Guiding Case- No. 108[1]

Cause of Action: Dispute on Contract of Carriage of Goods by Sea

Keywords: Contract of Carriage of Goods by Sea/ Modification of Contract/ Revise Port of Destination

Introduction of Fact:

On June 2014, Zhejiang Longda Stainless Steel Co., Ltd (“Longda”) exported stainless steel with cargo price USD 366,918.97 from Ningbo port, China to Colombo, Sri Lanka and booked cargo space with A.P.Moller-MaerskA/S (“Maersk”) via freight forwarding service.

On 28^th June 2014, the cargo was loaded on board MV. GUNDE MAERSK and Longda requested Maersk to telex release the cargo at port of destination.

On 9^th July 2014, Longda, via freight forwarding service, sent email to Maersk requesting for revising port of destination. On the same day, Maersk replied to Longda that the vessel would arrived at port of destination in no more than two days, so it’s impossible to revise port of destination. On 10^th July 2014, Longda enquired Maersk if the cargo can be shipped back by the same vessel, Maersk replied that it could not be operative, however, the cargo receiver at port of destination can clean customs and apply to local customs authority for returning back the cargo to loading port. On the same day, Longda asked Maersk if there were any other ways for returning back the cargo but got no reply.

On 12^th July 2014, the cargo arrived at Colombo, Sri Lanka. As per the instruction of Longda, Maersk issued original B/Ls on 29^th Jan 2015 which recorded below information: Shipper was Longda; Consignee and Notified Party were VENUS STEEL PVT LTD; loading port was Ningbo, China; port of destination was Colombo, Sri Lanka.

On 19^th May 2015, Longda sent email to Maersk, indicating that they have already applied for returning back cargo as per requirement of Maersk. Maersk then replied that the cargo has already been auctioned off by local customs authority. Longda filed lawsuit to Ningbo Maritime court to claim for the cargo loss against Maersk.

Judgement of Courts:

1. First instance court (Ningbo Maritime Court) opined that it was the consignee failed to deliver the cargo that led to the auction-off of cargo, thus decided dismissing the lawsuit of Longda. Longda appealed to second instance court.

2. Second instance court (Zhejiang High Court) considered that Longda had rights to request for revision of port of destination before cargo delivery and Maersk did not clearly reply to Longda whether the cargo could be arranged to return back or not, thus decided that Maersk shall bear 50% liability of cargo loss.

3. Retrial Court (Supreme Court) dismissed the judgement of second instance court and upheld the judgement of first instance court.

Meaning of Case:

Article 5 of Contract Law of PRC stipulated that “The parties shall abide by the principle of fairness in prescribing their respective rights and obligations.”Article 308 of the law provided that “Prior to carrier's delivery of the cargo to the consignee, the shipper may require the carrier to suspend the carriage, return the cargo, change the destination or deliver the cargo to another consignee, provided that it shall indemnify the carrier for any loss it sustains as a result.”

In shipping practice, the carriage of goods by sea has particularly large volume of shipment, pre-determined voyage and relatively fixed route, etc. The shipper's request for changing the port or returning the goods is sometimes not easy to operate, which may also hinder the normal operation of the carrier or cause great damage to the shipper or consignee of other goods. Under such circumstances, it would be unfair to require the carrier to unconditionally comply with the shipper's request for a change in the contract of carriage. In this case, Longda requested for revision of  port of destination only no more than 2-day in advance of cargo arrival which is unpractical for Maersk to follow Longda’s instruction. Longda has known about the general arrival time of the cargo and non-delivery of cargo at the destination port while did not take any measures to deal with the cargo as long as eight months, resulting in the goods being auctioned off by the customs. Although Longda maintains that Maersk failed to fulfill its duty of prudent management of cargo, they has not proved the fact with enough evidence. Finally, Supreme Court decided to support the allegation of Maersk and dismiss the lawsuit of Longda.

Guiding Case- No. 110[2]

Cause of Action: Dispute on Contract of Employed Salvage

Keywords: Contract of Salvage/ Employed Salvage/ Reward of Salvage

Introduction of Fact:

At 05:00 on 12^th August 2011, the vessel MV. Archangelos Gabriel with shipment of 54580mt crude oil ran aground near the north channel of Qiongzhou Strait, which caused both the vessel and cargo on board in danger and also seriously threatened the safety of marine environment. As the shipowner of the vessel, Archangelos Investments E.N.E. in Greece authorized their representative in Shanghai (“Shanghai Representative”) to send urgent letter to South China Sea Salvage Bureau (“ Salvage Bureau”)for salvage and accepted their quotation of salvage operation.

At 20:40 the same day, Shanghai representative submitted letter of entrustment to Salvage Bureau by email, entrusting their Tugboat No. 116 and 101 to assist the vessel to refloat, and guaranteed that whether finally successful or not salvage reward shall be paid at RMB3.2 per horsepower and the billing time will keep going until tugboat return back to their original on-duty standby point after shipowner notifying them to stop salvage. Besides, Shanghai representative also request Salvage Bureau to dispatch divers to investigate the underwater part of vessel and hire Tugboat “201” to carry their two person from Haikou to the vessel with hire rate RMB1.5 per horsepower per hour and billing for actual hiring time.

After completion of salvage, it was found that the value of the vessel salved was USD30,531,856, and value of cargo salved was USD48,053,870, that is, the value of the vessel salved accounted for 38.85% of the total salved value. Salvage Bureau claimed for whole salvage reward RMB7,240,998.24 against the shipowner and listed their salvage operation as below:

1) Tugboat 116 with GT 3681, horsepower 12240, total working time 155.58hours;

2) Tugboat 110 with GT 4091, horsepower 18850, total working time13.58hours;

3) Tugboat 201 with GT 552, horsepower 6093, total working time 24.41hours;

4) Divers did not carry out underwater survey while their total actual working time was 8 hours.

