10 Typical Maritime Cases of Chinese Courts in Year 2017

Case 1. Zhejiang Longda Stainless Steel Co., Ltd. vs. A.P. Moller-Maersk A/S - Disputes arising from the contract of carriage of goods by sea.

Art. 308 of PRC Contract Law provides that Before the carrier delivers the goods to the consignee, the shipper may ask the carrier to stop the transportation, return the goods, change the place of destination, or deliver the goods to another consignee. However, the consignor shall compensate for the losses thus caused to the carrier, which grants the shipper the liberty to change the contract of transportation before the cargo arrives at destination. However, whether this article should apply to the contract of carriage of good by sea has been a longstanding disputable issue in maritime judicial practice.

In this case, the PRC Supreme People’s Court confirmed this Article should also apply to the contract of carriage of goods by sea, but when it is difficult to satisfy or it will have a serious impact on the carrier’s normal operation, carrier is entitled to refuse shipper’s request for changing the port of discharge or returning the cargo to the loading port.

Case 2. PICC Property and Casualty Company Limited vs. Taizhou Sanfu Ship Engineering Co., Ltd. - Disputes regarding the shipbuilder’s risk insurance.

In this case, the Supreme People’s Court opine that-

The “Ship” as referred to in Chinese Maritime Code (CMC) is limited to the ones of which the construction has been completed with capacity of navigation. Whether the ships covered by shipbuilder’s risk insurance belong to the ones provided by CMC should be identified by whether the ships have the capacity of navigation in different construction stages. In this case, when Sanfu Company bought insurance, the materials for building the ship had not been moved to the slipway, which is far to the ships of CMC. Therefore, CMC should not apply in this case.

The “loss and expenses of the insured vessel” as referred to in the Insurance Clauses should be interpreted as the “loss and expenses of the insured”, and unless otherwise agreed, both the physical damage to the vessel and intangible economic loss should be included.

The policy of shipbuilder’s risk insurance has made it clear that the insurer’s liability is based on the shipbuilding contract and should be ascertained according to the policy and insurance clauses. Therefore, the compensation made by the insured to the buyer based on the negotiation outside the scope of the shipbuilding contract is beyond the insurer’s reasonable expectations at the time offering this insurance cover, the insurer is entitled to reject the insured’s claims for the losses arising from such compensation.

Case 3. GUANGZHOU HAIDE CARGOTRANS CO., LTD. vs. FUJIAN ITAWA INDUSTRY CO., LTD. – Disputes arising from the contract of carriage of goods by sea.

In this case, the cargo was disposed as abandoned by the customs of destination port in Colombia because nobody took delivery within the statutory period, then the shipper, who still held the original Bs/L and had not received the cargo price, alleged that carrier released the cargo without original bs/l and claimed against carrier for the loss of cargo price. In the first instance in Guangzhou Maritime Court (GMC), the carrier provided a copy of the document issued by the destination customs, but the court denied the authenticity of this document due to no original of this document. GMC was not satisfied with that the cargo was disposed by the customs and therefore held the carrier liable for releasing the cargo without original bs/l. The carrier appealed to Guangdong High People’s Court, and supplemented notarization and legalization of the abovementioned document. Finally, the second instance court supported the carrier’s defense and rejected shipper’s claims.

Case 4. China Merchants Logistics Holding Co., Ltd. vs. ZIM Integrated Shipping Services Ltd. et al - Disputes arising from the contract of carriage of goods by sea.

If the goods were not taken delivery of at the port of discharge, the carrier is entitled to claim against the shipper based on the contract of carriage of goods by sea for their losses arising therefrom.

Exercising the lien on cargo stipulated by Art. 87 & Art. 88 of CMC is not a pre-condition for the carrier to claim against the shipper, which is just one way of the carrier to protect rights and interests. Not exercising the lien on cargo has no impact on carrier claim against the shipper.

Notarization and Legalization should not be treated as the sole criterion to judge the authenticity of the evidence generated outside the territory of the People's Republic of China. The authenticity of such evidence should be assessed in integrated consideration of the specific details of the case, the category of the evidence, the facts to be proven, whether the evidence could be corroborated by other evidence and other related factors.

Case 5. Xiamen Lipeng Shipping Co., Ltd. vs. China Shipping Development Co., Ltd. – Disputes regarding the ship collision.

MV. LI PENG 1 sank following a collision with MV. BI HUA SHAN. As per the investigation report of MSA, MV. BI HUA SHAN should bear principal liability and MV. LI PENG 1 should bear secondary liability for the collision. During the trial of this collision case, Xiamen Maritime Court found that the sink of MV LI PENG 1 was mainly caused by inappropriate binding of containers onboard which aggravated the vessel’s incline to starboard.

The court opine that the liability of MV BI HUA SHAN for the collision accident should distinguished from her liability for the sink of MV LI PENG 1. Finally, the court held the fault portion of MV BI HUA SHAN for the collision is 60% and the fault portion of MV BI HUA SHAN for the sink of MV LI PENG 1 is 40%.

