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Maritime Law and Practice in China

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CHAPTER 24

Procedures for trial, constitution of limitation fund for maritime claim, recognition and payment of debts, exigence of maritime lien

Introduction

24.1 The maritime courts and its higher courts shall apply the Civil Procedure Law (the “CPL”) and the Special Maritime Procedure Law (the “SMPL”) in the trial of a maritime case. Where the SMPL provides for the rules of the trial of a maritime case, the court shall apply the special rules; otherwise the general rules as provided for in the CPL shall be applied.1 The SMPL lays out some special rules on the trial of certain maritime cases, namely, collision of ships, general average and marine insurer’s subrogating claim. In addition, it also specifically provides for trial procedures that are unique to certain kinds of maritime cases (i.e., the procedure for the constitution of limitation fund for marine claims, procedure for the registration and payment of debts and procedure for the exigence of maritime liens). Moreover, it adds some rules to those procedures that are applied in the trial of a maritime case (i.e., the summary procedure, the procedure for urging the payment of debt and the procedure for the public notice of exigence of claim) in order to adapt them for the character of a maritime case.2 This chapter will review both the general rules and special rules that are applied in the trial of a maritime case.

General trial procedure

The first instance trial procedure

24.2 In general, the first instance trial procedure consists of the following stages, which happen chronologically:3
  • • filing and acceptance of a claim;
  • • pre paration for the trial;
  • • hearing for the trial; and
  • • judgment.

Filing and acceptance of a claim

24.3 To bring an action with the court, the plaintiff shall submit a statement of claim with the court which has jurisdiction over the claim. The statement of claim shall set out

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the plaintiff’s name and domicile, the name, position and contact details of the plaintiff’s legal representative (if the plaintiff is a natural person, it must set out the name, gender, age, nation, occupation, employer of the plaintiff), the defendant’s name and domicile, the claim, the facts and reasons of the claim, the proof and its source, the name and domicile of the witness.4 Apart from the statement of claim, the plaintiff shall also submit the plaintiff’s certificate of incorporation, the certificate of the identity of the legal representative of the plaintiff,5 the power of attorney of the agent ad litem,6 the certificate of identity of the agent ad litem, the information which show the defendant’s name and domicile, and the relevant proof.7 24.4 The court shall accept the statement of claim filed by the plaintiff and issue the receipt to the plaintiff. If the filing complies with requirements of law, the court shall immediately register the acceptance of the filing of the claim; otherwise the court shall explain to the plaintiff the reasons for not accepting the filing of the claim.8 If the court decides not to accept the filing of the claim, the court shall issue a ruling setting out the reasons.9 The plaintiff can appeal the ruling.10 After accepting the case filing, the court may mediate

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between the plaintiff and the defendant in respect of the claim unless either of the parties refuses to accept the mediation.11

Preparation for trial

24.5 The court shall serve the copy of the statement of claim upon the defendant within five days of the acceptance of the case filing. the defendant shall file the statement of defence within 15 days of the receipt of the statement of claim. Where the defendant is a company incorporated outside the PRC, or a foreign natural person including Hong Kong, Macau and Taiwan person, the time limit of the submission of the statement of defence is 30 days.12 Despite the requirement of the submissions of the statement of defence, the defendant’s failure to file the statement of defence does not deprive the defendant of its right to defend the case and affect the trial of the case.13 24.6 If the defendant believes that the court has no jurisdiction over the claim, it can object to the jurisdiction of the court within the time limit of the submission of the statement of defence. Where the defendant challenges the court’s jurisdiction, the court shall first examine and determine whether it has jurisdiction over the claim. Where the defendant objects to the jurisdiction beyond the time limit of the submission of the statement of defence, the court will not examine and determine the jurisdiction issue but proceed with the trial of the case.14 The defendant can also challenge the court’s jurisdiction over the claim on the ground that there is an arbitration agreement in writing in respect of the claim. The defendant can make such a challenge beyond the time limit of the submission of the statement of defence but no later than the first hearing for trial.15 Where the court decides not to recognise the existence or validity of a foreign-related arbitration agreement but retains its jurisdiction over the claim, it must report the decision to its higher court, which in turn refers the matter up to the Supreme People’s Court (the “SPC”) for approval.16 24.7 The court shall constitute a collegiate bench usually consisting of three judges for the trial of the case unless the summary procedure is applied. The court shall give notice of the members of the collegiate bench to the plaintiff and defendant within three days of the constitution of the bench. 24.8 When the time limit of the submission of the statement of defence has expired; the court may schedule a pre-trial conference to make the preparation for the trial. The pre-trial conference is to deal with following issues:17
  • (i) to identify the plaintiff’s claim and the defendant’s defence;
  • (ii) to examine and deal with issue of adding a party or parties into the action, any alteration of the claim, the counterclaim and the claim made by an interested third party;
  • (iii)

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    to decide whether to investigate and search evidence, consign the appraisal, require the plaintiff and/or defendant to produce evidence, inspect and preserve evidence;
  • (iv) to arrange for the exchange of evidence;
  • (v) to summarise the issues in dispute; and
  • (vi) to mediate between the plaintiff and defendant.

Hearing

24.9 The court shall give notice to the plaintiff and defendant of the time of the hearing three days in advance and announce the names of the plaintiff and defendant, the cause of action, time and place of the hearing to open to the public unless the trial of the case is not open to the public.18 The hearing is composed of two stages: investigation into facts and debates. The plaintiff and defendant shall state their respective opinions on the issues in the dispute, produce evidence and debate. The court may, after the hearing for the trial, mediate between the plaintiff and the defendant for a settlement.

