ABSTRACT

On 11 November 2001,the People’s Republic of China officially became a member of the World Trade Organisation. During the preceding two decades China emerged as a major trading and maritime nation, has adopted more than twenty maritime related laws and has ratified most of the important international maritime conventions.

Maritime Law and Policy in China contains new translations of all the major maritime laws of the People’s Republic of China together with detailed explanations of the rationale behind the legislation. A comprehensive examination of the Maritime Code 1992 is included as is a new translation of the Maritime Procedure Law of the People’s Republic of China 1999, which lays down the jurisdiction of the maritime courts in China and provides for matters such as arrest of ships, orders for security and maritime injunctions. China’s ratification of the international maritime conventions is also examined in detail.


This title will be an indispensable reference work for maritime lawyers, marine insurers, P I Clubs, shipping companies and all trading companies conducting business with China.

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PART 1: MARITIME POLICY AND LEGAL SYSTEM IN CHINA

1 INTRODUCTION China has emerged as one of the major maritime nations in the last two decades. In 1980, China had only 955 ships totalling 6 million gross tons (gt). By 1990, this had increased to 1,948 (13 million gt), and by 1998, to 3,175

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Maritime related cases accepted by the Maritime Courts reached 5,166, representing a 20% average annual growth from 1990 (Table 1). To cope with increasing pressure from shipping and trade, China has passed more than 20 maritime-related laws, the most significant being the Maritime Code 1992 and the Maritime Procedure Law (MPL) 1999. China has also ratified most of the maritime conventions, in particular those adopted by the International Maritime Organization (IMO) (Table 2). As a whole, it constitutes a complete maritime legal system in line with the general international practice. One of the pillars of this legal system is the Maritime Code, adopted on 7 November 1992, at the 28th Meeting of the Standing Committee of the 7th National People’s Congress of the People’s Republic of China (PRC), and entered into force on 1 July 1993. It was a milestone for China in completing its maritime legal framework. The history of the drafting of the Maritime Code reflects China’s economic, political and legal development. The drafting originated in the early 1950s, just a few years after the founding of the new China, at a time when most of its fleet had moved to Taiwan and shipping facilities had been seriously damaged or destroyed. The new government took a series of policy decisions and measures in an attempt to keep the maritime transportation system in survival. Establishing a maritime law framework was one of these measures. The drafting of the Maritime Code began with the study and translation of the Russian Maritime Law. A drafting committee was established by the Ministry of Communications (MOC) consisting of law professors, lawyers and shipping practitioners from governmental agencies, shipping companies and maritime universities, and the first official draft was finished in 1963. In 1966, China began the ‘Cultural Revolution’ and the drafting was therefore stopped for political reasons, and was not resumed until 1981. The Maritime Code was at last completed after more than 40 years’ work, a milestone in regulating its maritime industry and in forming its maritime policy. At the time, it was one of the longest codes in China in terms of the number of Articles. During the discussion in the National People’s Congress, it was widely accepted that the Code had been very well drafted in terms of policy-making and structure as well as wording. It was passed with an overwhelming majority, 98 votes in favour out of a total of 101 votes, which was rare in Chinese legislation. The success of the drafting may be attributed to the following factors: (1) China has a group of professional maritime law experts who are familiar with both international maritime law and the Chinese legal system; (2) government accords a top priority to the maritime industry and the drafting of the Code; (3) the pressure arising out the development of economy and trade;

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(4) the assistance from international organisations and foreign maritime law experts; (5) a long germination period. The fact that it was drafted over a 40 year period meant that there was enough time to collect information, to develop new policy, to get comments and to undertake revisions. To implement the Maritime Code, China has also promulgated a series of Regulations in accordance with its Maritime Legislative Plan. These include the Ship Registration Regulations which were promulgated on 2 June 1994 and came into force on 1 January 1995. The MOC, in pursuance of Articles 210(2) and 211(2) of the Maritime Code, approved by the State Council of the PRC, promulgated two special Regulations on 15 November 1993, the Provisions Concerning Limitation of Liability for Small and Coastal Ships (the Coastal Provisions) and the Provisions Concerning Limitation of Liability for Passenger Ships Sailing between Chinese Ports (the Passenger Provisions). Both entered into force on 1 January 1994. The Maritime Procedure Law (the MPL) of the PRC is another important piece of legislation. It represents a significant step in achieving a cohesive maritime legal system. Passed on 25 December 1999 by the 9th National People’s Congress (NPC) and entering into force on 1 July 2000, the MPL consolidates previous laws and practice, and adopted the substantial provisions of the International Convention on Arrest of Ships 1999 (the 1999 Convention). The MPL is expected to have a great impact on maritime

