party's demand for corresponding performance.” In light of the aforesaid provision, the clause stating that the “bill of lading should be handed over upon the payment of relevant expenses” provides the forwarder with the right to withhold delivery if the shipper fails to pay relevant expenses. However, the clause stating that the “bill of lading should be handed over upon the payment of relevant expenses only applies to the single transaction at issue. Therefore the forwarder cannot reference such a clause as a ground for withholding delivery when the shipper failed to pay expenses under a previous transaction.   During the performance of the forwarding contract, if the performance of one party is not in conformity with the agreement, the other party may refuse to perform its obligation under the agreement due to the loss of trust. In judicial practice, the court may ascertain the legality and reasonableness of the conduct according to the provisions on “right to defense of simultaneous performance”, “right to defense of orderly performance” and “precarious right to defense” stipulated by the Contract Law of PRC. First, the court should ascertain the order of the parties’ obligations to each other, and then determine which right of defense is applicable. We recommend that the forwarding company should have a clear understanding of the relevant provisions on the exercise of the right to defense provided in the Contract Law and should not withhold the bill of lading blindly. If the shipper fails to settle the expenses for a previous transaction, the forwarder may file a separate lawsuit with the court.   VII. Cases on claims for damages arising out of pollution of the ocean and waterways leading to the sea ------Guidance for aquaculture farmers in filing a claim for damages   In the case of pollution of the ocean and water ways leading to the sea, farmers may bring suit for damages to protect their lawful rights and interests. However, some farmers are unaware they who to bring an action against and in which court they should bring their claim. Especially they also do not know how to present relevant evidence to the court. Such factors negatively influence farmers’ exercise of their rights to file suit to protect their own rights and interests.   Through investigation and as per the provisions stipulated by the Civil Procedure Law of PRC, Special Maritime Procedure Law of PRC and Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures, the following guidelines are provided for the farmers’ reference.   (1)   Definition of damages arising out of pollution of the ocean and water ways leading to the sea   Such damages include damage to the marine living resources, human health and fish farming and other legal marine operations, and negative influence on the marine environment arising out of pollution caused by human activities. It includes the damage arising out of marine pollution which was caused by 1) costal engineering; 2) ocean engineering; 3) land-sourced pollutant; 4) ships and other marine operations; and 5) discharging of waste material.   (2)   Selection of the appropriate court in which farmers should file suit   Disputes over damages arising out of pollution of the ocean and water ways leading to the sea falls into the category of tortious disputes. For maritime tortious disputes, the party concerned should file suit in the maritime court located where the tort took place or the place where the defendant is located. The local people’s court does not have jurisdiction over such cases.   With regard to cases of dispute over marine pollution which was caused by pollutants discharged by ships, oil leakage from ships or other harmful substances discharged by ships, or damages arising from marine production, operation or shipbreaking and repairing operations, the suit should be filed in the maritime court located where the pollution accident occurred, where the damage took place or where the precautionary measures were adopted. Disputes over the pollution in water ways and intertidal zones which was caused by shipping, production and relevant operations carried out on sea or the water ways leading to the sea, shipbuilding, ship repairing, breaking or port operation and construction, should be submitted to the maritime court as well.   (3)   Facts that must be proved by  aquaculture farmers making a claim for damages arising out of pollution of the ocean and water ways leading to the sea: 1)      Farmer’s lawful rights and interests in the polluted area; 2)      Defendants actual discharge of pollutants in the area; 3)      Losses sustained by the farmers   (4)   Evidence that must be provided by the farmers in their claim for damages arising out of marine pollution and pollution of the waters ways leading to the sea: 1)      Evidence which can prove the farmer’s lawful rights and interests in the polluted area   A.     Evidence proving the qualification of the subject of action   a. Evidence proving the farmer’s qualification of the subject of action:   If farmers are natural persons, documents proving the farmers’ identity should be provided, such as the ID card and household register;   If the farmers are organized as partnership organizations or collective economic organizations (such as villagers’ committee), evidence that can prove the establishment of the organization should be provided   b.      When filing a lawsuit, the farmers should provide the basic information of the defendant:   If the defendants are natural persons, ID cards or certificates issued by the public security department, address and telephone number of the defendants should be provided.   If the defendants are legal persons, the information related to the defendant’s company name, business registration, address and telephone number should be provided.   B.     Evidence proving the legality of the aquaculture farming   The farmers shall provide the relevant certificates for aquaculture in water area and intertidal mudflats (where the certificate was issued after 1st Jan. 2011, aquaculture permits should be provided, where it was issued before 31st December 2010 a certificate for aquaculture in water area and intertidal mudflats should be provided) or an aquacultural contract or agreement; a certificate of the right to use sea areas should be provided as well if sea areas are used by the farmers.   2)      Evidence proving that defendant actually discharged pollutants in such area   The fishery administration department and its subordinate supervision and management department have the right to carry out investigation on fishery pollution accidents. Therefore after the occurrence of a pollution accident, farmers should promptly report to the fishery administration department and the subordinate supervision department at the county level. Such government authorities should promptly confirm the occurrence of the pollution accident and ascertain the damage to the fishery industry. Investigation on the pollution accident and collection of evidence related to such accident should be carried out by the said authority, and appraisal conclusions should be made by a relevant qualified monitoring organization on maritime and fishery environment or other qualified accrediting organizations. The investigation report and appraisal conclusion issued by the fishery administration department and its subordinate supervision department should be served as valid evidence in a dispute over damage compensation arising out of pollution of marine aquaculture.   In addition, farmers should promptly report to the local maritime authorities and environmental protection departments, so that relevant departments can issue the liability allocation report. 3)      Evidence proving the losses sustained by the farmers   Farmers shall promptly seek assistance from lawyers or relevant professional organizations and make every effort to preserve relevant evidence in the meantime. Qualified accrediting organizations should be authorized to appraise the losses.   A.     Timely entrust notary department to notarize the current situation of the pollution and losses, and issue notarial documents. a. The content of the notarization should include the size of aquaculture area which sustained pollution, the species, quantities and weight of the damaged aquatic products, and damaged aquaculture facilities, such as fishing raft, fishing gear and net cages. b.      Color photos of the pollution site should be attached to the notarial documents issued by the notary department, video records would be even better. c. In the course of notarization, it would be best to notify the defendant or the parties who are responsible for the discharge of pollution. B.     Timely appraise the economic losses arising out of the pollution a. Qualified accrediting organizations higher than county level should be entrusted to carry out the appraisal. b.      The content of the appraisal should include the breeding condition of the sea water, breeding requirements and breeding density. c. The costs of breeding (including feed and labor cost), damaged aquatic products and damaged aquaculture facilities should be appraised as well. d.      Detailed information on the size of the aquaculture area which sustained pollution, the species, quantities and weight of the damaged aquatic products and damaged aquaculture facilities should be included in the appraisal report. e. The price published by the commodity price department at the time when the damage took place should be used for the calculation of the losses. f.  It would be best to calculate losses by referring to the aquaculture farmers who are similarly situated. C.     In order to prove the losses sustained by them, it would be best for  farmers to provide the following evidence: a. Evidence proving breeding costs Receipts for purchasing fingerlings and feed, bills for labor costs; b.      Evidence proving the value of the aquaculture farm The assignee of the aquaculture farm should provide the assignment agreement and the size of the aquaculture area and the transfer price can also serve as evidence of the amount of losses. c. Evidence proving the price of the aquaculture facilities If the aquaculture facilities were built by the farmers, the invoices for purchasing timber piles and nets should be provided. If the facilities were built by a third party contracted by the farmer, the construction contract and the project settlement documents should be provided. d.      Supply agreements for the fingerlings and feed, sales agreements for the aquaculture products. e. Information about the average profits nearby farmers or those similarly situated.   (5)   Period for submitting evidence   After the case is accepted by the court, the parties concerned shall peruse the legal instruments, especially the request for submission of evidence, and present relevant evidence as requested: 1)      Evidence should be collected and provided as requested within the period for submission of evidence; any party failing to submit evidence within the prescribed time limit shall be deemed as waiving the right to adduce evidence; 2)      If any party has difficulty in producing evidence during the prescribed time period, it should apply to the people’s court for a seven day extension prior to the expiration of the prescribed time period; 3)      Where a party provides witness testimony to the court, information about the name, address and telephone number of the witness should be provided as well, and the party concerned should apply to have witness appear in court; 4)      Where a party applies to the court for investigation and collection of evidence, a written application should be submitted to the court seven days prior to the expiration of the period for submission of evidence; the court has discretion over whether or not to approve the application; 5)      Where a party applies to the court for preservation of evidence, a written application must be submitted seven days prior to expiration of the period for submission of evidence.   