Judgment

24.10 The court may hand down the judgment at the close of the hearing or after the hearing. The judgment shall include the following items:
  • (i) cause of action, claim, facts and reasons in dispute;
  • (ii) facts determined by judgment and the reasons for the determination, applicable law and reasons;
  • (iii) judgment and the party to bear the court fee; and
  • (iv) time limit of the appeal of the judgment and the appellate court.
24.11 The trial of a case by general procedure must be closed within six months counting from the date of the acceptance of the case filing until the judgment being handed down. The six-month time limit does not incude the time period of the public announcement, appraisal, mediation and dealing with the challenge to jurisdiction. The six-month time limit can be extended for another six months with the approval of the president court, and may be extended further by the approval of its higher court. There is no requirement of the time limit of the trial of foreign-related cases.19

The second instance trial procedure

24.12 If the plaintiff or the defendant is not satisfied with the first instance judgment, he is allowed to appeal the judgment to the appellate court within 15 days of the service of the judgment.20 Where the plaintiff or the defendant has no domicile in the PRC, the time limit of the appeal is 30 days.21 The appellant shall submit a statement of appeal to the first instance court. The statement of appeal shall state the names of appellant and appellee, the first instance court, case number, cause of action, and the request and reasons for the appeal.

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The first instance court shall serve the statement of appeal upon the appellee within five days of the receipt of the same. The appellee shall submit the statement of defence within 15 days of the receipt of the statement of appeal.22 Where the appellee has no domicile in the PRC, the time limit of the service of the statement of defence is 30 days.23 That the appellee fails to submit the statement of defence does not affect the trial. The first instance court shall deliver the statement of claim, the statement of defence and case file to the appellate court. 24.13 The appellate court shall address the appeal request and examine facts and the applicable law concerned with the appeal request only, unless the first instance judgment violates prohibitive rules of the law, or prejudices the State’s interest or any third party’s rights and interest. The appellate court shall constitute a collegiate bench for the trial of the appeal by way of hearing. However, if there are no new facts, evidence or reasons that are raised in the trial, the collegiate bench can proceed with the judgment without a hearing. The appellate court can mediate the appellant and the appellee in respect of the appeal for a settlement. 24.14 The appellate court can deal with the appeal request as below:24
  • (a) where the first instance court determines facts clearly and applies the law correctly, to affirm the first instance judgment or ruling;
  • (b) where the first instance court determines facts wrongly or applies the law incorrectly, to amend, revoke or alter the first instance judgment or ruling;
  • (c) where the first instance court determines facts unclearly, to rule to revoke the first instance judgment and remand to the first instance court for retrial or to alter the judgment directly;
  • (d) where the first instance court violates procedure rules seriously, such as omitting a litigant or making the judgment in default illegally, to revoke the judgment and remand to the first instance court for retrial.

Special rules on the trial of the collision of ships

The collision of ships that is governed by the Chinese Maritime Code (the “CMC”) and the SMPL

24.15 The collision of ships refers to the accident of the touching of ships at sea or in other navigable waters adjacent thereto. Where a ship has caused damage to another ship, person, goods or other property on board the ship, either by the execution or non-execution of a manoeuvre or by the non-observance of navigation regulations, even if no collision has actually occurred, the provisions of the CMC and the SMPL shall apply as well. The collision involving ships or crafts to be used for military or public service purpose or happening at waters that are not linked to the sea such as inland rivers and lakes is not subject to the CMC and the SMPL.25

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Investigation form for maritime accident

24.16 When the plaintiff submits the statement of claim and the defendant submits the statement of defence, they shall fill out and submit to the court the maritime accident investigation form.26 The maritime accident investigation form is the statement of the course and cause of the collision.27 The form is usually composed of two parts. The first part is the basic information of the ship involved in the collision: the ship’s name, registry port and particulars, the time, date and position of the collision, weather condition and water current of the place where the collision occurred, the status of the ship prior to the collision (the time, position, course and speed of the ship at the first sight of the opposite ship, the distance between the ships involved in the collision at the first sight of each other), course of the collision, collision angle, etc. The second part is about the allegation of the collision liability and the claim for damages, etc. The form shall be filled out by the master or the duty officer or other interested person of ships involved in the collision. The plaintiff or the defendant shall fill out the form truthfully and correctly. If the plaintiff or the defendant forges the contents of the form, they shall assume the liability accordingly.28 24.17 The plaintiff and the defendant shall provide the evidence in support of these facts as stated in the marine accident investigation form. The evidence shall be submitted to the court prior to the first hearing of the trial. The plaintiff or the defendant shall also submit the following documents of the ships involved in the collision prior to the first hearing of the trial:29
  • (a) certificate of registry;
  • (b) certificate of survey;
  • (c) certificate of seaworthiness;
  • (d) trading certificate;
  • (e) log book, engine book, bell book, records of radio and radar;
  • (f) table of compass deviation;
  • (g) navigation chart;
  • (h) AIS records;
  • (i) certificates of competence of master, duty officer and engineer, and crew list (name, address and certificate of position);
  • (j) documents in proof of the meteorology and hydrology of the water where the collision occurred;
  • (k) sea protest or marine report;
  • (l) witness statement;
  • (m) other proof.
24.18 The maritime accident investigation form is a type of proof, i.e. a party’s statement.30 Those facts that are stated in the form can be admitted by the court if the opposite

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party to the collision admits them or the court has verified that they are true.31 To avoid the plaintiff or the defendant misrepresenting facts of the collision, the maritime court will not serve the form and other evidence of collision facts when the court serves the statement of claim and the statement of defence upon the plaintiff or the defendant.32 The plaintiff and defendant are not allowed to produce further evidence to disprove the statements that they have made in the maritime accident investigation form and other factual evidence which they have submitted, unless they are able to convince the court that the evidence was not in their control and also could not be obtained prior to the first hearing of the trial and therefore could not be submitted at the first hearing of the trial.33