The shipowner alleged that they’re not obliged to pay for cargo’s proportion of salvage reward, and failed to pay RMB 7,240,998.24 to Salvage Bureau. Salvage Bureau filed lawsuit to Guangzhou Maritime Court, claiming for RMB 7,240,998.24 and delayed payment interest RMB47,644.64.

Judgement of Courts:

1. First instance court (Guangzhou Maritime Court) decided that the shipowner shall pay reward salvage RMB6,592,913.58 and relevant delayed payment interest to Salvage Bureau. The shipowner objected to this judgement and appealed to second instance court.

2. Second instance court (Guangdong High Court) opined that, as per Article 183 of Maritime Code of PRC, that the shipowner shall only pay vessel’s proportion bear to the total salved value, thus dismissed the judgement of first instance and decided that shipowner shall pay RMB 2,561,346.93 to Salvage Bureau.

3. Retrial Court (Supreme Court) dismissed the judgement of second instance court and upheld the judgement of first instance court.

Meaning of Case:

Article 179 of Maritime Code of PRC stipulated the principal of “No Cure No Pay”. Article 180 stipulated several criteria to be considered for salvage reward. Article 183 provided that “ the salvage reward shall be paid by the owners of the salved ship and other property in accordance with the respective proportion which the salved values of the ship and other property bear to the total salved value.”

In this case, Supreme Court opined that Chapter IX Salvage at sea in Maritime Code of PRC (including the above three articles) and the International Convention on Salvage 1989 apply to salvage at sea with principal of “No Cure No Pay”, however, if relevant parties agreed that whether salvage is successful or not, the salved reward shall pay the reward as per the agreed price rate ( per horsepower/ per hour), then the nature of the contract is contract of employed salvage which is different from the salvage at sea defined in Maritime Code of PRC or the International Convention on Salvage 1989. Hence, in this case, the reward shall be bound by the contracts itself instead of Article 183 of Maritime Code of PRC or relevant provision of the International Convention on Salvage 1989.

Guiding Case- No.112[3]

Cause of Action: Application for Establishment of Limitation of Liability for Marine Claims

Keywords: Limitation of Liability for Marine Claims/ Principal of “One Limitation for One Occasion”

Introduction of Fact:

On 5^th June 2014, when the vessel MV. SAARAON sailing from Qinhuangdao to Tianjin, subsequently intruded into three aquaculture zones (“Zone A, B and C”) within Hebei province which caused damage to the relative farmers Mr. Guo (for zone-A),Mr. Liu (for Zone-B) and Mr. Li (for Zone-C). It was found that the vessel used British Chart Version No. 1249 during the voyage, and there was about 500nm between Zone A and B was, and 9000nm between Zone B and C.

On 22th September 2014, the shipowner ASTKCO.,LTD in Korea applied to Tianjin Maritime Court of PRC for the establishment of one limitation of liability for claims raised by Mr. Guo, Mr. Liu and Mr. Li for the above case, which was objected by those three parties. They alleged that their damage was resulted from shipowner’s act or omission done with the intent to cause such loss or recklessly and with knowledge that such loss would probably result; or even if the shipowner had rights to limit its liability, there were three occasions in the whole case and shipowner shall apply for three limitation of liability to three aquaculture zones.

Judgement of Courts:

1. First instance court (Ningbo Maritime Court) granted the applicant to establish one limitation of liability against Mr. Guo, Mr. Liu and Mr. Li, who appealed to second instance court.

2. Second instance court (Zhejiang High Court) dismissed the appeal and upheld the original award of first instance court.

3. Retrial court (Supreme Court) finally set aside the awards of first and second instance court, and dismissed the application for establishment one limitation of liability for the whole case.

Meaning of Case:

Article 212 of Maritime Code of PRC provided that: “The limitation of liability under Articles 210 and 211 of this Code shall apply to the aggregate of all claims that may arise on any given occasion against shipowners and salvors themselves, and any person for whose act, neglect or fault the shipowners and the salvors are responsible.” This is the principal of “one limitation of liability for one occasion” in marine cases under Chinese law which was defined in the above article.

In the above case, the vessel MV. SAARAON intruded into 3 aquaculture zone during her same voyage and caused damage to farmers in different aquaculture zones. Supreme court opined that whether there was only one “occasion” or “several occasions” in this case depended on how many causes there were. If only one cause leads to several infringements while the cause was not interrupted, it shall be considered as “one occasion”, otherwise, if the cause was interrupted and the interruption leads to new infringements, it shall be considered as a “new occasion”.

In this case, the crew of the vessel neglected to perform their cautious watching and navigated the vessel to aquaculture zone A even though the Chart used had already remark the coordinate of aquaculture zones, which was the first infringement in this case, then the vessel was moved by her inertia and was unable to take reasonable measures to stop entering Zone B which was only 500nm adjacent to Zone A, resulting in the second infringement. After about a half hour, the vessel entered Zone C which was the third infringement.

Supreme Court opined that 1) those two infringements were resulted by the same cause and constituted “one occasion”; 2) as to the third infringement to Zone C, the crew of the vessel should have enough time to avoid the infringement while he did not and there’s no relation between the first two infringements and the third one both in period of time and subjective state of crew, thus the third infringement constituted the “second occasion” ; 3) in conclusion, the applicant shall apply for establishing two limitations of liability for the above two occasion in the whole case.