China: Service of Process on Masters

(Sea Venture Volume 19) (Updated June 2006)

The Chinese Civil Procedure Code provides seven methods for service of process on a party to an action, where that party has no domicile within China. These methods are:

1. delivery by a method specified in any international treaties entered into or acceded to by both China and the process recipient's country of domicile;

2. delivery through diplomatic channels;

3. in the case of a Chinese national, delivery through the embassy or consulate of China in the process recipient's country of domicile;

4. delivery through the China-based attorney of the process recipient if the attorney is authorised to receive such service;

5. delivery through the process recipient's representative office, branch organisation, or business agent in China, if authorised to receive such service;

6. delivery by mail; and

7. service by public notice.

Any methods other than the ones listed in the code will not create effective service. However, in practice, some maritime courts have adopted other methods, such as serving court documents on the master, or on the subsidiaries of the owners. The reason courts use these improper methods of service is to avoid the long delays of service through diplomatic channels.

On December 25, 1999, the new Maritime Special Procedure Code of the People's Republic of China was enacted, and came into force on July 1, 2000. According to this new code, in addition to those methods listed in the Civil Procedure Code, maritime legal documents can also be served by the following methods:

1. delivery on the process attorney appointed by the party;

2. delivery to the party's branch office, representative office or business agent in China; and

3. delivery by other appropriate ways in which receipt can be confirmed.

Additionally, this provision goes on to state that legal documents regarding vessel arrests can also be served on the master of the vessel arrested. In light of this new provision, it seems clear that courts are not permitted to adopt the method of serving legal documents on masters, except in the case of Arrest Orders, Civil Rulings on Arresting Vessels, Release Orders and Civil Rulings on Releasing Vessels.

By providing maritime courts with the ability to serve masters in arrest matters, the legislature hopes to prevent the practice of maritime courts serving other court documents on masters, which severely infringes owners' interests. A master may be drunk when he takes the documents; he may throw them overboard upon leaving harbour. Certainly, he normally does not read Chinese and may have little idea what the documents are about. At the very least, it will take some time to get the documents to the defendant and the latter is entitled under Chinese law to 30 days in which to respond. Yet the ''court'' at Nantong routinely set a hearing for 30 days from the time that they serve the documents on the master. The principals may not even have received the documents by that time. Arrest matters often need to be effected speedily, as the new provisions recognise. However, to clarify this issue, the Supreme Court has notified the maritime courts that service on owners must be accomplished strictly in accordance with the relevant provisions of the Civil Procedure Code. Despite this, some Chinese maritime courts are still using the shortcut of serving court documents on masters.¹

Bull Housser & Tupper have acted on behalf of owners to challenge the validity of service on masters in several cases. In one case, the Nantong Court even threatened not to release a vessel when the master refused to accept service under our advice. They have also handled cases in which a default judgement was handed down against owners who were never validly served. The claimants then applied for an enforcement of the default judgement. The defendants petitioned the Supreme Court to stop the execution. The Supreme Court granted the defendants' petition and asked the original maritime court to reconsider the case on the grounds of improper procedure.

Owners should be advised that service of process on masters is not a valid method of service in China, and their masters should be instructed not to accept such service. If the masters are forced to accept service, a letter of protest should be immediately issued to protect the future interests of the owners.

With thanks to Deborah Yu of Bull Housser & Tupper, Shanghai, for preparing this article.

^1. This paragraph was updated in June 2006 by Wang Jing & Co. According to Article 118 of Answers to Commercial & Maritime Judicial Practice Involving Foreign Factors promulgated by the Chinese Supreme Court on 8 April 2004, besides the court documents in relation to arrest matters, the Statement of Complaint, Notice of Acceptance of Case, Notice of Responding to Action, Subpoena and other court documents can also be served on the master of the vessel arrested.