Completion of production of factual evidence

24.19 The plaintiff and the defendant shall complete the production of the evidence of the collision facts inclusive of the maritime accident investigation form prior to the first hearing of the trial. Only when the plaintiff or the defendant has completed the production of the factual evidence and also submitted the certificate of the completion of the production of evidence to the court, can they exchange the factual evidence inclusive of the maritime accident investigation form with each other and apply to the court for the review of the factual evidence. The court shall reject the application for the review of the evidence of collision facts before the applicant has completed the production of the factual evidence. For example, the court shall not allow the applicant to review the factual evidence that the court preserves at the request of a party until the party who has applied for the preservation of the evidence has confirmed to the court that it has completed the production of the factual evidence.34 If the plaintiff or the defendant intends to apply to the court for the preservation of evidence or the investigation and collection of the evidence of collision facts, they shall submit such an application to the court prior to the completion of the production of evidence.35 The court may not grant such application that is submitted after the completion of the production of evidence.

The investigation materials by the Maritime Safety Administration

24.20 The Maritime Safety Administration of the People’s Republic of China (the “MSA”) is responsible for the administration and supervision of maritime safety in China. The MSA has the power to investigate the ships’ collision.36 The court may admit the investigation materials that have been obtained by the MSA through its investigation of the collision according to the law, and determine the facts leading to the collision based upon

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those investigation materials of the MSA if such materials have been acknowledged by the parties involved in the collision, unless there is evidence in the contrary that can sufficiently disprove the investigation materials.37 The court may also admit the MSA’s maritime accident investigation report or its conclusions on the collision of ships accident, and make a judgment on the collision liability based upon the MSA’s report and conclusions, unless there is sufficient factual evidence or reasons that can disprove the investigation report or conclusions.38 During the course of the trial, the court may, at the request of the party, ask the MSA to explain and illustrate the relevant issues that have been dealt with in the investigation report and conclusions.39 24.21 In Orient Overseas Container Line (U.K.) Limited v Beihai Honghai Shipping Co., Ltd. in respect of the claim for the collision of ships,40 during the course of the re-trail by the SPC, OOCL applied to the SPC to obtain the investigation materials of the collision, which were kept by the Guangdong MSA in order to prove that MV “Xing Hai 668” as owned by Beihai Honghai Shipping was unseaworthy at the time of the collision. The SPC granted the application and asked the Guangzhou Maritime Court to assist in obtaining the investigation materials from Guangdong MSA. The Guangzhou Maritime Court obtained from Guangdong MSA the shipping certificates, crew’s certificates, and inquiry records of the crew. The SPC took the view that the inquiry records were witness statements, which were not acknowledged by Beihai Honghai Shipping and, further, the crew and other interested people who were interviewed by the MSA were not cross-examined by OOCL or Beihai Honghai Shipping. Further, the MSA did not make an investigation report on the collision nor determine whether the crew of MV “Xing Hai 668” was competent. Based on those findings, the SPC did not believe that the investigation materials obtained from Guangdong MSA could adequately prove the facts regarding the collision.

Requirement of inspection of a ship and appraisal of a ship’s value

24.22 The inspection of a ship and appraisal of a ship’s value must be done by an institution or individual who has been authorised by the authorities or has the professional qualification; otherwise the inspection or appraisal conclusion cannot be admitted by the court.41 This requirement is applied not only in the trial of the collision of ships but also in the inspection and appraisal of a ship in the trial of the maritime case other than the collision of ships.42 A qualified inspection institution refers to an institution that has the PRC Approval Certificate of the Qualification of the Statutory Ship’s Inspection Institution.43

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A qualified inspection individual refers to a person who has the Registered Ship’s Inspector Qualification Certificate.44 The MSA is responsible for the approval and issuing of the qualification certificates. The registered ship’s inspector must practise within a qualified ship’s inspection institution. A qualified appraisal institution of ship’s value refers to an institution that has the PRC Qualification Certificate of Price Appraisal Institution. A qualified appraisal individual refers to a person who has the PRC Qualification Certificate of the Price Appraisal Personnel.45 The Qualification Certificate is approved and issued by the PRC National Development and Form Commission Price Certification Centre.46

The time period of the trial of collision of ships

24.23 The maritime court shall complete the trial of the collision of ships case within one year counting from the date of the acceptance of the case filing, unless the president of the maritime court approves the extension of the time limit.47 This requirement is also applied in foreign-related collision cases. It is different from the general civil case where there is no time limit for the trial of a foreign-related civil case.

Special rules on the trial of general average

Jurisdiction of general average cases

24.24 The maritime court of the place where the ship first arrives, the adjustment of general average is made or the voyage is ended, has the jurisdiction over the claim arising out of general average.48 The parties who are involved in general average can choose by an agreement the maritime court that has substantive connection with the general average accident to hear the claim arising out of the general average.49 The parties can either mutually agree to entrust average adjusters with the adjustment, or directly bring an action in respect of the general average claim with a maritime court.50 In dealing with an unadjusted general average dispute, the maritime court shall order the parties to entrust average adjusters with the adjustment themselves, unless the court believe it necessary for the court to make the entrustment. If it is entrusted by the court, the adjustment fees shall be paid by the party who claims the general average in advance.51

General average adjustment report

24.25 The general average report made by average adjusters may be admissible as the proper basis for the contribution if no objection is raised by any of the parties; otherwise,