VIII.        Conclusion of labor contract with crewman according to law ------Issues and recommendations related to the conclusion of labor contract with crewman   The number of disputes this court heard regarding labor contracts concluded by and between the crewman and shipowner declined in 2011 compared to last year. However, cases in which a senior crewman, such as the master or chief engineer, fail to conclude a written labor contract with the shipowner and then claim double the amount of monthly wages happen from time to time. Careful attention should be paid to matters related to the recruitment of senior crewmen and legal issues arising therefrom.   (1)   When no written labor contract is concluded with the senior crewmen   Mr. He, a chief engineer, was employed by a shipowner in January 2010 to hold the post of chief engineer on M/V “Feng Sheng You 15” which provides costal cargo transportation services. It was agreed by both parties that Mr. He’s monthly wage would be RMB29,000, but no written labor contract was concluded between the parties concerned. During Mr. He’s employment, the shipowner timely paid Mr. He’s monthly wages in full. On March 2011, Mr. He went to work for another shipping company that provided a monthly wage of RMB32,000. Consequently, Mr. He, with the assistance of his lawyer, brought suit in this court claiming that the former shipowner should pay him his monthly wages at double amount under the provisions stipulated by Paragraph 1 in Article 82 of the Labor Contract Law of PRC, on the ground that no written labor contract had been concluded between the two parties concerned.   This is a typical labor contract dispute involving senior crewmen and shipowners. In judicial practice, since explicit provisions are provided by the Labor Contract Law and other relevant laws and regulations, if no agreement can be reached between the parties concerned, the senior crewmen’s claim may be upheld by the court and the shipowner may need to pay double the amount of monthly wages.   In addition, the court has also found that the certificate held by some senior crewman, especially the master, was not consistent with their actual qualifications. Some senior crewmen were suspected of falsely using others’ certificates. This is a great hidden danger to the safety of navigation and offshore operations. If an accident would occur that results in cargo damages or property losses, the shipowner would bear liability.   (2)   Reasons why senior crewmen refuse to conclude  written labor contracts   The main reason that senior crewmen refuse to sign written labor contracts is the shortage of senior crew in the shipping market. In the past 10 years, along with the development of carriage of goods by sea, the demand for senior crewmen, such as the master and chief engineer, has grown rapidly. The supply of senior crewmen is inadequate to meet the demand. Therefore in order to maximize the potential profits, the senior crewmen are unwilling to be bound by a labor contract which may prevent them from looking for jobs with higher wages and better conditions.   Another reason why no labor contract is signed with the senior crewman lies in the shipowner’s ignorance of legal matters and desire for economic gain. Where laws and regulations are in conflict with the shipowner’s immediate interests, they choose the immediate interests over compliance with laws and regulations. This is another reason why the senior crewman might refuse to sign a written labor contract. Some of the shipowners are unfamiliar with the Labor Contract Law and employ crew members as per the usual practice. They are not aware of the importance of concluding a labor contract. However, there are some shipowners who know about the importance of a written labor contract, but fear that the performance of the carriage contract would not be fulfilled if the senior crewman refuses to sign the labor contract, and so choose to employ the senior crewman without signing any written labor contract. Such conduct is in violation of laws and regulations. The result is shipowners having to pay double the amount of agreed upon monthly wages when the senior crewman later decides to file a claim for compensation.   The great conflict of interest between employers and employees seeking to protect their own rights and interests is another reason why senior crewman may refuse to sign a written labor contracts with the ship owner. Most of the ship owners who engage in costal transportation business activities are fishermen who benefit from the reformation and more open policies, thus they lack the legal awareness to collect and preserve relevant evidence in order to protect their own rights and interests. On the contrary, senior crewmen are well educated and know how to collect relevant evidence to protect their rights and interests. Once the senior crewmen get onboard the ship, they often take pictures of the daily logbook which can served as evidence of the existence of a contractual labor relationship and their employment period onboard the ship. Such evidence can give the senior crewmen the dominant position in future litigation.   (3)   Recommendations for the conclusion of written labor contracts with the senior crew   Article 82 of the Contract Law of PRC provides that “if an employer fails to conclude a written labor contract with an employee after the lapse of more than one month but less than one year as of the day when it began employing him, it shall pay to the worker his monthly wages at double the amount.” This provision should be applied to the conclusion of written labor contracts both with senior employees and ordinary employees. Therefore the shipowner shall sign written labor contracts with all employees, regardless of the position they hold. The Labor Contract Law essentially falls into the category of social law, aimed at resolving matters related to infringement of employees’ rights and interests due employers’ refusal to sign labor contracts, failure to pay employees’ wages and shortening of the labor contract period. The Labor Contract Law protects the lawful rights and interests of the employees who are economically and politically marginalized via increasing the employers’ responsibilities and the economic burden on them. Shipowners should be aware that even if senior crewmen possess a dominant position in the labor market, they are still members of a class that is economically and politically marginalized and needs to be protected from the perspective of current laws and regulations. The signing of a written labor contract with the senior crewmen is the shipowner’s legal obligation as an employer. And shipowners who fail to perform such obligations must face the resulting consequences. .   IX.    Application for ship arrest according to law ------Issues and recommendations related to the application of ship arrest before the institution of an action   (1)   Reasonably select the location for ship arrest   In January 2011, a German bank filed an application to this court for the arrest of M/V “First Ocean——” which was berthing at Chiwan terminal in the western part of Shenzhen City， due to a dispute over a ship mortgage. After hearing the case, this court rendered a ruling to arrest the subject ship in the waters of Shenzhen Port. It was a large container ship with a loading capacity of more than 8000 containers and the laden draft was more than 17m.  The arrest of the ship at Chiwan terminal had a negative influence on the port operation and the operation of other ships, and the port authority complained. In this respect, M/V “First Ocean” needed to change her berth at Chiwan Terminal from time to time. Since there is no such anchorage for large ships at the western water area under the jurisdiction of Shenzhen MSA, the ship could not move from Chiwan Terminal to the anchorage. There were some anchorages fit for large ships, however legal impediments to ship arrest may have arisen because the ship would need to pass through Hong Kong’s territorial waters when moving from the western port to the eastern waters. Since Guishan anchorage is under the jurisdiction of Guangzhou MSA, in order to move a ship to Guishan anchorage, the transfer of arrest formalities and supervision would be involved. If control or supervision were lost during the transfer, serious consequences may result. Therefore, if a large ship must be arrested at the western port in Shenzhen City, it can only be detained at the terminal. In such a case, in addition to losses for detention, a huge sum of port charges may arise as well. What’s more, it may have a negative impact on the port operation and the berthing plan of other ships. Overall, the party applying for ship arrest may sustain a huge sum of port charges and other indirect losses in addition to losses for detention. These losses should fall into the category of counter guarantees if these losses exceed the court’s expectation, the court may increase the amount of the counter guarantee at any time, which may in turn increase burden on the applicant.   Due to the ship’s mobility, it’s difficult for the applicant to know the exact location where the ship may call.  When seizing the opportunity to arrest a ship, the applicant should carefully plan in order to avoid unnecessary losses in the process of arresting the ship and in order to avoid negative influences on port operation and the normal operation of other ships. We recommend that when applying for ship arrest, especially for large ships, the applicant should carefully select the arrest location. The basic information of the location where the ship is berthed should be provided to the court. In case of a long-term arrest, the aforesaid information is absolutely necessary for choosing a proper arrest location.   (2)     When applying for ship arrest prior to the institution of an action, the applicant must strictly adhere to the legal requirement that a claim be filed within 30 days In hearing a case of application for ship arrest prior to a lawsuit being filed, this court found that after the ship was arrested, the respondent failed to provide a guarantee or reach an agreement with the applicant within the 30-day time limit, but the applicant and the respondent were willing to resolve the dispute outside litigation proceedings. In such a case, the applicant may, at the time near to the prescribed 30-day time limit, submit a settlement agreement between the parties to the court. Such an agreement may state that both parties agree to extend the time limit for ship arrest and are willing to carry out negotiations outside litigation proceedings. It may also prescribe that the provisions in the Special Maritime Procedure Law of PRC requiring that the applicant lodge an action or apply for arbitration within 30 days after the ship is arrested are waived and the respondent agrees that the court may continue to keep the ship under detention if the applicant fails to lodge an action after the 30-day time limit expires.   However, the requirement that a claim be filed within 30-days of arresting a ship is explicitly prescribed by the Special Maritime Procedure Law of PRC and may not be amended by the interested parties’ agreement. Arrest of the ship should lead to legal action between the parties. The rights and obligations of the interested parties may be varied by different laws and regulations. Unless the respondent provides guarantee to the court or the applicant, or the applicant agrees to release the ship, the applicant must file a lawsuit in the court which has jurisdiction over the subject case or apply to the relevant arbitration organization for arbitration within the 30-day time limit. In order to successfully release a ship, the respondent shall, within the 30-day time limit, provide a guarantee to the court or the applicant in the amount listed on the ruling rendered by maritime court. In that case the court may render a ruling to release the ship according to the laws and regulations or as per the application filed by the applicant. Therefore, if the applicant and respondent desire to enter into an out of court settlement negotiation, they should do so within the time limit prescribed for ship arrest. Otherwise the court may handle the case as per the provisions stipulated by the Special Maritime Procedure Law of PRC.   (3)   The amount of the guarantee should be reasonable   In accordance with the provision of the Special Maritime Procedure Law of PRC, the amount of the guarantee requested by the applicant against the respondent should be equal to the amount of his creditor’s rights, but must not exceed the value of the preserved property. With regard to the arrest of a ship prior to the institution of an action, the applicant may request that the respondent provide a guarantee at a random amount. Some applicants may request that the respondent provide a guarantee which exceeds the value of the ship. Under such circumstances, the ship may be arrested for a long period and the charges for property preservation may increase accordingly.   In judicial practice, the respondent usually provides the guarantee to the court or to the applicant if it agrees to the amount of the guarantee. There are four methods of providing the guarantee as per the provisions of the Special Maritime Procedure Law of PRC. In reality, the dispute is most often over the amount of the guarantee. Due to the requirement that an action be filed within 30 days of arresting the ship, it is difficult to verify the exact value of the arrested ship. However, it is possible to calculate the approximate value of the ship. If the respondent is asked to provide a guarantee which exceeds the value of the arrested ship, it may not actively provide such a guarantee to release the ship in consideration of the commercial profits. As a result, the ship may be sold via judicial sale and thus the market value of the ship would likely not be realized. What’s more, after the ship is arrested, the applicant must file a claim within the 30-day time limit and the value of the subject matter of the action should equal the amount of the guarantee requested by the applicant. Otherwise, the suit would not be viewed as being filed for the purpose of property preservation and the court may release the ship on the ground that the applicant failed to lodge an action within the prescribed time limit. We recommend that the amount of the guarantee requested by the applicant from the respondent when applying for ship arrest be practical and reasonable. If the amount of an applicant’s request for a guarantee that exceeds the value of the arrested ship, it would be inconsistent with the goal of protecting f its creditor’s rights. [1] “three districts” means the Marine Economic Optimization Development District around Pearl River Delta, Key District for Marine Economic Development of eastern part of Guangdong province and Key District for Marine Economic Development of western part of Guangdong province; “three zones” means the Marine Economic Cooperation Zone among Guangdong, Hong Kong and Macau, Marine Economic Cooperation Zone between Guangdong and Fujian and Marine Economic Cooperation Zone among Guangdong, Guangxi and Hainan; “three areas” means the littoral area, offshore sea area (including island area) and blue water area.

Foreword   The Report on Trials 2010 of Guangzhou Maritime Court is the first judicial report that we have released to the public. It mainly analyzes the cases of maritime disputes tried by this Court throughout the year of 2010, and offers advice and solutions from a legal perspective. It aims to regulate the order of the shipping market and promote the sound growth of the shipping industry.   As Guangdong strives to establish itself as a maritime power in China, its marine economy becomes one of the major engines of social and economic development. The Outline of the Plan for the Reform and Development of the Pearl River Delta (2008-2020), approved by the State Council, clearly proposes to build the Pearl River Delta into an international shipping and logistics centre developing in a coordinated and complementary manner alongside Hong Kong and Macao. To contribute to the realization of this grand aim, Guangdong Province needs to speed up the structural optimization of its shipping and trading, and to promote the sound and sustainable development of the shipping industry. Furthermore, the shipping market needs to function in a good legal environment. Such an environment will provide superior and efficient maritime legal services and protection that benefit the scientific development of the marine economy and shipping industry.   Throughout 2010, we insisted on rendering judicial services for the people under the leadership of the CPC Guangdong Provincial Committee, and under the supervision and guidance of the Higher People’s Court of Guangdong and the Standing Committee of the Municipal People’s Congress of Guangzhou. We constantly improved maritime trials, carefully fulfilled our judicial function in maritime matters, and conducted surveys of and provided legal services for shipping companies; we handled maritime cases in accordance with law, properly resolved disputes, and played a positive role in the scientific development of the marine economy of Guangdong. On the above basis, we hereby present this report. It first analyzes the types, main characteristics and change in quantity of maritime disputes. Second, it discusses the current trend in the shipping industry and reveals new challenges and problems emerging in the shipping market. Last but not least, it analyzes dispute-prone areas in shipping and studies typical cases, and on this basis puts forward countermeasures and advice, which may be referred to for government decision-making, industrial development and business operation.   The report is prepared and released by this Court as a contribution to the national aim of building an international shipping and logistics centre. It is also an attempt to resolve social conflicts, innovate within social management, and promote fair and just law enforcement. If any problem or advice herein is inappropriate in any way, please feel free to point it out to us.   Guangzhou Maritime Court January 2011 Table of Contents   I  History of Guangzhou Maritime Court   II  Basic Information on Maritime Trials Largely affected by the financial crisis. Highly linked to trading, logistics and other service industries. Emergence of new cases. A high proportion of dispute cases involved foreign, Hong Kong, Macao and Taiwan elements. The proportion of cases in connection with marine resource exploitation was relatively small. Cases were of distinct regional features.   III Active Response to the Risks to Shipping Industry Brought by the Global Financial Crisis — Problems under the impact of the financial crisis and solutions we propose Legal matters in handling cargo pile-up in ports Impact of the financial crisis on shipbuilding Impact of the financial crisis on the shipping & logistics industry Impact of the financial crisis on the ship finance lease market   IV Regulating the Order of the Shipping Market — Problems in goods carriage and port management and solutions we propose Problems with package deal forwarding Problems with cargo release without the presentation of original bill of lading Problems with ship operations while berthing in dock   V Regulating the Labour Market — Problems with seafarer management and solutions we propose Problems with seafarer labour export and offshore dummy companies Problems in ship operation safety and seafarer visa management Problems with fair protection of rights and interests of labourers and employers Problems with properly understanding and applying policies benefiting the common people   VI Regulating the Shipping Insurance Business — Problems with the shipping insurance industry and solutions we propose Problems in executing contracts for insurance Problems with the credibility of insurance surveyors Problems with inspection before acceptance of special cargo insurance     VII Protecting Eco-environment of Waters — Problems in dealing with pollution of water resources and solutions we propose Problems with actions taken by ship owners to minimize risk of pollution caused by accidents Problems with pollution assessment techniques Problems with pollution assessment mechanism Problems with the plaintiff capacity of water management functional authorities   VIII Conclusions         I  History of Guangzhou Maritime Court   Guangzhou Maritime Court was established on 1 June 1984 under the Decision on the Establishment of Maritime Courts in Coastal Port Cities. It is one of the first six maritime courts in China. Originally, it was administered by the former Maritime Court Office of the Ministry of Transport, and had jurisdiction over the sea areas in Guangdong Province, Guangxi Zhuang Autonomous Region and Hainan Province. In 2000, the General Office of the CPC Central Committee and the General Office of the State Council relayed the Opinions of the Supreme People’s Court, State Commission Office for Public Sector Reform and Ministry of Transport on Adjusting the Administration of Dalian and the Other Five Maritime Courts, which provided that each of the six maritime courts was to be jointly administered by the party committee, government and higher people’s court of the province or municipality where the court was located. Accordingly, this Court has since been jointly administered by the CPC Provincial Committee, Provincial Government and the Higher People’s Court of Guangdong Province. As Haikou and Beihai now have their own respective maritime courts, this Court’s jurisdiction has been adjusted too. Currently we have jurisdiction over the trial of first instance of maritime dispute cases occurring within the 3,368 km coastline, 2,414 km island coastline, 420,000 km2 sea areas and over 4,000 km navigable inland waters within Guangdong Province. With numerous ports, this jurisdiction is one of China’s regions with the most vigorous coastal shipping, ocean shipping and other marine economic activities.   To satisfy the growing need for trials, the Court is now divided into the Case Filing Chamber, Admiralty Tribunal, Maritime Tribunal, Tribunals of Shenzhen, Shantou, Zhanjiang and Jiangmen, Trial Supervision Division, Enforcement Division, Research Division, offices, Division of Politics, Discipline Inspection Office, Supervision Office, Judicial Police Detachment and Logistics Service Centre. We have in total 121 judges and staff, with the 55 judges each holding a bachelor's degree and 76.4% of them Master of Laws or higher. In view of the long coastlines under our jurisdiction, we have drawn support from the higher authorities and successively set up four detached tribunals in major coastal cities Shenzhen, Shantou, Zhanjiang and Jiangmen respectively to facilitate litigation and trials. The Shenzhen Tribunal was set up in 1993 as a pioneer detached tribunal among Chinese maritime courts, exercising jurisdiction over Shenzhen, Dongguan, and Huizhou etc.; Shantou Tribunal was set up in 1996, exercising jurisdiction over Shantou, Chaozhou, Jieyang and Meizhou etc.; Zhanjiang Tribunal was set up in 1997, exercising jurisdiction over Zhanjiang, Yangjiang and Maoming etc; Jiangmen Tribunal was set up in 2007, exercising jurisdiction over Foshan, Zhuhai, Jiangmen and Zhongshan etc. Since 2008, case filing circuit offices have been successively set up in places such as Nan’ao Island of Shantou and Bohe Port of Zhanjiang.   