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The MPL is to prevail where there is a difference between the Civil Procedure Law and the MPL (Article 2). The enactment of the Maritime Code, the MPL and other maritime-related laws and regulations was also a sign of establishing a comprehensive legal framework for the Chinese maritime industry. Previously, Chinese maritime polices relied largely on administrative decisions and documents – the so called Red Title Document – which could be changed according to political and social events. This resulted in criticism concerning the lack of stability and openness in Chinese shipping administration and policy-making. The ‘open door’ policy and the fast development of foreign trade and the shipping industry required a long term maritime policy. In this sense, the publication of the Maritime Code and regulations is a very important step in maritime development and reform of the country. These legislative maritime policies, some of which have been practised for a long time and others which are new philosophies, will influence the Chinese shipping industry in the future for the long term. China had been seeking GATT/WTO membership since 1986. After 15 years of negotiation with trading partners, China officially became a member of the World Trade Organisation (WTO) in November 2001. China’s accession to the WTO was a significant event to the world as well as to China. WTO membership will compel China to change its current commercial laws and practices to conform to WTO rules. Trade disputes would be resolved through the WTO adjudication procedures rather than through bilateral bargaining. This has already had a dynamic effect in drawing the Chinese maritime legal system toward openness and transparency.

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THE ROLE OF THE MOC UNDER THE MARITIME CODE

During the period of planned economy in China, administrative decisions and State interventions were the main measures used to regulate industry and its activities. With the economy developing and reforming, administrative measures have been largely scaled down in many industries, including the maritime transport sector.

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INTERNATIONAL STANDARDS

It is one of the guiding principles of China’s foreign policy to work within the confines of international law and to respect the commonly accepted international practice. As one of the main drafters of the Maritime Code, the adviser of the Standing Committee of the People’s Congress, Guo Riqi, pointed out: ‘The Maritime Code has been drafted strictly according to

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Third, the implementation of international conventions has to be given priority for both economic and political reasons. As is widely recognised, one of the existing problems in the world maritime industry is that conventions adopted by international organisations have not been implemented adequately, properly and identically by its member countries, especially by less developed countries. In answering the question: ‘What do you think will be the major challenge for the world maritime community for the remainder of the century?’, Mr William A O’Neil, the Secretary General of the IMO replied, ‘Making sure that the conventions and other regulations that have been adopted by the IMO over the years are properly implemented’. The measures introduced by the IMO during the last 30 years have provided a framework for maritime safety and reduced maritime pollution from ships. If all of these measures were vigorously applied, the problems would be reduced dramatically. States which are parties to maritime conventions need to implement them through domestic legislation. However, it is for the individual State to decide how to undertake their international obligations. As a member country of the IMO, it is also in China’s interest to properly implement these conventions through its maritime legislation. Last, it is an attempt to unify international maritime law and practice. Shipping is an international business, operated and to some extent regulated internationally. There is no doubt that international action is generally more effective than national action, especially in the context of prevention of marine pollution. This means that every country should enforce the same rules. As Prof F Berlingieri pointed out:

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Maritime Code still adopted different regimes for international trade and domestic trade that may be justified as follows. First, international trade linking to other parts of the world is a market-oriented economy with little or no intervention from the government. In principle, international trade is open to foreign flag ships. Back in 1988, an important reform measure was adopted which completely opened up Chinese international trade to the outside world. According to this, the government would neither assign the carried amounts of foreign trade cargo to any domestic or foreign carriers nor impose any cargo share on the national ships through administrative measures. Carriers and cargo owners were encouraged to have direct talks with respect to the carriage of cargo based on normal commercial practices. Since then, in its international trade, China has phased out cargo reservation policies. These measures marked the emergence of Chinese maritime transportation services, to a large extent, from governmental intervention to free competition; although the abandoning of the practice of cargo reservation also meant a great loss to national shipping companies. China Ocean Shipping (Group) Company (COSCO) alone lost a security of about 255,000 tons of cargo every day. Actually, China’s accords of 1991 with the US, of 1992 with the European Community and of 1993 with South Korea have encouraged the container majors to move directly into the Chinese market, running their own feeders, booking their own cargoes and marketing their own services. More and more big liner operators, such as APL, Hapag-Lloyd (together with its alliance: NYK line, Neptune Orient Lines and P&O Containers Ltd), Maersk Line/Sea-Land, Mitsui OSK Lines (MOL), Nedlloyd Lines, Orient Overseas Container Lines and MISC make direct calls at Chinese ports. A comment from a foreign liner executive noted that China is becoming a freight market like any other country. The international trade is governed by the Maritime Code. In port services, foreign flag ships used to have to pay higher port dues than national flag ships when calling at Chinese ports. This practice was changed on 1 April 1992. Since then, there has been no discriminatory treatment of foreign flag ships in international trade. While domestic trade is governed by the Law of Contracts, the Administration Rules of Waterway Transport and the Enforcement Details of Contracts of Waterway Transport, under which contracts must guarantee the fulfilment of the National Plan, any contract that violates the National Plan is deemed ‘null and void’. The domestic trade is still under the influence of the planned economy and reserved for the national flag ships. However, the proportion of planned transportation has recently decreased dramatically, but transportation of strategic materials, energy materials and materials for disaster relief remains under State control.