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the maritime court shall decide whether to accept the report or not.52 If any party raises an objection to the adjustment report and the objection has been admitted by the court, the party who has entrusted the adjustment shall notify the adjuster to re-adjust or supplement the adjustment report, whichever is necessary. If the party fails to give notice to the adjuster, the court may notify the adjuster to re-adjust the general average. The party who raises the objection shall pay the re-adjustment fees in advance; otherwise it shall be regarded that the party has withdrawn the objection.53 24.26 In Ming Yang Shipping Co., Ltd. v The People’s Insurance Company (Group) of China 54 in respect of a claim for the contribution of general average, MV “Ming Yang” encountered bad weather en route from a Japanese port to Shanghai and the main engine of the vessel was broken. The vessel was then towed to a Japanese port for repair. Afterwards, Ming Yang Shipping as the owners of the vessel declared general average. At the request of Ming Yang Shipping, PICC as the insurer of the cargo on board the vessel issued a letter of general average guarantee to Ming Yang Shipping. At the time of the accident, the vessel was performing a voyage charter. According to the voyage charterparty, the general average adjustment shall be made in accordance with the Beijing Adjustment Rules 1995. The China Council for the Promotion of International Trade Average Adjuster Department adjusted the general average and made the adjustment statement, according to which PICC should contribute USD 453,520.95. PICC had paid the salvage fee in sum of USD 321,913.82, and therefore PICC’s final contribution amount was USD 131,606.77. PICC refused to make the contribution on the ground that the accident was caused due to the unseaworthiness of the vessel. Ming Yang Shipping then brought an action against PICC in the Shanghai Maritime Court claiming for the contribution of the general average. Before Ming Yang Shipping commenced the action, PICC had sued Ming Yang Shipping in the same court for the recovery of the salvage fees that it had paid in advance. Both the maritime court and the Shanghai High People’s Court held that due to the breakdown of the main engine, the vessel and cargoes on board encountered the common risks. In such circumstances, it was necessary and reasonable for Ming Yang Shipping to seek the salvage of the vessel and the cargoes on board, and the conditions of general average were met. The courts also accepted the adjustment report made by China Council for the Promotion of International Trade Average Adjuster Department. The courts further held that before the maritime court made a decision on the issue as to whether the vessel was seaworthy and whether the general average accident was caused due to the unseaworthiness of the vessel, Ming Yang Shipping was entitled to require PICC to contribute in the general average. If the court determined that the vessel was unseaworthy and the general average accident was caused therefor, PICC could file a recourse claim against Ming Yang Shipping for the contribution it had made.55 The courts therefore held that PICC should perform its undertakings in the letter of general average guarantee.

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Claim for non-general average losses

24.27 A party may bring an action against the liable person for non-general average losses without being prejudiced by the proceedings commenced for the general average claim arising from the same maritime accident. Actions brought by the parties in respect of the same maritime accident for non-general average losses and for general average contribution by recourse claim against the liable person in the maritime court that entertains the general average case can be consolidated by the same court.56 A case of general average shall be tried and concluded within one year counting from the date of the acceptance of the filing of the case. Where an extension of the period is necessary under special circumstances, it shall be subject to approval by the president of the court. The provision of the trial period shall also apply in the trial of the claim for non-general average losses.57

Special rules on the trial of marine insurer’s subrogation claim

24.28 Where an accident covered was caused by a third party and the insurer has indemnified the insured, the insurer is entitled to claim compensation against the third party by exercising the right of subrogation up to the amount of the indemnity paid.58 In exercising the right of subrogation, an insurer shall bring an action in its own name against the third party that caused the accident covered if no action has been brought by the insured against the third party. Where the insured has already brought an action against the third party, an insurer may apply to the court entertaining the case for the alteration of the party to the lawsuit and subrogate the rights of the insured against the third party. Where the losses of the insured caused by a third party cannot be fully covered by insurance indemnity, the insurer and the insured may act as co-plaintiffs to claim compensation against the third party.59 24.29 Where an insurer brings a subrogation action or applies for the alteration of the party to the lawsuit or for acting as co-plaintiffs, the insurer shall submit to the maritime court evidence showing that it has indemnified the insured the insurance loss.60 The evidence refers to the receipt of the payment of the insurance indemnity, the bank slip of the payment or other document in proof of the payment of the indemnity.61 The insurer is not required to submit the certificate of the assignment of rights and interests issued by the insured. If the insurer submits only the certificate of the assignment of rights and interests issued by the insured but no evidence of the payment of the indemnity, the insurer cannot prove that it has subrogated the right of the insured to claim for the third party.62 The court shall examine the evidence submitted by the insurer. If through examination the court believes that the insurer fails to submit the evidence as required, the court shall make a ruling not to entertain

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the insurer’s filing of the subrogation action or not to grant the insurer’s application for the alteration of the party or acting as the co-plaintiffs.63 The insurer is allowed to appeal such rulings.64 If an insurer’s application is made during the course of the second instance trial, the appellate court shall remand the case to the maritime court for retrial in order to ensure the insurer has the right to appeal the civil ruling of its application.65 24.30 In the trial of the insurers’ subrogation claim, the maritime court shall examine and determine whether the third party is liable to the insured and whether the insurer has actually indemnified the insured for the insurance loss. The court shall not examine whether the insurance contract is valid and whether the insurer wrongfully pays the insurance indemnity. The third party cannot defend the subrogation claim on the grounds of the validity of the insurance contract or defective or wrongful payment of the insurance loss by the insurer.66 When the insurer has subrogated the right to claim, it is entitled to argue that the time limit of the claim against the third party is discontinued if the insured has commenced legal proceedings against the third party or the insured has arrested the vessel or the third party has agreed to perform its obligation to the insured.67 Where the insurer has replaced the insured or acted as co-plaintiffs in the lawsuit against the third party, the insurer is entitled to claim benefit from the attachment of property of the third party that the insured has obtained including the security obtained by way of ship arrest. However, the insurer shall not take the liability for wrongful attachment of property or ship arrest for which the insured shall be liable for its own fault.68 24.31 In respect of a claim for oil pollution damage caused by a ship, the aggrieved party may claim either against the owner of the ship causing the oil pollution damage, or directly against the insurer who is answerable for the liabilities of such shipowner, or against the person who provides financial security therefor. Where the insurer for oil pollution damage or the person who provides the financial security therefor is sued in an action, such insurer or person is entitled to demand the shipowner to join the proceedings. At the request of the liability insurer or the financial security provider, the court may notify the shipowner to join the proceedings as a party who has no independent claim in the subject of the proceedings.69 24.32 The insured may have concluded an arbitration agreement with a third party before the insurer subrogates the right of claim against the third party. The Supreme People’s Court is of the view that in foreign-related subrogation claim cases, given that the insurer does not negotiate the conclusion of an arbitration agreement between the insured and the third party and the arbitration agreement is not concluded by the meeting of minds of the insurer and the third party, the insurer shall not be bound by the arbitration

