China - Supreme Court’s Memorandum of National Courts’ Symposium on Commercial and Maritime Cases

The Club would like to draw Members’ attention to Haitong & Partners' Circular 3-1 2022 dated 27.01.2022 in which Haitong provide their comments on the maritime section of the Supreme Court’s Memorandum of National Courts’ Symposium on Commercial and Maritime Cases. 

The Memorandum is a summary by the Supreme People’s Court (“SPC”) and the people’s courts (all levels) of judicial precedents and experience garnered at trial in previous years. The Memorandum does not represent law or judicial interpretation but it sets out useful and important rules for the future interpretation and application of certain previously unclear procedural rules and legal points. 

We briefly set out below the rules commented upon by Haitong in their circular. Haitong’s full circular in English and Chinese may be downloaded further below.

  1. Actual shipper vs Contractual shipper: Contractual shipper may be other than the party named in the bill of lading. Owners are recommended to verify from the booking process which party is the contractual shipper before commencing proceedings to recover expenses incurred from a failure to take delivery of goods.
  2. Carrier’s obligation to provide cargo worthy containers: This obligation is deemed part of the carrier’s obligation to provide a seaworthy ship and is thus not an obligation that the carrier can contract out of.
  3. Defence of inherent vice: The SPC has provided a uniform standard for the determination of the “nature or inherent vice of the goods”.
  4. Burden of proof in post-delivery cargo claims: Where the damage is not apparent on delivery, the carrier is to be notified of the damage within 7 days from delivery, or 15 days in the case of containerised cargo, failing which the goods will be deemed to have been delivered in good condition.
  5. Trade allowance for bulk cargo: If the cargo shortage is under 0.5%, the carrier can be exempted from liability. If the shortage exceeds 0.5%, the carrier will be liable for the whole of the shortage. If however evidence can be adduced in the latter case to distinguish the trade allowance shortage from the shortage attributable to the carrier, the carrier may be exempted from liability for the trade allowance shortage. 
  6. Use of “unknown” clauses: Carriers’ reliance on such clauses, e.gs. “Shipper’s Load and Count”, “Shipper’s Load Count and Seal”, “Said to Contain”, “Weight, Measure, Quality, Quantity, Condition, Contents and Value Unknown”, may not be upheld unless, for example, the carrier can prove that it had no appropriate method at the time of loading to verify the weight of the goods.
  7. Delivery against “To Order” bills of lading: When the carrier delivers goods against such a bill of lading and the bill has not been property endorsed, the carrier will be liable to the claimant who has suffered losses unless it can prove that it has carefully examined the bill of lading for the identity of the holder, and can determine that the holder has obtained the original bills through alternative legal means. Whilst not explicit in the Memorandum, it is assumed that the said holder must also have obtained the right to delivery of the goods. 
  8. Carrier’s lien on goods for unpaid freight: Where a “freight prepaid” bill of lading has been issued, the carrier’s attempt to lien the cargo for unpaid freight will not be supported by the courts unless the holder of the “freight prepaid” bill is the shipper. Note however that the carrier may be able to exercise a lien on cargo against other holders of the bill of lading if the right to lien has been obtained from charter party terms providing such a right, which terms have been effectively incorporated into the bill of lading.
  9. Carrier’s expenses from cargo interests’ failure to take delivery: The SPC has determined that the carrier’s sole recourse for container demurrage and other expenses is against the shipper, and not against the named consignee unless the latter has made a demand for delivery of the goods.
  10. Delivery of goods without presentation of original bill of lading: The carrier may be able to escape liability if it can demonstrate that the goods remain under its control. However, whether “goods are still under the control of the carrier” will depend on the facts and it is anticipated that this question will give rise to much debate.
  11. Carrier obligated by law at discharging port to deliver goods without presentation of original bill of lading: In order to avoid liability, the carrier, in addition to proving that local laws obliged it to deliver the goods to the local government authorities, must also prove that it has lost control of the goods by delivering them. 
  12. Commencement of time to bring a claim in an alleged misdelivery case: The guidance provided is that the one year time bar shall commence from when the carrier shall have delivered the goods to the holder of bill of lading, same to be deemed a “reasonable date” from when the goods arrived at the discharging port, assuming all other conditions for delivery are satisfied. In practice, unless a concerned party is able to clearly establish the “reasonable date”, such date is likely to be decided by the courts in their discretion.
  13. Standard rate for container demurrage: If a rate has been agreed by the parties, such will be applicable. If not, the rate published on the container supplier’s website or a market rate published on the container operator’s website for the place and the period in question may be applicable. The SPC views container demurrage as compensation for the carrier’s loss and as such, the compensation rate can roughly be determined by reference to the market price of a similar new container.  
  14. Port operator cannot invoke the carrier’s right of exemption or limitation of liability: The port operator cannot act as carrier, actual carrier, servant or agent of the carrier and the actual carrier and therefore does not enjoy the carrier’s right of exemption or limitation of liability.
  15. Network liability system under multimodal contracts involving foreign party(ies): Where Chinese law is applicable to a dispute arising in the context of such a multimodal transport, the liability and limitation of the multimodal transport operator will be determined under the laws and regulations of the country governing that specific section of the multimodal transport. The time limit for the claim will however be determined under Chinese law.
  16. Cargo claimants have no right to maritime lien against the carrying ship: The SPC stipulates that in a collision where both ships are to blame, the cargo claimants may invoke a maritime lien against the other ship, but not against the carrying ship. 
  17. Same limitation of liability to apply to all ships involved in the same accident: The SPC has additionally now clarified that in a collision between a ship engaged in international carriage and a ship engaged in transport between Chinese ports, the latter ship will need to establish a limitation fund for maritime claims even if the former ship does not apply for the setting up of such a fund nor claims limitation in the maritime claim.
  18. Single liability limitation system: The SPC clarifies that claims for loss of life or personal injury and claims other than for loss of life or personal injury are to be separately set off, and limited.
  19. Ship pollution response organizations (SPRO) may sue in respect of clean-up cost: The SPC clarifies that a SPRO may directly sue the party responsible for the pollution for clean-up costs even where the said clean-up costs have been incurred under the direct orders of a maritime administrative authority. The exact nature of the legal relationship between the parties which will enable the bringing of such a claim however remains unclear. 
  20. Can suits be brought in respect of a maritime traffic accident liability identification statement? The SPC has changed its previous opinion and now clarifies that concerned parties in a maritime traffic accident have no right to bring administrative lawsuits against the maritime safety administration if dissatisfied with the administration’s statement identifying liability for the accident.

If Members have any questions relating to Haitong’s circular, please do not hesitate to reach out to your usual contact at the Club.

Downloads

  • Hai Tong Circular 3-1 2022 - English (652 KB)

    27/01/2022

    Download PDF
  • Hai Tong Circular 3-1 2022 - Chinese (675 KB)

    27/01/2022

    Download PDF

Jacqueline Tan

Legal Services Manager

Date28/01/2022