Ever since our establishment on 1 June 1984, we have been devoted to the development of marine economy; our judicial areas have been expanded, and the cases of maritime disputes we accept have been steadily increasing. By the end of 2010, we have handled 19,544 cases with subject matters amounting to nearly 20,000 million Yuan and involving more than 60 countries and regions. We have concluded a number of cases influential both at home and abroad, including the M.T. Mariner case which involved over 10 countries. CCTV presented a series of reports on the case with the title “The Most Significant Case after China’s Entry into the WTO”. The following charts illustrate the rapid growth of trials and enforcement conducted by this Court since 2000.   Figure 1: Cases entertained since 2000     Table 1: Comparison of cases entertained since 2000 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Number of cases 1019 1226 1081 1306 1097 1411 1136 1489 1587 1579 1325 Growth (%)   20.31 -11.83 20.81 -16.00 28.62 -19.49 31.07 6.58 -0.50 -16.09   Figure 2: Subject matter values of cases entertained since 2000 Table 2: Comparison of subject matter values of cases entertained since 2000 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Subject matter value of cases (Thousand Yuan) 1167480 988510 1149260 1531820 2334310 2262410 1305870 1173070 1581670 2412640 2588010 Growth (%)   -15.33 16.26 33.29 52.39 -3.08 -42.28 -10.17 34.83 52.54 7.27     Figure 3: Cases closed since 2000 Table 3: Comparison of cases closed since 2000 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Number of cases closed 1062 996 1100 1266 899 1479 1215 1348 1624 1604 1404 Growth (%)   -6.21 10.44 15.09 -28.99 64.52 -17.85 10.95 20.47 -1.23 -12.47               Figure 4: Enforcement cases since 2000   Table 4: Comparison of enforcement cases since 2000 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Number of cases closed 389 278 307 337 235 344 284 378 359 351 281 Growth (%)   -28.53 10.43 9.77 -30.27 46.38 -17.44 33.10 -5.03 -2.23 -19.94   Figure 5: Subject matter values of enforcement cases since 2000 Table 5: Comparison of subject matter values of enforcement cases since 2000 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Subject matter value of cases (Thousand Yuan) 298550 311900 370190 468470 597170 383760 339550 148180 113150 188140 928830 Growth (%)   4.47 18.69 26.55 27.47 -35.74 -11.52 -56.36 -23.64 66.27 393.69     II  Basic Information on Maritime Trials   In 2010, we insisted on rendering judicial services for the people under the leadership of the CPC Guangdong Provincial Committee, and under the supervision and guidance of the Higher People’s Court of Guangdong and the Standing Committee of the Municipal People’s Congress of Guangzhou. We constantly improved maritime trials, actively fulfilled our judicial function in maritime matters, and promoted the progress of maritime trials. Throughout the year, we accepted 1,585 cases (including 260 cases carried over from the previous year), of which 1,409 were closed. The closing ratio was 88.58%, up 2.48% on a year-over-year basis. The subject matters of the closed cases valued 3,167 million Yuan, increasing by 1.08 times compared to the previous year; 283 enforcement cases were closed, and the enforcement closing ratio was 95.9%, up 10.74% year over year.   Cases we entertained mainly fell into the following types: 154 cases of disputes arising out of carriage of goods by sea (coastal), accounting for 19.9% of the first instances of maritime cases; 138 cases of disputes arising out of freight forwarding contracts, accounting for 17.8%; 73 cases of disputes arising out of ship contracts (sale, financing, repairs, shipbuilding, chartering and mortgage etc.), accounting for 9.4%; 69 cases of disputes arising out of seafarers labour contracts, accounting for 8.9%; 55 cases of disputes over damages for pollution caused by vessel or port operations, accounting for 7.1%; 37 cases of disputes over damages for ship collision, accounting for 4.8%; 29 cases of disputes arising out of marine insurance contracts, accounting for 3.7%; 20 cases of disputes over personal injury or death at sea, accounting for 2.6%; 12 cases of disputes over port operations, accounting for 1.6%. Through analysis, these cases were found to have the following characteristics:   — Largely affected by the financial crisis. In 2010, the number of cases of ship contract disputes soared to 73, with the value of subject matters amounting to 1,440 million Yuan. In many cases of disputes over shipbuilding, the dispute arose when the shipowner, due to a lack of funds, cancelled the shipbuilding order or requested to adjust the price or change the term of payment or the contracted ship type. The number of cases of ship chartering disputes sharply increased from 3 in 2009 to 34 in 2010, mostly caused by the charterer’s failure to timely pay the shipowner or the crew as a result of broken capital chain and deteriorating financial conditions; disputes also arose over ship finance lease, which had been rare before. Furthermore, among disputes over ship repair, there were cases in which the shipyard initiated proceedings and requested the court to auction off the repaired ship to pay off debts when the shipowner defaulted on repair charges. Likewise, under the continuous impact of the financial crisis, shipping enterprises were constantly faced with operation problems such as declining freight rates, reduced orders and freight arrears, while port enterprises were faced with lower throughput, cargo pile-up and port charge arrears; consequently, there was a sharp increase in proceedings in connection with disputes over arrears of freight/port charges or non-delivery taking.   — Highly linked to trading, logistics and other service industries. Since China’s entry into the WTO, the government has gradually opened up the trading, logistics, intermediary and other service markets; consequently foreign trade agencies have been flourishing. As the Asian Games were hosted by Guangzhou in 2010, more resources were input into the city’s infrastructure, thus promoting its trading, shipping, logistics and other service industries. Such growing business gave rise to a large increase in disputes arising out of forwarding contracts in 2010. Cases of such disputes numbered 138, accounting for 17.8% of all cases. Note that as the shipping market and logistics develops, there have been changes in the business scope and service modes of forwarders. In some forwarding contracts that gave rise to a dispute, package deal forwarding was agreed as the mode of forwarding. In these contracts, traditional forwarding was replaced by package deal forwarding, which covered on-site pick-up, road transport, loading and delivery. These changes pose a new challenge to the application of law.   — Emergence of new cases. Over the past three years, the Court has entertained 141 cases of maritime disputes other than disputes in connection with maritime tort and maritime contracts. A number of new types of cases have emerged. Examples are disputes arising from marine construction technology contract and contract for setting of navigation marks, as well as disputes over fuel subsidies for fishing vessels, maritime subrogation, compensation for damage to offshore/underwater installations caused by vessels, and damages for negative effects on navigational safety. The Court has also tried and closed a case of dispute over damages for water pollution from land-based sources, the claimant being a procuratorial authority on behalf of the State, which is the first case of its kind in China. These new cases have largely enriched the specialized functions of the maritime court. As marine economy develops, quality and efficient judicial services through maritime trials are increasingly in demand. Cases we entertained have extended from traditional cases involving vessel, cargo and port to cases involving water, island and the sea, and from traditional shipping dispute cases centring on cargo, to new cases related to the marine economy.   —A high proportion of dispute cases involved foreign, Hong Kong, Macao and Taiwan elements. As cases of maritime disputes largely involve foreign elements, and as Guangdong is adjacent to Hong Kong, Macao and Taiwan, in 2010 the Court entertained 388 dispute cases of first instance involving foreign, Hong Kong, Macao and Taiwan elements. These cases accounted for 43.67% of all cases of first instance and involved more than 60 countries and regions. Covering almost all shipping powers around the world and major trade partners of China, they had a far-reaching influence worldwide. During the trials of such cases, other than Chinese law, foreign laws and international conventions, treaties or practice may also apply. This poses a great challenge for the professionalism and ability of judges.   — The proportion of cases in connection with marine resource exploitation was relatively small. The main types of cases we entertained were of traditional disputes arising out of contracts for carriage of goods by sea, disputes over forwarding, disputes arising out of ship contracts, and disputes over marine insurance. These cases took up 42% of the total number of cases. This was closely related to the developed marine economy and brisk shipping market in the Pearl River Delta Region. On the contrary, throughout the year, there were only 10 cases in connection with exploitation of marine resources. As Guangdong carries on its strategy of marine economy, it can be predicted that dispute cases in relation to marine resource exploitation will emerge and increase, such as disputes over island development, coastal reclamation, offshore oil, seafloor exploration, hydrographic charting, buoys, clean-up markings, and seabed sweeping.   — Cases were of distinct regional features. The development of shipping and marine economy in Guangdong represents distinct regional features. Here are some statistics from our four detached tribunals. The Shenzhen Tribunal, located in a core city in the Pearl River Delta, mainly handled disputes arising from forwarding contracts and contracts for carriage of goods by sea; forwarding contract disputes handled accounted for 65% of such disputes handled by the Court as a whole. The Jiangmen Tribunal, located in the hinterland of the Pearl River Delta, largely dealt with disputes arising from contracts for waterway transport of goods and disputes over compensation for bridge damage caused by ship contact; the Shantou Tribunal in the East handled considerable disputes over compensation for port damage caused by ship contact; Zhanjiang Tribunal entertained a large proportion of cases for disputes arising out of seafarer labour contracts. Furthermore, as Shantou and Zhanjiang Tribunals each has jurisdiction over numerous fishing ports, the fishing disputes they handled accounted for 83% of all similar cases entertained by the Court as a whole. These were mainly disputes arising from aquiculture and fishery partnership contracts, and disputes over damages for infringement in relation to fishing. Over the past few years, the four detached tribunals have played an active role in serving the public. They have efficiently resolved the difficulties with maritime proceedings for ordinary people in coastal areas. Cases they entertained accounted for 59.4% of the total number of cases entertained by the Court.   III Active Response to the Risks to Shipping Industry Brought by the Global Financial Crisis — Problems under the impact of the financial crisis and solutions we propose   (I) Legal matters in handling cargo pile-up in ports   In a case where cargo delivery was no taken in port, the frozen beltfish exported by an enterprise arrived at Shekou Port, Shenzhen, and was detained in the port as no one came to take delivery; consequently, the storage life of the beltfish ran out and a large sum of storage charges were incurred. The customs authorities stated that they had no right to deal with this matter as the Customs Law of the People’s Republic of China makes no provisions for handling export cargoes. The Court consulted with the customs authorities, inspection authorities and other departments concerned, and eventually ruled that the enterprise should dispose of the detained beltfish so as to avoid further loss of storage charges.   