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agreement unless the insurer expressly acknowledges that the arbitration agreement is binding upon it.70

Summary procedure, procedure for urging payment of debt and procedure for public notice of exigence of claim

Summary procedure

24.33 In hearing a simple maritime case in which the facts are evident, the rights and obligations are clear and the dispute is a minor one, the maritime court may apply the provisions governing summary procedure in the CPL in the trial of the maritime case.71 That the facts are evident means that the parties’ statements on the facts in dispute are by and large the same and the parties are able to provide the evidence in proof to the facts, and the court does not need to investigate and collect the evidence in order to determine the facts. That the rights and obligations are clear means that the court can definitely determine who shall bear liability. That the dispute is a minor one means that in principle the parties have no dispute on those issues as to the case merit, who shall bear the liability and the subject of the action.72 However, the court shall not apply the summary procedure in the trial of a case in the following circumstances:73
  • (a) the defendant’s whereabouts are unknown when the plaintiff brings an action;
  • (b) the case is remanded by appellate court for retrial;
  • (c) there are a number of persons within one part to the lawsuit;
  • (d) the case is heard by applying the trial supervision procedure;
  • (e) the case concerns the interests of the State or the public;
  • (f) a third party brings an action for the alteration or cancellation of an effective judgment, ruling or mediation order;
  • (g) other circumstances where it is improper to apply summary procedure.
24.34 In the trial of a case by applying summary procedure, the plaintiff can bring an action orally. The court may summon the parties, serve documents and hear the case in a simple way. The case shall be heard by a single judge only and concluded within three months. The court shall convert the summary procedure into ordinary procedure if it finds that it is improper to hear the case by applying the summary procedure during the course of the trial.74

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Small claim procedure

24.35 In the trial of a case by applying summary procedure, if the amount of the subject matter of the case is no more than 30 per cent of the last year’s average yearly wage of the employee of the province, autonomous or municipality where the maritime court or its dispatched tribunal is located, the judgment made by the maritime court on the case is final and enforceable and the parties cannot appeal to the appellate court.75 However, the maritime court cannot apply the small claim procedure in the following circumstances:76
  • (1) the case concerns a dispute of personal relationship or the affirmation of the ownership of property;
  • (2) the case concerns a foreign-related dispute;
  • (3) the case involves appraisal or evaluation or there is dispute on the appraisal or evaluation that is conducted prior to the action;
  • (4) any other dispute that is not properly heard by way of the small claim procedure.

Procedure for urging payment of debt

24.36 Where a creditor, on the basis of a maritime-related matter, requests a debtor to pay a debt in cash or in securities, if it is found to be in conformity with those provisions of the procedure for urging payment of debt in the CPL, the creditor can apply to the maritime court for an order of the payment of the debt. Where the debtor is an alien, a stateless person or a foreign enterprise or organisation that has a domicile or representative office or branch within the territory of the PRC on which the payment order can be served, the creditor can apply to the maritime court that has jurisdiction for such a payment order.77 24.37 To apply for an order of payment, the creditor shall meet the conditions as below:78
  • (a) the debtor shall pay a debt in cash or in securities;
  • (b) the creditor is not in debt to the debtor;
  • (c) the debt is due and its amount is certain;
  • (d) the debtor is in the PRC and its whereabouts are known, or it has a domicile or representative office or branch within the territory of the PRC;
  • (e) the order of payment can be served upon the debtor;
  • (f) the court has jurisdiction over the application;
  • (g) the creditor has not applied to the court for the attachment of the property of the debtor.
24.38 If the debtor objects to the order of payment, he can raise the objection within 15 days of the receipt of the order. Where the court, through the examination of the debtor’s objection, finds that the creditor’s application for the order of payment falls within any one of the circumstances where the court shall not entertain the application, or shall reject the application, or shall rule to terminate the procedure for urging the payment of debt, or has

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reasonable doubt about the conditions of issuing the order of payment, the court shall grant the debtor’s objection and rule to terminate the procedure for urging the payment of debt.79 Where the debtor does not deny the debt but only raises that he has no capability to pay the debt, or proposes to delay the payment of the debt or pay the debt in an alternative way, the court shall reject the objection and affirm the order of payment.80

