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Arrest of Ships in Mainland China by H & Y Law Firm


Arrest of Ships in Mainland China by H & Y Law Firm

1. Applicable Laws

China is not a contracting state-member of the International Convention Relating to the Arrest of Sea –Going Ships (1952). Therefore, in Mainland China, arrest of ship is only governed by the domestic laws, mainly the Special Maritime Procedure Law of PRC coming into force on July 1, 2000.

Despite not being a state-member of the aforesaid International Convention, China extensively absorbs the advanced ideas and provisions from the related Conventions on arrest of ships, which are fully embodied in Chapter 3 of the Special Maritime Procedure Law of PRC. That is to say, China has basically established the rules concerning the arrest of ships by inspiration of the international conventions.

2. The Scope of the Maritime Claims underlying the Arrest

Article 21 of the Special Maritime Procedure Law of PRC lists 22 types of maritime claims, only upon which the arrest of ships can be pursued. Further, the applicant can apply for arrest of a ship prior to litigation in order to obtain a security. The closed list of 22 types of claims is similar to the provisions of Article 1 of 1999 Convention on Arrest of Ships (A to V of the list 1).

Briefly, no application can be accepted for the arrest of a ship on account of maritime claims other than the said 22 specific types, except for the enforcement of a judgment, an arbitration award or other legal documents.

3. Ships that can be subject to Arrest

(1) Offending Ships

The offending ship can be arrested in any of the following circumstances:(i) the ship-owner is liable for the maritime claim and is the owner of the ship when the arrest is effected; (ii) the demise charterer of the ship is liable for the maritime claim and is the demise charterer or owner of the ship when the arrest is effected; (iii) the maritime claim is based upon a ship mortgage or rights of the similar nature; (iv) the maritime claim relates to ownership or possession of a ship; or the maritime claim is secured by a maritime lien.

A claimant may apply for arrest of the offending ship regardless of non-awareness of the name of the person against whom the claim is triggered.

(2) Sister Ships

Sister ships owned at the time of the arrest by the shipowner, demise charterer, time charterer or voyage charterer who is responsible for the maritime claim can be arrested. However, basing upon the claims concerning ownership or possession of a ship, it is only the offending ship may be arrested.

(3) Immune Ships

Ships engaged in military or governmental services are not subject to arrest.

4. Procedure of Arrest

(1) Competent Jurisdiction

In China, an application for arrest of ship before instituting an action shall be filed to the PRC maritime court of the place where the offending ship berths. The jurisdiction agreement or arbitration agreement reached between the parties doesn’t have any effect on the arrest of ships. Even if the related maritime case has been accepted by a foreign court or the dispute concerned has been submitted to arbitration, the claimant may file an application for arrest of ship to the Chinese maritime court provided that the ship in case is within the territory of China.

(2) Filing an Application

The claimant who wishes to apply for arrest of ship shall file a written application to the competent maritime court. In the application,the particulars of the maritime claim, reasons for the application, the name of the ship and the amount of security required shall be specified with relevant evidence attached.

When the supporting documents are in other languages a Chinese translation shall be requested. If these documents are formed outside the territory of China, they must be notarized and legalized.

The maritime court, having accepted the application, shall make an order within 48 hours. Where the arrest of ship is ordered, it will be executed forthwith; where the conditions for the arrest of ship are not met, the court will make an order to reject the application.

(3) Counter-Security:

The maritime court may request the claimant to provide counter-security to cover costs, charges, damages, fees or other expenses arising from a potential wrongful arrest. If the claimant fails to do so, the maritime court will reject the application.

(4) Action on the Merits

The claimant must bring an action or applies for arbitration in accordance with the arbitration agreement within 30 days after the arrest is performed, otherwise the maritime court shall release the ship or return the security if a security has been given after the arrest.

Where legal proceedings or arbitral proceedings are not commenced in respect of a maritime dispute after the execution of the arrest of ship, any party may bring an action on the maritime claim in the maritime court who ordered the arrest or any other competent maritime court, unless the jurisdiction agreement or arbitration agreement between the parties provides otherwise.

5. Release from Arrest

The owner of the ship can request the release of the ship from arrest before the maritime court ordering the arrest. He may demand the ship immediately released upon the sufficient security is provided.

6. Wrongful Arrest

Chinese law does not specify particular obligations on the claimant for the arrest, for example, a full disclosure of the facts leading to the arrest. However, if the application for the arrest is proven to be wrong, the applicant shall compensate the losses suffered by the owners or any interested persons affected by the arrest.

The owners or any interested persons may bring an action against the applicant to the maritime court that ordered the arrest.

7. Time Bar

Claims for which a ship may be arrested are subject to the time limitation under the Maritime Code of the PRC. According to the Maritime Code, the time limitation regarding different maritime claims is as follows:

The limitation period for claims on the carriage of goods by sea and the contribution in general average is one year; for claims with regard to charter parties and salvage at sea is two years, and for claims concerning collision of ships is two years, etc.

8. Costs

(1) Court Fees

The court fee for applying for arrest of ship is RMB 5,000. ( around USD 715. )

(2) Attorney’s Fees

The lawyer’s fee is usually calculated on hourly basis, for example, USD180 / hour.