In this case, both parties established the limitation fund. After ascertaining the losses of each party, the offset should be made first and then the balance could be paid from the fund.

Case 6. Allan Mendoza Tablate Accused of the Crime of Causing Marine Traffic Casualties

This is the first criminal case tried by the maritime court in China.

In May of 2016, MV Catalina collided with the fishing boat Lu Rong Yu 58398 when passing through the Xiangshan coastal waters in Zhejiang Province. Lu Rong Yu 58398 was turned over by the collision, 14 crew members onboard were dead and 5 crew members were missing. Allan was the second officer of MV Catalina who was on duty on the bridge at the time of accident. The waters where the accident happened is within the fishing area and it was foggy in the sea with poor visibility when MV Catalina passing through, but Allan did not keep proper lookout, not take the measures for navigation in fog and not navigate the vessel at a safe speed, and further failed to make right assessment of the situation and the risk of collision at material time to take effective measures for avoiding the collision. Therefore, Ningbo MSA identified the MV Catalina should bear the principal liability for this accident and Allan was accused of the crime of Causing Traffic Casualty. Through the trial of Ningbo Maritime Court, Allan was found guilty and sentenced to 3.5 years in prison.

Case 7. Soyuz Trans Link LLP vs. Shenzhen Yunda Logistics Supply Chain Service Co., Ltd. – a case regarding the Maritime Injunction

Soyuz Trans Link LLP entrusted Shenzhen Yunda Logistics Supply Chain Service Co., Ltd to handle the matters of freight forwarder relating to the multimodal transport from Yokohama Port, Japan to Lianyungang Port, China by sea, and then to Kazakhstan by railway. After the goods arrived at Lianyungang Port as scheduled, Yunda Company refused to arrange the next section of the transport with the reason that Soyuz Trans Link (Dubai), an affiliated company of Soyuz Trans Link LLP had failed to pay the expenses of other previous matters, which caused the goods staying in Lianyungang for around half a year. Soyuz Trans Link LLP paid the freight forwarder expenses for this multimodal transport matter to Yunda Company and noticed in writing to terminate the contract with Yunda Company. Then Soyuz Trans Link LLP applied for the Maritime Injunction in Shanghai Maritime Court (SMC) to prevent the expansion of losses. SMC held that Yunda Company, who had no reasonable reason for refusing to deliver the goods Soyuz Trans Link LLP, had breached the contract and violated the laws. So SMC approved the application of Soyuz Trans Link LLP and ordered Yunda Company to deliver the goods to Soyuz Trans Link LLP immediately.

Case 8. Wenzhou MSA Applied for Determination of a Property as Ownerless

Wenzhou MSA received the report on 20^th Oct. 2016 that a vessel was found stranding in the lower reaches of Ou’yue Bridge. After investigation, Wenzhou MSA found that there were bunkers loaded onboard, no certificate and no crew. Wenzhou MSA refloated the vessel and moved it into dock. The bunkers onboard was discharged. After further investigation, the Owner or the crew member of this vessel still could not be found. The ownership of the vessel could not be identified and nobody appeared to claim the rights regarding this vessel. Then Wenzhou MSA applied to Ningbo Maritime Court (NMC) for determining the vessel as Ownerless. NMC issued the announcement and upon the expiration of the 1-year announcement period, NMC rendered the judgment ascertaining the vessel as ownerless, and the auction price of the vessel should be nationalized after deduction of the costs for announcement, assessment and auction.

Case 9. Harpina Owning Company Limited vs. Jiangsu Tianyuan Ship Import and Export Co., Ltd. et al. – Disputes regarding Shipbuilding Contract.

During the period from end of 2013 to June 2014, Cardiff Marine Inc., a company incorporated in Greece, in the names of six companies (including Harpina Owning Company Limited), entered six Shipbuilding Contracts with Jiangsu Tianyuan Ship Import and Export Co., Ltd. et al. The first vessel was delivered in good order but disputes arose form all the rest 5 vessels. On 1^st March 2017, Harpina applied to Wuhan Maritime Court for maritime injunction, requesting the defendants deliver the involved vessel immediately. On 16^th of the same month, Harpina referred this case to LMAA for arbitration. At the same time, there had been three other on-going arbitrations in LMAA regaridng other vessels, and one on-going litigation in English Court. Through the mediation conducted by WMC, settlement was reached by Harpina and the defendants. Harpina made the payment and the defendants delivered the vessel. Harpina withdraw the arbitration in LMAA and bore all the costs for the arbitration. All the other cases were also settled following this mode.

Case 10. Daewoo Shipbuilding & Marine Engineering Co., Ltd vs. C Duckling Corporation- Disputes regarding Ship Mortgage Contract.

In this case, Qingdao Maritime Court applied the Panamanian law to identify the effect of the plaintiff’s mortgage and upheld the plaintiff’s priority to be paid from the vessel.