Procedure for public notice of exigency of claim

24.39 The holder of a bill of lading or similar document for taking the delivery of cargo can apply to the maritime court where the cargo is located for the public notice of exigency of claim where such documents are out of control or lost.81 Out of control means that the bills of lading or similar documents for taking the delivery of cargo are stolen or lost.82 The applicant shall submit to the court an application in writing in which are stated the type and number of the bill of lading or the similar document for taking the delivery of cargo, the description, quantity, carrier, shipper and consignee of the cargo, the name of the carrying vessel, voyage, and endorsement of the bill of lading or the similar document, the reasons and facts of the application, etc. 24.40 When the court grants the application for the public notice of exigency of claim, the court shall notify the carrier, its agent or the person who takes into custody the cargo to cease to deliver the cargo and issue a public notice to urge the interested person to assert his right. The period of public notice shall not be less than 30 days. After having received the notice from the court, the carrier, its agent or the person who takes into custody the cargo shall cease to deliver the cargo until the procedure for public notice of exigence of claim has been terminated. The applicant shall bear the storage fees and the risks of the cargo during the public notice period. During the period of the public notice, the assignment of bill of lading or the similar document for taking delivery of the cargo is invalid. Where the cargo is to be used for an important State construction project or for relief purposes, or it is improper to store the cargo for a long time period due to the character of the cargo, or the cargo is seasonal, the court may, at the request of the applicant, rule that the applicant can take delivery of the cargo prior to the expiration of the public notice period, if the applicant provides sufficient security.83 24.41 During the public notice period, the interested party can declare its title to the bill of lading or similar document for taking delivery of the cargo in the maritime court. After receiving the declaration, the court shall terminate the procedure for the public notice of the assertion of the claim and notify the applicant, the carrier, its agent or the person who takes the cargo into custody accordingly. The applicant and the interested person can bring an action in respect of the dispute on the title to the bill of lading or similar document for taking delivery of the cargo. Where no person declares its title to the bill of lading or similar document for taking the delivery of cargo during the public notice period, the court shall make a judgment to declare that the bill of lading or similar document has become invalid.

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The judgment shall be published and be notified to the carrier, its agent or the person who takes into custody the cargo accordingly. The applicant of the public notice of the exigence of claim is entitled to request the carrier, its agent or the person who takes into custody the cargo to deliver the cargo to it when the court has published the declaration judgment. The interested party who has good reason for not declaring its title to the bill of lading or similar document in the court can bring an action to the court within one year of being aware of or should have been aware of the court’s public notice of the exigence of the claim.84

Procedure for constitution of liability limitation fund for maritime claims

Parties who can apply for constitution of limitation fund

24.42 After the occurrence of a maritime accident, the shipowner, charterer, operator, salvor or insurer who wishes to apply for limitation of liability in accordance with the law can apply to a maritime court for the constitution of a limitation fund for maritime claims. In the event of oil pollution damage caused by a ship, the shipowner and insurer or the person who provides financial security therefor shall, for the purpose of obtaining the right of liability limitation provided by law, constitute with the maritime court a limitation fund for the maritime claim in respect of the oil pollution damage.85 The shipowner refers to the person who is stated as the owner of the ship in the ship’s registry certificate.86 The operator refers to the person who is registered as the operator of the ship or entrusted by the ship-owner to actually employ and control the ship as well as take liability for the ship but does not include the non-vessel operating operator.87

Jurisdiction of the maritime court

24.43 The application for the constitution of limitation fund can be made either before an action is brought or during the course of the legal proceedings but no later than the first instance judgment being made. Where the application is made before an action is brought, the applicant shall file the application with the maritime court of the place where the accident occurs, or the contract is performed, or the ship is arrested. Where the marine accident occurs outside Chinese territory, the place where the accident occurs refers to the first port where the ship arrives after the accident. The constitution of the limitation fund shall not be bound by the jurisdiction agreement or arbitration agreement concluded between the parties. If the application is made during the course of the court proceedings, the applicant shall file the application with the maritime court of the trial of the maritime claim.88 24.44 In the event of oil pollution damage caused by the persistent oil carried on board an oil tanker, the maritime court of the place where the oil pollution accident occurs has jurisdiction over the oil pollution damage claim and the application for the constitution

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of the limitation fund for the oil pollution claim. Where the oil pollution accident caused by persistent oil carried on board oil tankers occurs outside the PRC territorial waters but causes oil pollution damage or poses the threat of oil pollution damage to PRC territorial waters, the maritime court of the place where the consequence of the oil pollution damage occurs or preventive measures are taken has jurisdiction over the oil pollution damage claim and the application for the constitution of the limitation fund.89 24.45 Where in the same marine accident, different liable parties apply to different maritime court for the constitution of a limitation fund, the court that accepts the case filing later shall transfer the case to the court that accepts the case filing later. After the limitation fund is constituted, the maritime court with which the fund is constituted has jurisdiction over the claim against the liable party in respect of the marine accident unless there is a jurisdiction agreement between the parties.90

Application for constitution of limitation fund and examination of application by court

24.46 The applicant shall state in the application the amount of the limitation fund, reasons for the application, interested person’s name, address and communication methods that are known to the applicant, and submit the evidence in support of the application. The maritime court shall, within seven days of the acceptance of an application for the constitution of a limitation fund for maritime claims, notify all the interested persons already known and issue an announcement of the same in newspapers or other news media for three consecutive days. If the ship involved in the limitation fund navigates internationally, the maritime court shall also announce the constitution of the limitation fund in newspapers or other news media issued abroad. The notice and announcement shall contain:91
  • (a) name of the applicant;
  • (b) facts and reasons for the application;
  • (c) particulars for the constitution of the limitation fund for maritime claims;
  • (d) particulars necessary in registration of claims;
  • (e) other matters that need to be announced.
24.47 Any interested person who objects to the application for the constitution of the limitation fund shall file a written objection in the maritime court within seven days of the receipt of the notice or within 30 days of the announcement if he does not receive the notice. The maritime court shall examine the objection and make an order within 15 days of the receipt of the objection. If the objection is well founded, it shall make an order to reject the application for the constitution of the limitation fund. Otherwise, it shall make an order to grant the application. Any party who is not satisfied with the order can appeal to the appellate court.92

