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The Supreme People’s Court of the People’s Republic of China Clarifies Some Issues for Maritime Cases

By Wang Zhonghua (Shandong Youhua Law Firm)
2nd Floor, Block B, Building Ruinakangdu, 69 Haimen Road,
Qingdao, P.R.China 266071
Tel: +86 532 8197 8792
E-mail: wangzhonghua@youhualaw.com
Web: www.youhualaw.com

On 18 July 2012, the National Conference on Maritime Trials was held by the Supreme People’s Court of the People’s Republic of China (“SPC”). At the Conference, the SPC clarified eleven issues regarding the trial of maritime cases, which will provide some guidance for shipping law practitioners.

1. Procedure in rejecting the validity of foreign-related arbitration agreement.

The SPC restates that the maritime courts shall report to the SPC for their review when determining to reject the validity of foreign-related arbitration agreement and to reject the recognition and enforcement of foreign arbitration awards and, it is wrong for the maritime courts to evade the requirements of REPORT by deciding that the disputes do not fall into the arbitration affairs or that the arbitration agreement is null and void.

2. Choice of Applicable Law for maritime cases.

When determining the choice of applicable law, the Chapter 14 of the Maritime Code of the People’s Republic of China (“MC”) shall prevail over the Law of the People’s Republic of China on Choice of Applicable Law for Foreign-related Civil Relationships.

The Chapter 4 of the MC in nature is not mandatory provisions and the parities can choose the law applicable to the contract of carriage of goods by sea.

3. Contract of carriage of goods by sea.

In the cases of delivery without production of an original bill of lading, the shipper or the B/L holder shall provide the prima facie evidence proving that the goods has been delivered without an original bill of lading. As soon as the claimant proves that, the burden of proof shifts to the carrier who must adduce evidence that the goods has still been in his custody. The amount of compensation shall be determined on the basis of the CIF value of the goods.

When the consignee fails to take delivery of the goods, the expenses and risks arising therefrom in principle shall be borne by the shipper even the bill of lading marked freight collect. The carrier may exercise the right of lien on the goods to satisfy their claim for freight, demurrage etc. Whether to exercise the right of lien does not prejudice the carrier’s claim against the shipper or the B/L holder.

4. Marine insurance.

The MC and the Provisions of the Supreme People’s Court on Several Issues about the Trial of Cases Concerning Marine Insurance Disputes shall receive priority application over the Insurance Law.

In the subrogation case, the insurer must adduce the payment documents to establish that they have paid the insurance compensation to the insured, failing which, the court shall not accept the subrogation case.

During the trial of the claim between the insured and the carrier, the insurer map apply to the court for replacing the Plaintiff with themselves or joining the case as a co-Plaintiff with the insured after the insurer has honored the insurance policy. If this happens in the trial of the second instance, the case shall be returned to the first instance court for a retrial.

5. Crew member employment contract, crew service contract and crew personal injury.

The maritime court may, not subject to the labor arbitration priority, directly accept the case arising under, out of, or relating to the crew member employment contract and crew service contract. However, the disputes must be limited to those with respect to the work on board.

For crew personal injury case, the MC shall be applied firstly, the Tort Law secondly and the Interpretation of the Supreme People’s Court concerning the Personal Injury thirdly. Specially, unlike the Interpretation, article 35 of the Tort Law provides that, if the employee causes any harm to himself as the result of the labor services, the employee and the employer shall assume corresponding liabilities according to their respective faults, which, the fault liability principle should also be applied for crew personal injury case. Besides, according to the Interpretation, the death compensation is calculated on the basis of the per capita disposable income where the trial court is located. As far as the maritime court is concerned, the location of the trial court means that of the principal office of the maritime court instead of their branch office.

6. Certificates for fisheries.

For fisheries claims, the fisherman must provide the Certificates both for sea area use and for fishing to establish their legal benefit for fishing. Without the Certificates, the claim for the loss of fishing income will be denied by the court.

7. Coast and river carriage

Firstly, the Contract Law rather than the Chapter 4 of the MC shall be applied to the case regarding coast and river carriage and, the Rules for Carriage of Goods by Waterway promulgated by the Ministry of Communication could also be referenced in such cases.

The contract of coast or river carriage shall become null and void when the carrier fails to obtain the License for waterway carriage.

8. Ship-source oil pollution.

In principle, the claim for oil pollution damage caused by Chinese ships which sail only in coastal lines to the Chinese territorial sea shall apply the Chinese domestic laws rather than the CLC. However, as per article 52 of Regulations of the People’s Republic of China on the Prevention and Control of Vessel-Included Marine Environment Pollution, with regard to the limitation of liability for pollution damage caused by vessels carrying persistent oils in bulk to sea areas under the jurisdiction of the People’s Republic of China, the provisions of the international conventions concluded or acceded to by the People’s Republic of China shall apply. Therefore, the limitation of liability provided by CLC shall apply to the oil pollution damage caused by Chinese ships which sail only in coastal lines, and the other issues, e.g. the principle of liability and the time limit shall apply the Chinese domestic laws.

9. Container demurrage.

In the absence of a contract or of an explicit agreement between the shipper and the carrier, the demurrage tariffs published on carrier’s website could not be deemed as their agreement. Under such circumstance, the carrier should bear the burden of proving the market demurrage rate.

10. Ship mortgage.

Article 17 of the MC stipulates that once a mortgage is established on a ship, the ownership of the mortgaged ship shall not be transferred without the consent of the mortgagee. But what will happen if the ship is sold without the consent of the mortgagee. Article 3 of the Interpretation of the Supreme People’s Court on Sale and Purchase Contract states that, where any party claims that a contract is void because the seller has no right to own or dispose of the subject matter upon entering into the contract, the court shall not support such request. If the seller causes the title of the subject matter to be unable to be transferred due to not obtaining the ownership of or the right to dispose the subject matter, the buyer has a right to request the seller to bear the default liability or request to terminate the contract and claims for liquidated damages. Therefore, such sale and purchase of mortgaged ship contract without the consent of the mortgagee is valid, but which does not prejudice the mortgagee to exercise the right of ship mortgage, that is to say when the mortgagor fails to pay to the mortgagee, the mortgagee may apply for sale of the mortgaged ship and enjoy the preferred compensation from the proceeds.

11. Ship arrest and auction.

According to the Maritime Special Procedure Law, the maritime court may arrest a bareboat chartered ship when the bareboat charterer of the ship is liable for the maritime claim and is the bareboat charterer or owner of the ship when the arrest is effected. And the arrested bareboat chartered ship also could be sold by the court with the application of the claimant.

The Maritime Special Procedure Law also permit a movable arrest of a ship, i.e. a ship may, with the consent of the claimant, be allowed to resume operations subject to restrictions on disposing of the ship or creating a new mortgage on the ship, however which shall be limited to the material voyage of the ship which sails only in coastal lines.




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