Case of HiHonor being Selected by Shandong High  People’s Court as Top 10 Typical Cases of Equal Protection of Legitimate Rights of Domestic and Foreign Parties

Basic Information

ITS LIMITED (Commonwealth of Dominica) provided repair and supply services for a ship owned by a Russian shipowner, who later defaulted on ship repair fees exceeding USD 5.6 million. Prior to this, ITS had initiated a lawsuit at the Seoul Central District Court (South Korea) in accordance with the exclusive jurisdiction clause of the ship repair contract, and the South Korean court was advancing the subpoena service procedure. To protect its creditor's rights more effectively, ITS, during the pendency of the South Korean lawsuit, entrusted HiHonor Lawyers to apply to the Qingdao Maritime Court for the arrest of a sister ship "FM" owned by the same Russian shipowner.

The case involved two foreign parties, with the ship repair location in South Korea and the judicial arrest location in China, forming a cross-jurisdictional scenario covering four jurisdictions. Additionally, the existence of parallel litigation in South Korea further increased the difficulty of dispute resolution.

Results

1. Emergency Ship Arrest: On Friday April 12, 2024, HiHonor Lawyers learned that the "FM" ship was berthing at the Dagang Port of Qingdao and might depart on the same day or during the weekend. We completed the application materials by 16:00 on the same day, urgently submitted the ship arrest application, and clearly explained to the Case Filing Division of the Qingdao Maritime Court the urgency of the ship's departure, the background merits, and the risk of the creditor's rights.

The court promptly reviewed and confirmed that the conditions for ship arrest were met. After urgent approval, the vessel was successfully arrested by 20:00 on the same day via assistance of MSA. The entire process took less than 4 hours.

2. Promoting negotiation: After the ship arrest, the Russian shipowner failed to provide security in China as required, while only provided a cash security of USD 3.6 million and a fish cargo security of USD 1 million in South Korea. Among which, the fish cargo had poor value preservation and was prone to depreciation due to factors such as market price fluctuations and limited fresh-keeping period. The total security amount was far less sufficient to effectively cover the claims amount USD 5.6 million.

As the 30-day ship arrest period under PRC law was approaching, we acting on behalf of ITS, applied to QMC court for judicial auction of the ship with the case registration certificate issued by the Korean court. Under the dual pressure of the ship arrest and judicial auction application in PRC court, and the cargo arrest in South Korea, the shipowner resumed negotiations with ITS and reached a settlement. After receiving the application for lifting the arrest, Qingdao Maritime Court completed the release of the ship within one/1 hour.

Case Highlights

The timely professional actions of HiHonor lawyers served as key basis. By accurately grasping the timing of the ship's departure, efficiently completed the ship arrest application materials, and proactively clarified the cross-jurisdictional background and creditor's rights risk to the court. The application for the judicial sale of vessel with case-filing documents from the Korean court, exert pressure to bring the vessel owner back to negotiation table, breaking the deadlock of the dispute.

The parties to this case were foreign entities from Dominica and Russia, and the core dispute had been accepted by the South Korea court, with no direct connection to China.

Nevertheless, Qingdao Maritime Court of PR China responded quickly to the ship arrest application and completed the arrest within 4 hours; HiHonor lawyers simultaneously coordinated and advanced the process, ultimately facilitating a settlement between the parties.

This initiative not only helped the parties from other countries realize their rights and interests but also demonstrated the responsibility and value of China's judicial system in serving international disputes resolution.

This case was selected into the "Typical Cases of Equal Protection of the Legitimate Rights and Interests of Chinese and Foreign Parties" by the Shandong High People's Court.

In case of any query on this matter, pls. welcome to contact Xinwei ZHAO or Huanying LIU via email: xinwei.zhao@hihonorlaw.com, huanying.liu@hihonorlaw.com