Under the impact of the financial crisis, delivery of cargoes is frequently not taken and containers unclaimed remain in ports in Guangdong Province. These cargoes and containers pile up in goods yards and create a series of legal matters, mainly including: first, when delivery of cargo is not taken in the port of destination, the carrier often incurs loss of freight and prepaid storage charges. As a contract for carriage of goods by sea involves a consignor, carrier and consignee, the carrier is also faced with the legal question as to whether to claim against the consignor or the consignee. Second, while the carrier may apply to a court for finding unclaimed goods unowned and auction off such goods, the law makes no provisions on whether the carrier is entitled to be compensated directly from the auction proceeds. Third, there are legal barriers to the disposal of export cargoes detained in ports.   With respect to legal matters arising when delivery of cargo is not taken in the port of destination, relevant laws in effect only provide for general principles and offer no case-by-case approach. We suggest enacting relevant laws, rules or judicial interpretations to offer the following solutions: first, clear provisions on how the carrier may claim the freight, storage charges or container demurrage when the delivery of cargo is not taken in the destination port; second, judicial interpretation providing that the carrier may obtain compensation for loss directly from the proceeds of the auction of unowned cargo; third, amendments to the Customs Law to the effect that unclaimed export cargoes may be disposed of by the customs authority with reference to import cargoes. Furthermore, the courts should cooperate and communicate more with the customs authorities and frontier inspection authorities, so as to better connect different means of disposal, i.e. the discharge, retention and application by the carrier for finding the property unowned, with the auction by the court, and with the sales by the Customs; to avoid long-term pile-up of goods and make best use of logistics resources of the ports.   (II) Impact of the financial crisis on shipbuilding   In a case where a petition was submitted for recognition and enforcement of a foreign arbitral award, a Greek company and a Chinese shipyard had entered into a ship conversion contract which agreed that all disputes arising therefrom should be referred to arbitration in London. The parties thereto later had a dispute over contract performance, and after arbitration subject to the arbitration clause, the arbitral tribunal awarded that the Chinese shipyard should be liable for damages; accordingly, the Greek company petitioned the Court for recognition and enforcement of such arbitral award made in London. Based on the cause of such dispute, the competent judge of the Court interpreted applicable laws to, and considered the issue with both parties. Eventually the parties reached conciliation and the petition was withdrawn.   Shipbuilding enterprises in the Pearl River Delta Region have been under tremendous impact of the global financial crisis. First, orders for new ships have fallen sharply, with prices showing a downward trend. Shipowners frequently cancel shipbuilding contracts or request a reduction in price; second, in the downward market caused by the financial crisis, variables exist in shipowners’ operating conditions and capacity for due performance. These variables will increase the risks of shipbuilding enterprises in executing contracts; third, the rising prices of steel and other raw materials puts more of a burden on shipbuilding enterprises and exerts new pressure on the industry. Under the combined effects of these factors, the shipbuilding industry turns to a buyer’s market, and shipbuilding enterprises are in an adverse situation with difficulties in financing, acquiring orders and delivery. Besides, some smaller shipbuilding yards are mainly engaged in ship repair with shipbuilding as a supplement. Under the impact of financial crisis, some of these shipyards were involved in ship repair disputes arsing when the shipowner failed to pay the repair charges on schedule. Consequently the shipyards initiated proceedings and applied for the sale of the ships by auction.   At present, large shipbuilding enterprises in Guangdong enter into shipbuilding contracts as contractor and in forms with reference to English law. Such contracts model on sales contracts, and are based on principles different from those understood by Chinese shipyards. A lot of miscomprehension is generated as a majority of Chinese shipyards know little about the UK Sale of Goods Act and provisions on shipbuilding contracts. For this reason, we advise shipbuilding enterprises to timely adjust the scale of production and operation according to changes in the market, and to select forms of contracts with more prudence. When handling disputes, the Court will offer more clarifications and mediate in the conflicting understanding of a contract, so that the parties may again reach consensus on and maintain the shipbuilding contract.   (III) Impact of the financial crisis on the shipping & logistics industry   In a case of dispute arsing from a contract for carriage of goods by sea, a shipping company had carried a cargo for an industrial company which later had deteriorated production and ceased to operate, with the freight and container demurrage unpaid. The shipping company brought an action to the Court after placing a lien on the cargo. In accordance with law, the Court adjudged that the industrial company should pay the freight and container demurrage to the shipping company, and the shipping company should have a priority right to the cargo auction proceeds.   With a decrease in exports, shipping and logistics enterprises have seen the shipping market change from “whoever owns a ship makes a profit” to “whoever owns a ship loses money”. Some port and shipping enterprises relying on export have been heavily impacted, and some with poor performance have to cut down staff or even close down. Manufacturers have financial difficulties and generally fall into arrears with freight. Consequently it takes a longer period to recover freight, with higher bad debts ratio of accounts receivable and higher operational risks. Operating costs have also increased, as more human and material resources have to be input in order to develop the market and cope with operational risks. As freight rates drop sharply, some merchants, who have entered into a long-term contract of affreightment or space booking, refuse to pay the freight and request to modify the contract. They want to renegotiate with the shipping company to reduce the freight rates, resulting in an increasing number of disputes.   For the above reasons, we advise shipping enterprises to keep track of changes in the market, timely adjust production and operation scales, and optimize the industrial structure. In trials of disputes over freight, the Court will apply the principle of changed circumstances on a case-by-case basis to reconcile the interests of all parties concerned; with respect to manufacturing enterprises under greater impact of the financial crisis, when handling applications for property attachment, the Court will fully consider such enterprises’ survival and development, their employees’ livelihood and the social stability; on this basis the Court will take flexible attachment measures, in an attempt to ensure the realization of lawful rights and interests of creditors while avoiding causing operational difficulties to the enterprises with improper attachment measures.   (IV) Impact of the financial crisis on the ship finance lease market   In a case of dispute arising from a contract for a ship finance lease, the plaintiff, a finance company, and the defendant, an ocean engineering company, had entered into a finance lease contract for the leaseback of three ships, the rent of each exceeding 100 million Yuan. The defendant suffered sharp deterioration in its financial situation and ceased to operate, and fell into arrears of crew wages and rent to the plaintiff. For this reason, the plaintiff put claims to the Court for the return of ships and payment of rent. In view of the huge value of the subject matter, the Court maintained the normal operation of the ships to minimize the losses of both parties, and presided over the mediation between the parties based on ascertained facts. Eventually the parties reached agreement and the case was closed in mediation.   Ship finance leasing is an emerging financial business in China. It is a civil arrangement where the lessor lets a ship to the lessee in accordance with a lease; the lessee possesses and operates the ship and pays rents to the lessor during the lease term. Generally, in a ship finance lease, a bank or another financial institute provides the funds for ship construction or purchasing to acquire ownership of the ship, and then lets the ship to a shipping company to get profits from the rent. As an emerging financial business, ship finance leasing integrates funds and assets. It provides shipping companies with a good solution to shortage of funds for ship construction or purchasing, and is therefore well received in the shipping market. However, as a ship finance leasing involves a huge amount of funds and complicated relations, and concerns finance, trade, insurance and material supply, the market risks it may bring are prominent during the financial crisis. The main risks are: 1, performance risks, mainly the risk that the lessor is unable to recover his investment when the lessee fails to timely pay the rent and interest thereon due to changes in the shipping market, poor performance, or bad capital turnover; 2, exchange rate risk: if the ship for lease has been imported, international payment and settlement is involved. As exchange rates are volatile during the financial crisis, a large price difference may occur if the lessor and the lessee use different currencies for income and debt. As a medium- and long-term investment project, a ship finance lease involves a particularly prominent risk of exchange rates; furthermore, a ship finance lease may also involve operational risks and force majeure risks, and is therefore prone to disputes.   To cope with these problems, we advise the transport authorities to further regulate the industry and strictly implement the Notice of Regulating the Domestic Ship Finance Lease Business; to control market access, ensure the credit and performance capacity of the lessor and the lessee, and further regulate such leasing. Both the lessor and the lessee are advised to fully measure the market risks and its respective risk-bearing capacity. In case of foreign exchange settlement, the cost difference caused by fluctuations in the exchange rate should also be considered. These measures will help to facilitate the economic benefits of financing while avoiding its disadvantages.   IV Regulating the Order of the Shipping Market — Problems in goods carriage and port management and solutions we propose   (I) Problems with package deal forwarding   In a case of dispute arising out of a forwarding contract, the plaintiff, a garment company, had entrusted a shipment of jeans to the U.S. to the defendant, a logistics company. The defendant sub-entrusted another logistics company with the task of goods collection from the plaintiff’s factory via a trailer. During the transport by the trailer, an employee of the second logistics company stole part of the goods. After the goods had arrived in the U.S., the plaintiff found out the shortage and accordingly claimed for damages against the defendant, who refused to compensate by alleging that it was the forwarding agent of the plaintiff.   