China's New Maritime Procedure Law

August 2000

(Sea Venture Volume 19)

China's new Maritime Procedure Law came into force on 1^st July 2000. It aims to streamline the application of the PRC Maritime Code throughout the PRC by laying down detailed procedures. It should make maritime litigation in the PRC quicker, less expensive and, crucially, more predictable.

Claims giving a Right to Arrest

The Maritime Procedural Law (''MPL'') replaces the 1994 Provisions on Arrest. In it, China adopts the closed list of claims in the Arrest Convention 1999. This includes a new right to arrest for unpaid insurance premiums, including unpaid P&I calls; a specific right to arrest for agency fees, commission and brokerage; and expanded provisions dealing with environmental claims.

Vessels liable to Arrest

The MPL mirrors the provisions of the Arrest Convention 1999. If a claim is protected by a maritime lien, the ship in connection with which the claim arose can be arrested irrespective of who owns the ship at the time of arrest. Otherwise, for most other types of maritime claim, arrest is only possible if, at the time of the arrest, the ship to be arrested is owned or demise chartered by the defendant. This is a major change from the current law that permits arrest of any ship which, both when the claim arose and at the time of arrest, is owned, operated or chartered by the defendant.

Counter-security for Wrongful Arrest

Will be discretionary (now compulsory) but, in practice, it is anticipated that Courts will continue to order counter-security as of rote. Usual sums required range from the value of the claim to 30 days notional hire. There is no definition of what constitutes ''wrongful arrest''. Potentially this includes a bona fide arrest that is subsequently set aside on the merits. In addition, provisions for compensation in respect of excessive security demands by the arresting party should further protect the shipowner against being held to ransom.

''Appeal'' against Arrest

The Court will make its ruling within 48 hours of receiving the application for arrest. Within 5 days thereafter, a party can apply for ''reconsideration'' to the same Maritime Court which issued (or refused to issue) the original order. The Court will either confirm or change its original ruling within 5 days. Previously there was no set timetable for reconsideration, rendering the process of little benefit to foreign shipowners. However, there are still no guidelines as to when an arrest should be set aside, the chances of the original Maritime Court changing its mind are remote and there is no appeal to a higher court.

Recognition of Foreign Jurisdiction Clauses

The arresting party must commence proceedings in respect of its substantive claim within 30 days of the arrest. The MPL stipulates that those proceedings may be commenced at the Maritime Court that arrested the ship unless the parties are bound by a foreign jurisdiction or arbitration clause. As a result, claimants should be able to arrest a ship in the PRC to obtain security for a claim that they will litigate elsewhere, without fear that the PRC Courts will seize jurisdiction over the substantive dispute.

Arrest of Cargo / Bunkers for Security

Specific provisions on arrest of cargo, bunkers and equipment to obtain security will supplement current general provisions allowing for pre-litigation conservatory measures. Cargo owned by the intended defendant can be arrested up to the value of the claim. Counter-security for wrongful arrest may be required. Substantive proceedings must be commenced within 15 days. If the defendant fails to put up security within 15 days (or earlier, if the cargo is perishable), the claimant can apply for auction of the cargo.

Mandatory Injunctions

New powers to require a defendant to act/refrain from acting, before or during litigation, where a claimant has a good prima facie claim and the order is required to prevent or contain damage (e.g. where cargo interests require a carrier to issue a bill of lading after receipt of cargo/carrier requires a receiver to take delivery of cargo etc). Counter-security may be required. Sanction – fine or imprisonment.

Service of Process in Maritime Claims – anything goes

Litigation documents will be validly served wherever receipt can be confirmed. It is sufficient if they are served on a representative or branch office established in the PRC or, in arrest cases, on the Master.

New Procedures for Trial of Collision Cases

Completely revised procedures, requiring all parties to lodge a binding Marine Accident Investigation Form (equivalent to a Preliminary Act) recording the facts of the accident. Unlike the usual procedure in China, all evidence must be produced before the first hearing. The trial will be completed within one year.

Summary Procedures

There is provision for straightforward maritime claims to be dealt with summarily. The claimant may lodge its claim orally, following which both parties come before the Court. The Court will either dispatch the case immediately or set a date for trial. Simplified procedures are employed and the trial must be concluded within 3 months.

With thanks to Adrian Clarke and Claire Morgan of the Shanghai office of Sinclair Roche and Temperley for allowing us to publish this article which was first produced by SRT as an information sheet¹.

¹This article was also published on the Steamship website in March 2000