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 24.48 After receiving the objection to the constitution of the limitation fund, the court shall examine whether the applicant is a proper party who can make the application for the constitution of the limitation fund and whether claims arising from the marine accident are those claims for which a liable party is entitled to limit its liability according to the provisions of article 207 of the CMC and whether the amount of the limitation fund is in compliance with the provisions of the CMC. According to article 209 of the CMC, a liable person shall be deprived of his right to limit his liability if it is proved that the loss results from his act or omission done with the intent to cause such loss or recklessly and with knowledge that such loss would probably result. When the court examines the objection filed by an interested party to the constitution of the limitation fund, the court shall not examine whether the applicant of the constitution of the limitation fund can be deprived of his right to limit his liability in accordance with article 209 of the CMC. This issue shall be examined after the limitation fund has been constituted and an interested person has registered his claim with the court and requests the court to affirm his right.93 24.49 In the case of the constitution of the limitation fund by Sekwang Shipping Co., Ltd.,94 MV “Dae Myong” owned by Sekwang Shipping collided with MV “Great Prestige” in the water near the mouth of the Yangtze River. As a result of the collision, about 700 mts of toxic chemical product carried on board MV “Dae Myong” leaked into the sea water causing pollution to the sea. Sekwang Shipping applied to the Shanghai Maritime Court for the constitution of limitation fund for its liability for the claims arising from the accident. Shanghai Environmental Protection Bureau, the East China Sea Fishery Supervision Bureau and the Shanghai Maritime Safety Bureau claimed that Sekwang Shipping should be deprived of the right to limit its liability to them for their claims arising from the pollution accident because MV “Dae Myong” was unseaworthy, and therefore requested that the court should not allow Sekwang Shipping to constitute the limitation fund. The Shanghai High People’s Court held that at the stage of the constitution of the limitation fund, the court should examine whether the applicant of the constitution of the limitation is a proper party and whether the claims arising from the marine accident are those claims for which the applicant can limit its liability according to the law and whether the amount of the limitation fund is in compliance with the provision of the law. As to whether the applicant should be deprived of the right to limit its liability, this should be examined after the limitation fund had been constituted. The court therefore rejected the objection to the constitution of the limitation fund by Sekwang Shipping.

Constitution of the limitation fund

24.50 The applicant shall constitute the limitation fund within three days of the court’s order to allow the constitution of the limitation fund to become effective. Otherwise, it shall be regarded that the applicant withdraws the application. The limitation fund may be constituted either by depositing cash or by providing a security acceptable to the court. The security acceptable to the court refers to a letter of guarantee that is issued by a bank or other financial company in China. The sum of the limitation fund shall cover the amount of liability to be limited and any interest accruing from the date of the accident up to the date

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of the constitution of the limitation fund. Where the fund is constituted by way of security, the amount of the security shall cover the sum of the limitation fund and any interest accruing thereon during the period of such constitution. Where the fund is constituted by cash, the day of the applicant’s remitting the limitation fund into the bank account designated by the court shall be deemed to be the day of the constitution of the limitation fund. Where the fund is constituted by way of security, the day of the maritime court’s accepting the security shall be deemed to be the day of the constitution of the fund.95

Court’s dealing with property preservation

24.51 After the limitation fund is constituted, any party who has filed a claim in respect of the limitation fund shall not exercise any right against any other property of the party who constitutes the limitation fund or the party in whose name the limitation fund is constituted in respect of the claim as filed against the limitation fund. However, a party can still apply to the court for the preservation of the property of the party who constitutes the limitation fund or the party in whose name the limitation fund is constituted in respect of any claim for which the party is not entitled to limit its liability. In respect of the oil pollution damage caused by the persistent oil carried on board an oil tanker, if, during the time period as designated by the court to raise objection to the shipowner’s application for the constitution of the limitation fund, no interested party objects to the shipowner to limit its liability for the oil pollution damage, the court shall, after the limitation fund has been constituted, lift the property preservation measures or return the security that is provided by the shipowner or insurer or other party in order to lift the property preservation measures. If an interested party objects to the shipowner to limit its liability for the oil pollution damage within the time period designated by the court, the court shall, after the court’s judgment that the shipowner is entitled to limit its liability has become effective, lift the property preservation measures or return the security that is provided in order to lift the property preservation measures.96

Registration of claims and distribution of limitation fund among creditors

24.52 After the maritime court publicises the announcement of accepting the application for the constitution of limitation fund for marine claims, a creditor shall register his claim arising out of the marine accident with the maritime court within the time period designated by the court. Otherwise, it shall be regarded that a creditor has waived his claim. A creditor shall file an application in writing with the maritime court and provide the evidence in proof of its claim. The evidence includes a final and enforceable judgment, ruling, mediation statement, arbitration award, notarised documents concerning the credit and other documents and material evidencing the credit. The maritime court shall examine the creditor’s application for the registration of the credit, and rule to allow the registration of the credit if the evidence as required is provided or not to register the credit if the evidence as required is not provided.

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 24.53 Where a creditor submits a judgment, ruling, mediation agreement, arbitration award, or the notarised documents concerning his claim, the court shall, after having examined and determined that these documents are authentic and lawful, make an order to recognise these documents. Where a creditor submits other documents in support of its claim, he shall bring an action in respect of his claim before the maritime court or commence arbitration proceedings if there is an arbitration agreement concluded between the creditor and the party who applies for the constitution of a limitation fund within seven days of the registration of the claim with the court. The parties cannot appeal the judgment of the claim made by the maritime court. However, where the creditor claims that the party who constitutes the limitation fund is not entitled to limit the liability for the marine claim, the creditor and the liable party can appeal the judgment or ruling of the claim. Where the court needs to determine the ratio of liability for the collision of ships accident in the trial of the creditor’s claim, the creditor and the liable party can appeal the court’s judgment or ruling of the creditor’s claim.97 Where the persistent oil carried on board an oil tanker causes oil pollution damage and the aggrieved party brings an action against the shipowner of the oil tanker and claims that the shipowner is not entitled to limit its liability for oil pollution damage, the maritime court may first determine whether the shipowner is entitled to limit its liability for the oil pollution damage and make a judgment on it first.98 24.54 After examining and affirming the creditors’ marine claims, the maritime court shall issue a notice to the creditors for a creditors’ meeting. The creditors’ meeting may through negotiation put forward a plan for the distribution of the limitation fund and sign a distribution agreement. The agreement shall be binding upon the parties after the court has recognised it. Where the distribution plan cannot be agreed in the creditors’ meeting, the court shall decide on the plan according to the rankings of maritime claims as provided for in the CMC. The limitation fund shall be distributed among the creditors together with the interest accruing on the limitation fund at the same time.99