With the high-speed development of the shipping market, there have been changes in the business scope and service modes of forwarders. These changes facilitate cargo transport, but in turn create new legal matters. The Court has lately entertained a number of cases similar to the foregoing, all of which involve package deal forwarding. In this mode of forwarding, when entrustment is unclear and a shortage of goods occurs, there comes the issue as to whether the forwarder has to assume liability. Problems with these cases are: 1, the consignor contacts the forwarder orally without a written power of attorney; 2, the forwarder “sub-entrusts” all or part of the arrangements to a third party without gaining express consent of the consignor; 3, a shortage of goods occurs in transit from the factory to the loading port by a trailer company sub-entrusted by the forwarder, or, in the case of multimodal transport, a shortage of goods is found at the destination port; 4, where the consignor does not pay the “freight”, the forwarder requests the consignor to make the payment by withholding the bill of lading, detaining the goods or taking other measures. Under such circumstances the forwarder claims that the two parties are in a relation under a contract for carriage of goods; however, in the event of a shortage of goods in transit or cargo release at the destination port without the presentation of original bill of lading, the forwarder claims that the parties are in a relation under an agency contract.   To conduct fair trials of disputes arising out of forwarding contracts and equally protect the lawful rights and interests of forwarders and consignors, the Court has drawn up guidance and judgment criteria, which to a certain degree regulate the forwarding market. To resolve the abovementioned problems, we propose the following solutions: 1, the consignor and the forwarder should clearly define each other’s rights and obligations in writing, which will serve to protect their lawful rights and interests; 2, if the forwarder sub-entrusts all or part of the transport arrangements to a third party, the express consent of the consignor should be obtained in advance; 3, the forwarder should select a trailer company in good standing and with good reputation, e.g. one equipped with a GPS monitoring system to prevent stealing. Where multimodal transport is concerned, the forwarder should see to the smooth handover of goods through all links; 4, the forwarder should fulfil its obligations and report to the consignor with the progress of the entrustment.   (II) Problems with cargo release without the presentation of original bill of lading   In a case of dispute over cargo release without the presentation of original bill of lading (BL), a Chinese seller had sold the goods to a foreign buyer at FOB price (cost price exclusive of freight and insurance), and the carriage of goods was taken charge of by the foreign buyer. After the seller had booked space from a Chinese forwarder as instructed by the buyer, the forwarder issued a BL to the seller. The carrier recorded on the BL was a foreign non-vessel operating common carrier (NVOCC) in a name similar to the forwarder. The BL was not registered with the Ministry of Transport; and the cargo thereunder was released at the destination port without the presentation of original BL. Accordingly the seller initiated proceedings and requested the Chinese forwarder and the foreign NVOCC to compensate for the loss of cargo jointly and severally. The forwarder refused to compensate by alleging that it was the agent of the foreign NVOCC.   Similar cases are not rare in recent years. According to the statistics from competent authorities, Chinese sellers have consequently suffered huge losses and the domestic shipping market is seriously disturbed. Problems in these cases are: 1, when a Chinese seller sells goods to a foreign buyer at FOB price and the buyer appoints a foreign carrier, the carrier is likely to deliver the goods to the buyer at the destination port without collecting the original BL, after which the buyer may not make the payment to the seller; as a result, the seller, though holding an original BL, has no control over the goods thereunder, while it is difficult to claim against the foreign NVOCC as it has no assets in China; 2, without obtaining the qualification for non-vessel carrier operation and paying a deposit, the foreign NVOCC operates non-vessel carrier business in China and issues a house bill of lading (HBL) not registered with the Ministry of Transport so as to avoid supervision; 3, some NVOCCs are actually dummy affiliates of Chinese forwarders set up to avoid legal liability and taxes. Their main characteristics are: each of these NVOCCs has similar name, same staff and same place of business with a Chinese forwarder, and uses special invoices issued by a third party. When negotiating with a Chinese consignor about carriage of goods, the forwarder obscures its agency relation with the foreign NVOCC. It merely indicates in the BL, which is issued to the seller after loading, that it issues the BL as agent of the foreign NVOCC. In the event of a dispute over cargo release without the presentation of original BL, the forwarder will refuse to assume liability by alleging that it is the agent.   In the trial of the foregoing case, the Court took into account these facts: the Chinese forwarder did not disclose its agency relationship with the foreign NVOCC and did not obtain the explicit authority of the NVOCC, and the NVOCC did not obtain the qualification for non-vessel carrier operation. Based on these facts and in accordance with law, the Court adjudged that the forwarder should be jointly and severally liable. The judgment protected the lawful rights and interests of the Chinese seller, and came as a blow to such behaviours that disturb the domestic shipping market. We also advise Chinese consignors to avoid selling goods at FOB prices, and to arrange for the transport on their own, and select a carrier with good reputation to carry the goods. Once a court has discovered any of the abovementioned violations or illegal activities, it should timely report to the shipping administration and tax authorities.   (III) Problems with ship operations while berthing in dock   In a case of dispute over compensation for dock damage caused by ship contact, the dock owned by the plaintiff had a berthing capacity of 1,000 tonnage, yet the plaintiff told the defendant to berth with reference to a ship with a cargo capacity of 5,000 tonnage. The subject ship had a gear box failure during berthing and consequently contacted the dock, causing serious damage to the latter.   The Court has analyzed many cases of disputes over compensation for dock damage caused by ship contact, and concluded the following causes of such accidents: 1, some docks have complicated waters and the masters are not familiar with the waters and currents in these docks; 2, failures in ships’ equipment and apparel (towline); 3, port operators do not provide adequate control over port operation safety. For example, due to a lack of port patrol officers or immature safety facilities, ships cannot receive prompt and effective instructions from the ports, resulting in contacts, or port operators allow ships beyond the ports’ berthing capacity to berth.   To avoid or reduce such contact accidents, we propose the following solutions: 1, shipping enterprises should exert greater control over the safety of ship berthing, urge navigators to get familiar with port waters and to berth with good seamanship, and when necessary hire a tugboat or pilot to assist in the berthing; furthermore, they should pay more attention to the maintenance of ship equipment, so as to ensure the ships’ seaworthiness. 2, port operators should exert greater control over port operation safety, implement a safety responsibility system, and provide lighting and other safety supporting facilities for ship berthing; they should try to raise awareness of port operation safety, and only allow ships within the ports’ capacity to berth.   V Regulating the Labour Market — Problems with seafarer management and solutions we propose   (I) Problems with seafarer labour export and offshore dummy companies   In a case of dispute over labour remuneration and medical expenses initiated by seafarers against a shipping company, some seafarers were deployed to a foreign ship without signing a labour contract; when the seafarers left the ship, they initiated proceedings on labour remuneration and medical expenses. Through analysis of similar cases, the Court has found that some overseas shipping companies lack legal awareness and in many cases do not sign written contracts, while relevant Chinese companies or intermediaries have poor management and inadequate control, both resulting in the frequent occurrence of such disputes.   We also find that some shipping companies have set up an offshore company, the operations of which are run by a Chinese company as agent so as to avoid legal liability. In one case, a management company claimed against a Chinese shipping company for a shipping agency fee. However, the contract concerned had been entered into between the management company and a Hong Kong company, rather than the said shipping company. The Hong Kong company did not appear in court, and the shipping company insisted that it merely acted as agent of the Hong Kong company. It was ascertained that although the aforesaid contract bore a seal of the Hong Kong company, all operations including payment to the management company were handled by the Chinese shipping company. The Court holds that the Hong Kong company was actually a shell company that the shipping company set up in Hong Kong. Accordingly, if the shipping company was ruled to be agent of the Hong Kong company and therefore not liable, it would be difficult to enforce any judgment in favour of the management company against the Hong Kong company. The establishment of such offshore dummy companies enables shipping companies to illegally avoid legal liability, and consequently disturbs the shipping market.   We suggest that labour authorities should exert greater supervision over the labour protection of seafarers, and the foreign affairs authorities should have better control over the seafarer labour export market, and should timely caution against and report on offshore companies with bad credit or poor management; seafarer management agencies or intermediaries should have greater legal awareness and do their best to protect the lawful rights and interests of seafarers deployed overseas. Administration for industry and commerce should widely disseminate and apply the Company Law, and look into the actual relationship between offshore and domestic companies. Furthermore, they should prevent the practice of setting a nominal company to avoid liability, and hold any violating domestic companies legally liable.   (II) Problems in ship operation safety and seafarer visa management   In trials of certain ship disputes, the Court finds that some inland ship managers have absolutely no awareness of safety. They not only fail to fulfil their basic obligations under their operation contracts, i.e. to ensure seaworthiness of ships and eligibility of seafarers, but also fail to rigorously manage ships and seafarers’ visas in accordance with regulations on safety management. A few ship managers even apply to the Maritime Safety Administration for voyage visas for ships in the name of seafarers who do not serve on such ships. Such practice gives rise to hidden troubles in operation and management safety. In accordance with the Regulations on Traffic Safety in Inland Waters, one condition for the seaworthiness of a ship is that the ship shall be crewed by seafarers meeting the regulations stipulated by the transport authorities under the State Council. Each seafarer shall be competent and eligible for his post. This is a fundamental requirement for safe navigation and management, as well as a significant guarantee of traffic safety at sea and in navigable inland waters.   