This country-specific Q&A provides an overview of the legal framework and key issues surrounding Shipping in China.
This Q&A is part of the global guide to Shipping.
For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/shipping
What system of port state control applies in your jurisdiction? What are their powers?
The port state control authority in China is the Maritime Safety Administration (MSA).
MSA is responsible for marine safety supervision, marine pollution prevention, inspection of vessels and maritime installations, administration of navigation safety, enforcement of administrative law and administrative management of seamen, and investigation of shipwrecks.
Are there any applicable international conventions covering wreck removal or pollution? If not what laws apply?
China has ratified “Nairobi International Convention for the Removal of Wrecks, 2007” on 4/14/2015.
In addition, China has acceded to the International Convention on Civil Liability for Oil Pollution Damage, the International Convention Relating to intervention on the High Seas in Case of Oil Pollution, the Convention on the Prevention of Marine Pollution By Dumping of Wastes and other Matters, the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 (Bunker Convention) and the Amendment to 1973 International Convention for Prevention of Pollution From Ships and Appendix I(MARPOL73/78).
Are there any applicable international conventions covering collision and salvage? If not what laws apply?
China has acceded to the Regulations for Preventing Collisions at Sea, 1972” and the International Convention on Salvage 1989.
However, China has not acceded to the “Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels (Brussels Collision Convention, 1910)”.
The Maritime Code of the PRC (CMC) also sets out inter alia the Collision and Salvage chapters.
Is your country party to the 1976 Convention on Limitation of Liability for Maritime Claims? If not, is there equivalent domestic legislation that applies? Who can rely on such limitation of liability provisions?
China has not ratified the the 1976 Convention on Limitation of Liability for Maritime Claims (“LLMC”), but the CMC largely follows the limitation regime under the LLMC. Under CMC, the law sets out a list of claims which are subject to limitation (Article 207).
According to CMC, the following parties can rely on limitation of liability.
a) Shipowners including charterers and operators of ships;
c) Persons for whose act, neglect or default the shipowners or salvors are responsible;
d) The insurer liable for the maritime claims.
If cargo arrives delayed, lost or damaged, what can the receiver do to secure their claim? Is your country party to the 1952 Arrest Convention? If your country has ratified the 1999 Convention, will that be applied, or does that depend upon the 1999 Convention coming into force? If your country does not apply any Convention, (and/or if your country allows ships to be detained other than by formal arrest) what rules apply to permit the detention of a ship, and what limits are there on the right to arrest or detain (for example, must there be a “maritime claim”, and, if so, how is that defined)? Is it possible to arrest in order to obtain security for a claim to be pursued in another jurisdiction or in arbitration?
If cargo arrives delayed, lost or damaged, under Chinese law, the receivers can arrest the vessel to secure the claim.
China is not a party to the 1952 Arrest Convention. Hence the “Special Maritime Procedure Law of the People's Republic of China” will apply to permit the detention. According to it, a maritime claim which falls into one of the 22 categories shall be the premise for ship arrest or detainment. The 22 categories are listed as followed:
- loss or damage to property caused by the operation of the ship;
- casualties of persons directly related to the operation of the ship;
- salvage at sea;
- damage or threat of damage caused by the ship to the environment, the coast or interested parties concerned; Measures taken to prevent, reduce or eliminate such damage; Compensation paid for such damage; The cost of reasonable measures actually taken or intended to be taken to restore the environment; Losses suffered or likely to be suffered by a third party as a result of such damage; Damage, costs or losses of a similar nature to those referred to in this paragraph;
- expenses relating to buoyancy, removal, recovery or destruction of sunken ships, debris, stranded ships, abandoned ships or rendering harmless, including expenses relating to buoyancy, removal, recovery or destruction of articles still in or formerly on board the ship or rendering harmless, and expenses relating to the maintenance of the abandoned ship and the maintenance of its crew;
- An agreement on the use or charter of the ship;
- An agreement on the carriage of goods or passengers;
- goods (including baggage) on board the ship or loss or damage thereto;
- general average;
- to provide materials or services for the operation, management, maintenance or repair of the ship;
- construction, alteration, repair, alteration or equipping of ships;
- fees and charges for ports, canals, wharves, harbours and other watercourses;
- wages and other payments for seafarers, including repatriation expenses and social insurance premiums to be paid for seafarers;
- expenses paid for the ship or shipowner;
- the ship insurance premium (including mutual insurance dues) paid by or on behalf of the shipowner or bareboat charterer;
- commissions, brokerage fees or agency fees related to the ship that the shipowner or
- disputes among joint owners of the ship concerning the use or profit of the ship;
- mortgage of the ship or right of the same nature;
- disputes arising from contracts for the sale of ships.