Procedure for the registration of claims in auction of a ship and distribution of the proceeds from the auction

24.55 After the announcement of the maritime court’s order for forced auction of a ship, creditors shall, within the time limit announced, apply for the registration of their claims pertaining to the ship to be auctioned. Creditors who fail to register their claims within 60 days of the last announcement date of the forced auction of a ship shall be deemed to have waived their rights to be satisfied from the proceeds from the auction.100 However, the party who applies for the auction of a ship can directly participate in the distribution of the proceeds from the auction with no need to apply for the registration of its credit first.101

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 24.56 A creditor shall file an application in writing with the maritime court and provide the evidence in proof of its credit. The evidence includes final and enforceable judgment, ruling, mediation statement, arbitration award, notarised documents concerning the credit and other documents and material evidencing the credit. The maritime court shall examine the creditor’s application for the registration of the credit, and rule to allow the registration of the credit if the evidence as required is provided; otherwise rule not to register the credit. Where the creditor submits a judgment, ruling, mediation statement, arbitration award, or the notarised documents concerning the credit, the court shall make an order to recognise these documents after having examined and believed that these documents are authentic and lawful. Where a creditor submits other documents in support of its credit, he shall bring an action before the maritime court in respect of his claim pertaining to the ship to be auctioned or commence arbitration proceedings if there is an arbitration agreement concluded between the creditor and the owner of the ship to be auctioned. The parties cannot appeal the judgment of the claim made by the maritime court.102 However, where a creditor has already brought an action before a maritime court in respect of the maritime claim pertaining to the ship to be auctioned before he registers his credit, the creditor can appeal the judgment of the maritime claim made by the maritime court. Moreover, where the court needs to determine the ratio of liability for the collision of ships in the trial of the creditor’s claim, the creditor can appeal the judgment of his claim made by the court.103 24.57 After examining and affirming the creditors’ credits, the maritime court shall issue a notice to the creditors for a creditors’ meeting. The creditors’ meeting may through negotiation put forward a plan for the distribution of the proceeds from the auction of a ship and sign a distribution agreement. The agreement shall be binding upon the parties after the court has recognised it. Where the distribution plan cannot be agreed in the creditors’ meeting, the court shall decide on the plan for the distribution according to the rankings of maritime claims as provided for in the CMC. The legal costs to be borne by the liable person, expenses incurred in order to preserve the ship or to procure its auction and to distribute the proceeds from the auction, as well as other expenses incurred in the common interests of the creditors shall first be paid out of the proceeds from such auction. After the payment of these costs and expenses, the balance of the proceeds shall be distributed in accordance with the ranking of claims as below:
  • (a) the maritime lien on the ship auctioned;
  • (b) the maritime claim secured by possessory lien on the ship auctioned;
  • (c) the maritime claim secured by mortgage of the ship auctioned; and
  • (d) other maritime claim pertaining to the ship auctioned.
24.58 Where a party applies for the arrest and auction of a sister ship,104 although the maritime claim based upon which the party makes such applications does not pertain to the ship and therefore cannot apply for the registration of its credit in the auction of the ship according to the law, the party can still participate in the distribution of the balance

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of the proceeds from the auction of the ship if any after the above listed claims have been distributed from the proceeds.105

Procedure for exigence of maritime lien106

24.59 The maritime lien shall not be extinguished by virtue of the transfer of the ownership of a ship, except those that have not been enforced within 60 days of a public notice on the transfer of the ownership of the ship made by a maritime court at the request of the transferee when the transfer was affected.107 Where a ship is transferred, the transferee of the ship, i.e. the buyer of the ship or the party who intends to buy the ship, can apply to the maritime court of the place where the ship is to be delivered or transferred for the exigence of the maritime lien, demanding the maritime lien holder to assert his right promptly so as to extinguish the maritime lien attached to the ship. The transferee shall submit to the maritime court a written application, the contract for the ship transfer, technical data of the ship and other documents. After receiving the application, the maritime court shall examine them and rule to approve or disapprove the application within seven days of the receipt of the application. The transferee who is dissatisfied with the court’s ruling can apply to the maritime court for review once only but not appeal it to the appellate court. 24.60 After the court’s ruling to approve the application for the exigence of the maritime lien becomes effective, the court shall issue an announcement in newspapers or other news media for three consecutive days urging the maritime lien holder to assert his right within 60 days of the last announcement date. If the ship navigates internationally, the announcement shall be publicised in the newspapers or other media issued abroad. A maritime lien holder who asserts his right within the period of exigence shall complete registration of his right with the maritime court; otherwise he shall be deemed to have waived the maritime lien. Where no one asserts the maritime lien on the expiry of the period of exigence of the maritime lien, the maritime court shall, on the application of the transferee of the ship, make a judgment declaring that the ship is free from the maritime lien. Where an interested person asserts the maritime lien during the period of the exigence of the maritime lien, the maritime court shall rule to terminate the procedure for the exigence of the maritime lien.