We advise ship owners and mangers to raise awareness of production safety and of law, eradicate illegal or untrue applications, and eliminate hidden troubles in all links of shipping operations. The Maritime Safety Administration should conduct a strict examination of ship safety and seafarers’ eligibility and exert greater supervision over ship inward and outward visas.   (III) Problems with fair protection of rights and interests of labourers and employers   The Court finds that it is quite common that written contracts are not signed for labour relations involving seafarers. In particular, in small or private shipping companies, a large proportion of seafarers are deployed or self-employed seafarers in temporary employment. In the event of a dispute between such seafarers and their employers, it will be difficult to produce evidence for the agreed wages, working conditions and period, and other facts. In accordance with the Labour Contract Law, as long as a seafarer is able to prove that labour relation de facto has been formed and wages have been agreed upon, the employer shall make payment doubling such wages to the seafarer. This provision is intended to urge employers to timely sign labour contracts with labourers, so that the rights and interests of labourers can be protected. The Court also entertained some cases of disputes over overtime payments to seafarers. These disputes arose when shipping companies failed to timely settle overtime payments while there were no applicable regulations in place. Viewed from the enforcement of relevant judgments, the aforesaid double wages and overtime compensation paid to seafarers are usually higher than the wage arrears. For this reason, a shipping company that fails to sign written labour contracts with seafarers will have to pay a higher price. Shipping companies and employers should attach great importance to this issue and manage labour contracts in compliance with applicable regulations.   In trials of these cases, the Court finds that a few seafarers intentionally did not sign a labour contract, and started to purposely collect evidence of their service on the ship from the date they got on board, e.g. taking and keeping photos of the daily log. After some time they resigned with an excuse, and then claimed for double wages on the ground that no written labour contract was signed. The labour authorities, shipping companies and employers should be aware of this problem.   We advise the labour authorities to exert greater supervision over these labour contracts, and when necessary cooperate with the customs or port authorities to carry out activities within their jurisdiction, so as to examine and rule out arrears of wages and employment of seafarers without written labour contracts. Furthermore, when hiring a seafarer, each shipping company should make sure to sign a written labour contract with the seafarer, so as to fairly protect the rights and interest of both parties. These measures will help to regulate the seafarer labour market and create a more harmonious labour market.   (IV) Problems with properly understanding and applying policies benefiting the common people   Due to increasing fuel prices, China has offered diesel subsidies to power-driven fishing vessels since 2006 to help the fishing population cope with rising costs. Although the subsidies are given to the owner of each fishing vessel, the government has not made provisions for the allocation and use of such subsidies. Disputes and conflicts thus arise in practice, mainly including the following circumstances: in a partnership, a partner holds that the other party wants to pocket all or most of the diesel subsidies; a party holds that the other party is not cooperative, resulting in the failed application for diesel subsidies; after collecting the diesel subsidies, a party withholds the allotment to the other party without authorization. In 2010, courts in Guangdong Province closed some cases in which the crew of fishing vessels claimed for allotment of diesel subsidies. As the government intends the subsidies to reduce the oil costs of production and operations, the Court holds that in cases where the owner and the crew of a fishing vessel share the production costs, the owner has no right to dispose of the diesel subsidies at its discretion. Accordingly, it was adjudged that the crew were entitled to an allotment of the subsidies. This decision facilitates the implementation of governmental policies benefiting the common people.   We advise the local government or fishing authorities to promote relevant laws and regulations, and to ensure owners and crews of fishing vessels or fishermen properly understand and implement such laws and regulations. By making effective agreements on the allotment and use of diesel subsidies during production and operation, disputes will be reduced and the fishing industry will develop in a sound and orderly way.   VI Regulating the Shipping Insurance Business — Problems with the shipping insurance industry and solutions we propose   (I) Problems in executing contracts for insurance   In trying cases of disputes arising out of contracts for cargo transport insurance, the Court finds that it was agreed on some insurance contracts that in the event of cargo loss, the insured should first lodge a written claim or even bring an action against the carrier or another third party; if the insured waived its claim against the third party, the insurer does not assume any liability for compensation. The Court holds that in accordance with the Insurance Law, the insured has the right to request the insurer to settle the claims in advance. The law does not support any agreement on the insured’s obligation to first claim or even proceed against the carrier or any liable third party. The time limit is one year for a consignor to claim against the carrier under a contract for carriage of goods by sea, while the time limit is two years for the consignor to claim against the insurer under an insurance contract. If the consignor is negligent in claiming or unable to claim against the carrier as agreed, and one year later claims against the insurer, the insurer will be at risk of exceeding the time limit to claim against the carrier after it has obtained the subrogation after settling the insured’s claim. For this reason, such agreement is not conducive to the protection of the lawful rights and interests of the insurer, or to the sound development of the shipping insurance market.   In addition, it is agreed in some insurance contracts that if the insured requests the insurer to settle the claim first, the insured shall sign and hand over to the insurer a subrogation form and a statement of claim against the carrier or a third party, together with other relevant documents and materials, and shall assist the insurer with the recovery from the liable party. The Court holds that this restriction is impracticable. The claim settlement by the insurer is a precondition for the issuance of a subrogation form; accordingly, it would be unreasonable to require the insured to issue a subrogation form before the insurer has made the payment. As the above agreement is a standard term provided by the insurer, when no other evidence is available, the Court has to interpret such agreement to the disadvantage of the insurer.   We advise insurers to properly manage insurance contracts, study applicable laws and regulations and discuss feasibility before drafting standard terms, and take into account the lawful rights and interests of both the insured and the insurer.   (II) Problems with the credibility of insurance surveyors   In trying cases of disputes arising out of ship insurance contracts, the Court finds that with respect to the evaluation of a ship involved in a covered accident and the calculation of the ship repair or salvage expenses, the surveyor reports issued by a few insurance surveyors firms aroused a lot of controversy. In some cases, two consecutive surveyor reports even came to contradicting conclusions on the same issue; consequently the Court had to ascertain relevant facts with the help of other evidence. This hinders trials and dispute resolution. It is known that in some places, a surveyors firm can carry on business after simply registering with the local administration for industry and commerce; founders or employees of some surveyors firms are former employees of insurance companies, and may be prone to bias drive by illegal benefits; some surveyors have limited ability and competence that they fail to offer authoritative opinions on specialized issues. These phenomena have impaired the credibility of insurance surveyors firms to different degrees.   We advise insurance regulatory authorities to attach more importance to these problems and cooperate with insurance companies in improving the supervision and control over insurance surveyors firms, surveyors and the reports they issue.   (III) Problems with inspection before acceptance of special cargo insurance   In a case of dispute arsing out of a marine insurance contract, an insured imported a cargo of second-hand electromechanical equipment and took out all risks insurance on the transport of such cargo with an insurer. However, no inspection was conducted of the equipment conditions before loading, and damage was found when the cargo arrived at the destination port. The insured and the insurer disputed bitterly on the value of cargo loss. The cargo damage survey report, issued by a surveyors firm after the accident, was not able to illustrate the actual conditions of the equipment before loading; accordingly there was no basis for the equipment repairs costs it estimated with reference to the actual prices in the repair market. Through the efforts of the Court, the case was eventually closed in mediation. Nevertheless, where such special cargo is not inspected or secured before loading, it would be more difficult for courts to ascertain the relevant facts once an accident occurs, and the dispute resolution among the consignor, insurer and carrier would be hindered. We advise insurers, before signing a transport insurance contract in connection with special cargoes, to conduct a pre-inspection before loading, so as to minimize the risk of settlement.   In view of the promise made by the Chinese government upon entry into the WTO, i.e. to open up the domestic insurance market, we advise domestic insurance companies to practically improve their services and enhance their credibility, so as to gain better integrated competitiveness in the global shipping insurance market.   VII Protecting Eco-environment of Waters — Problems in dealing with pollution of water resources and solutions we propose   (I) Problems with actions taken by ship owners to minimize risk of pollution caused by accidents   In a dispute case, two foreign vessels, i.e. M/V “Hyundai Advance” and M/V “MSC Ilona” collided at the Pearl River estuary, resulting in serious pollution from oil spill. As the two foreign vessels had respectively taken out insurance with the Swedish Club and the Steamship Mutual Underwriting Association Limited before the accident, the shipowners eventually reconciled with the plaintiff, the Administration of Ocean and Fisheries of Guangdong Province, with the assistance of the P & I clubs. This case inspires all shipowners. In most similar cases the Court has tried and achieved reconciliation, the owner of a ship causing such an accident has taken out insurance on the ship, and therefore is able to reach reconciliation with the strong support of the insurer. We advise shipowners to ensure that proper ship insurance is in place, so as to reduce and diversify risks of polluting the waters and avoid going bankrupt when an accident happens.   