bareboat charterer should pay or are paid on his behalf;
Disputes concerning the ownership or possession of a ship;
Legally speaking, a vessel can be arrested in China to obtain security for claim to be pursued in another jurisdiction or in arbitration, this is confirmed by the judicial interpretations of the PRC Supreme Court, which provides that “where a foreign court has already accepted a related maritime case or the relevant dispute has already been submitted for arbitration, but the involved property is within the People's Republic of China, if the party applies for property preservation with the maritime court of the place where the property is located, the maritime court shall accept the application.” However, in practice, it is flexible to arrest a vessel in China to obtain a security for enforcing an arbitration award issued by a member state of New York Convention. In the absence of a mutual agreement or treaty, the Chinese court will not recognize or enforce a foreign court judgment. As such, it is practically difficult to arrest a vessel to obtain security for claim to be pursued in another court jurisdiction.
For an arrest, are there any special or notable procedural requirements, such as the provision of a PDF or original power of attorney to authorise you to act?
In terms of ship arrest, the Chinese maritime court requires submission of an original application, the original power of attorney and the certification of identity of the legal representative. In case of emergency, faxed copy of the application may be accepted and the original application can be submitted later but this may vary from different requirements of the maritime court. The power of attorney and the certification of identity of the legal representative issued by foreign parties shall be notarized by the local notary public and legalized by the Chinese embassy or the consulate-general in their countries. Again it varies from court to court, in case of emergency, whether they will accept the original power of attorney and the certification of identity of the legal representative first, with the notarized and legalized copies to be supplemented later once they are available.
What maritime liens are recognised?
Recognizable maritime liens are specified in Clause 22 of the CMC, including:
a) Payment claims for wages, other remuneration, crew repatriation and social insurance costs made by the Master, crew members and other members of the complement in accordance with the relevant labour laws, administrative rules and regulations or labour contracts;
b) Claims in respect of loss of life or personal injury occurred in the operation of the ship;
c) Payment claims for ship's tonnage dues, pilotage dues, harbour dues and other port charges;
d) Payment claims for salvage payment;
e) Compensation claims for loss of or damage to property resulting from tortious act in the course of ship operation.
It shall be noted that according to the CMC, all maritime liens are statutory. Chinese court will not accept claim for maritime liens based on contractual terms.
Is it a requirement that the owner or demise charterer of the vessel be liable in personam? Or can a vessel be arrested in respect of debts incurred by, say, a charterer who has bought but not paid for bunkers or other necessaries?
Yes, it is a requirement that the owner or demise charterer of the vessel be liable in personam.
If the owner or demise charterer of the vessel is not liable for the unpaid bunkers or other necessaries, the vessel shall not be arrested. However, a claimant may attach the bunker or other necessaries if they are supplied by the liable party, say the time charterer in most circumstances.
Are sister ship or associated ship arrests possible?
A claimant can arrest sister ship under the same ownership or owned by the same demise charterer to secure his claim against the shipowner. However, Chinese law does not accept the concept of “associated ship” or “beneficial owner”.
Does the arresting party need to put up counter-security as the price of an arrest? In what circumstances will the arrestor be liable for damages if the arrest is set aside?
The arresting party is required to put up counter-security with the Chinese maritime court.
Arrestor would be held liable if the arrest is proven as wrongful. In China's judicial practice, wrongful ship detention/arrest may occur in the following circumstances:
(a) There is no maritime claim to account for ship detention/arrest; or
(b) The owner of the arrested ship is not liable for the maritime claim and the Arrestor is not acting in good faith at the time of arrest; or
(c) The security demand by the maritime claimant is unreasonably high.
How can an owner secure the release of the vessel? For example, is a Club LOU acceptable security for the claim?
For purpose of ship release, Owner shall provide the security in amount and in wording as agreed with the claimants after negotiation or to the Chinese maritime court’s satisfaction.
If the security is provided directly to the claimant, Club LOU sometimes may be acceptable. However, if the security is provided directly to the court, usually the Chinese maritime court will not accept Club LOU and the Court will require the security to be issued by reputable Chinese financial institute, such as Chinese insurance company or Chinese bank.
Describe the procedure for the judicial sale of arrested ships. What is the priority ranking of claims?
The procedure for judicial sale of arrested ships is as follows:
a) The applicant submits an application for ship auction to the maritime court which ordered to arrest the ship.
b) Court reviews the application and make a ruling accordingly.
c) The court issues a public notice and announcements of ship sales
d) The court sets up an auction committee to proceed with the auction. Recently more and more court would like to proceed with the auction through the online judicial sale platform, mostly at “Taobao” operated by Alibaba.
e) Auction and closing.