Shipowners should make every effort to reduce pollution once an accident takes place. When pollution happens, some liable shipowners adopt a negative and evasive attitude, which is highly undesirable. For instance, when M/V “Minghui 8” collided with another ship and sank after incurring damage to her cargo oil tank, the MSA sent a letter to request the shipowner to remove the oil so as to eliminate the threat of pollution; however, the shipowner ignored such request, and was eventually ordered by the Court to indemnify the MSA for the expenses of the compulsory actions to remove the oil. In the event of spill of oil or fuel on board a ship, the liable shipowner should take positive actions to minimize pollution, i.e. by timely blocking the spill and immediately calling a marine rescue centre, so that the MSA will send people to deploy booms and oil absorbent mats to contain oil pollution. The shipowner should timely report to the MSA on the details of the accident, the overall ship condition, the location of spill and dimensions of drain outlets of the ship, approximate speed of spill, total volume and loading positions of oil on board, and degree of risk of oil spill etc. The shipowner should make every effort to minimize oil spill and reduce pollution of the marine environment and any other losses. Furthermore, pointless rescue actions should be prevented lest secondary pollution may occur. For example, when oil spill occurred when M/V “Ocean Success” was unloading oil at port, the ship interests poured oil dispersant into the sea and used a fire hydrant to spray over the floating oil within the booms. When people sent by the MSA arrived, a white oil film had been formed over the water surface, resulting in secondary pollution.   To solve these problems, we propose the following solutions: 1, to engage an assessment agency as early as possible to collect evidence. The shipowner of M/V “Ocean Success” did not engage a foreign expert until 10 days after the accident, and the other Chinese expert engaged had never appeared on the scene. Consequently, the evidence it provided was not admitted by the Court in that such evidence was not adequate to refute the evidence provided by the plaintiff. The liable shipowner should actively collect evidence at the scene upon occurrence of the accident, including taking photos and video of the accident scene, keeping water samples, engaging a qualified assessment agency for prompt investigation and evidence collection, and acquiring initial data. These will be necessary conditions for the resolution of any future dispute; 2, to set up a fund to limit the amount of compensation. After the occurrence of an accident causing pollution of water resources, the liable shipowner should fully exercise the special mechanism to protect shipowners’ rights and interests, and set up a fund of limitation of liability for maritime claims so as to keep the amount of compensation within the statutory limit.   (II) Problems with pollution assessment techniques   In a dispute case, the defendant challenged the claim that the marine pollution in dispute was caused by an oil spill on the part of the defendant, and held that an assessment should be conducted of the oil pollution in order to indentify the oil concentration of the waters before the pollution accident. However, restricted by time, geography and other factors, it was difficult to identify the exact oil concentration of the waters before the accident. This is one of the difficulties in the technical assessment of water pollution.   There are two technical barriers to claims in relation to water resources pollution: 1, there are no adequate technical means to exactly assess the scale of pollutant spread and the extent of damage to the marine life and environment. Due to the fluidity of the waters, and as pollutants will flow away as time goes by and marine creatures will swiftly escaped from a polluted scene, it becomes extremely difficult to determine the extent of damage caused by pollution. 2, there is no basis for the calculation of the amount of most losses. Oil pollution accidents mainly cause two types of damage to the national and public interests: the first type is damage to the national environmental resources, such as natural fishery resources, aquatic plants, mangrove, birds and landscape; the other type is damage to the environmental quality, such as deteriorated water quality, temporary or permanent loss of various uses and functions, disappearance of habitats for animals and plants. Nevertheless, the plaintiff can only claim for the loss of fishery resources, mainly because it is clearly stipulated in the Regulations on Calculation of Fishery Loss Caused by Pollution of Water Resources, issued by the Ministry of Agriculture, that the loss of natural fishery resources can be estimated at no less than 3 folds of the direct damage to aquatic products. As there is no basis for the calculation of other losses, the plaintiff cannot claim for such losses.   To overcome the foregoing technical barriers, we suggest setting up an oil pollution compensation fund and cooperating with international experts. In accordance with the Regulations on the Prevention and Control of Marine Pollution from Ships enacted by China in 2010, owners of cargo oil shall contribute to the ship oil pollution compensation fund. The State is contemplating setting up a ship oil compensation fund and the management committee thereof. We suggest drawing lessons from the practice of the International Oil Pollution Compensation Funds (IOPC Funds), namely to actively participate in assessing and determining the damage as the party providing the compensation. After an accident, an expert team is formed consisting of experts from the IOPC Funds and the International Group of P&I Clubs to assess the cleanup costs and other claims made by the victims. Experts sent by the IOPC Funds are generally experts from the International Tanker Owners Pollution Federation (ITOPF). They not only encourage reasonable cleanup actions, but also rapidly assess claims caused by the pollution and facilitate the resolution of disputes over damages.   (III) Problems with pollution assessment mechanism   In a case of public interest litigation caused by water pollution, the defendant challenged the objectivity and fairness of an investigation report issued by a fishery environment monitoring centre and provided by the plaintiff, the fishery authorities. The defendant held that the data used in the investigation report, including oil concentration in the waters and monitoring records, were all provided by fishery inspectors affiliated with the plaintiff. This reveals the institutional defects of assessment organizations. Some assessment organizations are affiliated with the plaintiff, and some participate in the investigation as accident investigators and are accordingly obliged to provide technical support and services for plaintiffs such as marine administrations; consequently, the credibility of investigation reports they issue are widely challenged. Furthermore, assessment organizations have different qualifications. Some are only qualified for environmental monitoring, some are qualified for assessing damage to fishery resources and do not have  adequate ability and experience for assessing damage to environmental resources and the environment.   To cope with these problems, we suggest forming a specialized organization consisting of maritime experts, marine environment researchers and price evaluation experts to assess pollution of water resources and damage to environment, thereby supporting relief for environmental damage.   (IV) Problems with the plaintiff capacity of water management functional authorities   In a case of dispute over damages for marine pollution initiated by the Environmental Protection Bureau of Zhuhai, Guangdong against two shipowners, the two defendants raised objection to the capacity of the plaintiff, alleging that it was legally groundless for the plaintiff to initiate public interest litigation on behalf of the State. In most cases of public interest litigation, the capacity of the plaintiff is challenged, showing that this is a highly controversial issue. In China, other than the Marine Environmental Law, no other laws directly provide for public interest litigation. Accordingly, functional authorities are not legally authorized to initiate public interest litigation. Furthermore, the Civil Procedure Law provides that one condition for the plaintiff to bring an action is that the plaintiff must “have a direct interest in the case”, while one of the features of public interest litigation is that the plaintiff has no direct interest in the damage at issue. The aforesaid provision becomes a legal barrier hindering functional authorities from initiating public interest litigation. As a result, only a small number of public interest litigation is initiated, failing to effectively reduce the pollution of water resources. Over the 26 years since our establishment, we have entertained cases of public interest litigation over water pollution with subject matters amounting to approximately 70 million Yuan. According to preliminary statistics provided by the Administration of Ocean and Fisheries of Guangdong Province, Guangdong suffered economic losses of nearly 200 million Yuan as a result of pollution of the ocean and fisheries merely between 2001 and 2007. Plus the losses caused by pollution of water resources under the administration of the MSA, environmental protection bureau, port authorities, water authorities, Pearl River water resources authorities and other government agencies, the amount of claims known only takes up a very low proportion. According to the statistics on China’s Green National Accounting Study Report 2004, China sustained losses of around 511,800 million Yuan due to environmental pollution in 2004, yet few cases of public interest litigation were thus initiated.   We advise the People's Congress or local governments to enact laws and regulations to explicitly authorize relevant functional authorities to initiate public interest litigation over water pollution. Moreover, in cases of public interest litigation over water pollution, the courts can only adjudge the damages to be turned in the national treasury, while no monitoring mechanism is available to supervise whether the damages are used to restore the water environment. To cope with this problem, we suggest setting up a water resources pollution compensation fund, with contributions from the government, polluters, environmental organizations and the society. Damages adjudged by maritime courts in public interest litigation should also be included into the fund. The fund should be managed by an appointed body, and be exclusively used to restore and control the loss of national and public interests caused by pollution of water resources.   VIII Conclusions   The Report on Trials 2010 of Guangzhou Maritime Court is the epitome of the overall maritime trials conducted by the Court throughout 2010. By reviewing the maritime trials completed, the Court has analyzed changes and legal issues in shipping-based financing, forwarding, labour, and insurance markets, and proposed solutions and countermeasures. We hope our efforts will provide some empirical reference and guidance for shipping companies in preventing risks and disputes, thereby promoting the sound and orderly development of the shipping economy.   A clear objective to promote the marine economy is set out in the Proposal for Formulating the Twelfth Five-Year Plan for National Economic and Social Development, passed in the 5th plenary session of the 17th Central Committee of the CPC. 2011 is the first year of China’s 12th Five-Year Plan. Protecting and promoting the sound development of the shipping economy is vital to the growth of trade and economy of Guangdong Province. The Court will insist on rendering judicial services for the people, improving maritime trials, and actively fulfilling our judicial functions. Through these efforts, we will make greater contributions to the growth of the marine and shipping economy of Guangdong.