The priority ranking of claims is as follows:
a) Claims for litigation expenses, expenses incurred for preservation, auction and distribution of the ship auction proceeds, and other expenses paid for the common interests of creditors;
b) A maritime claim with a maritime lien, a maritime claim secured by a possessory lien, a maritime claim secured by a maritime mortgage, or any other maritime claim;
c) A maritime claim for arrest of a sister ship referring to debts of the shipowner.
d) Other debts of the shipowner.
Who is liable under a bill of lading? How is “the carrier” identified? Or is that not a relevant question?
The shipper, the consignee, the carrier and the shipowner can be liable under a bill of lading in different scenarios.
Under a master bill of lading, the carrier normally refers to the vessel’s registered owner or demise charterer (if any). In voyage charter, the disponent owner can also be deemed as the contractual carrier under that particular charterparty.
It shall be noted that, in Chinese judicial practice, if an intermediary, who enters into contract of carriage of goods by sea in its own name, issues a bill of lading and undertakes to carry and deliver goods in its own name as carrier, the said intermediary, such as a non-vessel operating common carrier (NVOCC) or a freight forwarder, will also be deemed as the carrier.
Is the proper law of the bill of lading relevant? If so, how is it determined?
No. The parties of the carriage contract of goods by sea can choose the applicable law by agreement. However, in the absence of mutual agreement, the pre-printed governing law at the reverse of the bill of lading is normally not enforceable by Chinese courts.
Are jurisdiction clauses recognised and enforced?
No. The jurisdiction clause in the bill of lading is normally not enforceable by Chinese court.
What is the attitude of your courts to the incorporation of a charterparty, specifically: is an arbitration clause in the charter given effect in the bill of lading context?
The Chinese courts do not normally enforce a clause in the bill of lading purporting to incorporate a charterparty clause (including the charterparty arbitration clause), unless the bill of lading holder is also a party to the charterparty and is aware of the charterparty terms.
Is your country party to any of the international conventions concerning bills of lading (the Hague Rules, Hamburg Rules etc)? If so, which one, and how has it been adopted – by ratification, accession, or in some other manner? If not, how are such issues covered in your legal system?
No. Issues concerning bills of lading are covered by Chapter 4 of the CMC.
Is your country party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? If not, what rules apply? What are the available grounds to resist enforcement?
Yes, but with Reciprocal Reservation and Commercial Reservation declaration that:
China only recognizes and enforces arbitration awards from state parties to the New York convention, and resolving disputes in commercial nature from the perspective of Chinese law.
Please summarise the relevant time limits for commencing suit in your jurisdiction (e.g. claims in contract or in tort, personal injury and other passenger claims, cargo claims, salvage and collision claims, product liability claims).
(1) Tort claim under civil law (rather than CMC):
The time bar for tort claim is three years, counting from the day on which the obligee knows or should have known that his or her right has been infringed upon and who the obligor is, exept as otherwise provided for by any law. Such as:
The time bar for bringing an action claiming compensation for the damage done by the defect in a product is two years, counting from the date on which the party concerned knows of or should know of the infringement of his rights and interests.
(2) Contract claim under civil law (rather than CMC):
The time bar for contract claim is three years, counting from the day on which the obligee knows or should have known that his or her right has been infringed upon and who the obligor is, except as otherwise provided for by any law.
(3) Personal injury and other passenger claim:
The time bar for claims against the carrier with regard to the carriage of passengers by sea is usually two years. In particular:-
a) Time bar for claims for personal injury is counting from the day on which the passenger disembarked or should have disembarked;
b) Time bar for claims for death of passengers that occurred during the period of carriage is counting from the day on which the passenger should have disembarked; whereas those for the death of passengers that occurred after the disembarkation but resulted from an injury during the period of carriage by sea is counting from the day of the death the passenger concerned, provided that this period does not exceed three years from the time of disembarkation;
c) Time bar for claims for loss of or damage to the luggage is counting from the day of disembarkation or the day on which the passenger should have disembarked.
(4) Cargo claim:
a) The time limit for claims against the carrier with regard to the carriage of goods by sea is one year, counting from the day on which the goods were delivered or should have been delivered by the carrier.
b) The time limit for claims against the carrier with regard to voyage charter party is two years, counting from the day on which the claimant knew or should have known that his right had been infringed.
(5) Salvage and collision claim:
a) The time limit for claims with regard to salvage at sea is two years, counting from the day on which the salvage operation was completed.
b) The time limit for claims with regard to collision of ships is two years, counting from the day on which the collision occurred.