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Second, carriers have different liabilities in different trades. Article 2(2) of the Maritime Code provides that ‘the provisions concerning contracts of carriage of goods by sea contained in Chapter 4 of this Code shall not be applicable to the maritime transport of goods between the ports of the People’s Republic of China’, but only applicable to international trade. Article 51 in the Chapter, which was adopted from Article 4(2) of the Hague Rules, provides that a carrier shall not be liable for the loss of or damage to the goods arising or resulting from any of the following causes: (1) fault of the Master, crew members, pilot or servant of the carrier in the navigation or management of the ship; (2) fire, unless caused by the actual fault of the carrier; (3) force majeure and perils, dangers and accidents of the sea or other navigable waters; (4) war or armed conflict; (5) act of the government or competent authorities, quarantine restrictions or seizure under legal process; (6) strikes, stoppages or restraint of labour; (7) saving or attempting to save life or property at sea; (8) act of the shipper or owner of the goods or their agents; (9) nature or inherent vice of the goods; (10) inadequacy of packing or insufficiency or illegibility of marks; (11) latent defect of the ship not discoverable by due diligence; or (12) any other cause arising without the fault of the carrier or his servant. However, international carriers are liable for delays in delivery of the cargo carried. Article 50(2) of the Maritime Code provides that the carrier shall be liable for loss of, or damage to, goods caused by delay in delivery due to the fault of the carrier. This provision is adapted from Article 5 of the Hamburg Rules. Thus, it may be concluded that the carrier’s liability under the Maritime Code was based on the principles of the Hague Rules but greatly influenced by the Hamburg Rules in some aspects. In domestic trade, under the Enforcement Details of Contracts of Waterway Transport, a carrier undertakes strict liability for the carried goods. This means he is liable for all the losses of and damages to goods carried to the full extent without package limitation, excepting only losses and damages caused by ‘force majeure, inherent vice of goods and acts or negligence of the shippers or consignees’. But domestic carriers are not liable for any delay in delivery. Third, carriers enjoy different global limitations of liabilities. For international trade, limitation of liability for maritime claims is governed by Articles 204–15 in Chapter 11 of the Maritime Code. These provisions were

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LIMITATION OF SHIPOWNER’S LIABILITY

The Several Regulations on Average Claims 1959 (1959 Regulations), issued by the Ministry of Communications of the PRC, formed the first piece of maritime regulation relating to limitation of the shipowner’s liability. Although simple, it contains the important doctrine of limitation of liability. It stipulates in Article 4 that ‘the liability of the shipowner is limited to the total

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The Maritime Code changes the principles of limitation of the shipowner’s liability from ship’s value system to tonnage system. The relevant provisions are in Chapter 11, ‘Limitation of Liability for Maritime Claims’ (Articles 204–15) in the Maritime Code, which adopted the principles and the substantial Articles of the 1976 International Convention on Limitation of Liability for Maritime Claims (the 1976 Convention). However, some differences exist and will be discussed in the following parts. The provisions concerning the limitation of liability in the Maritime Code are only applicable to international sea-going ships exceeding 300 gross tons (international limits). In pursuance of Articles 210(2) and 211(2) of the Maritime Code, approved by the State Council of the PRC, the MOC promulgated two special regulations on limitations regarding coastal vessels and passenger vessels, namely, the Coastal Provisions and the Passenger Provisions. The two special regulations apply the same principles as the Maritime Code but with different limits. Under these two regulations, the limits of liability for ships sailing between national ports or those engaging in coastal works are about 50% below the international limits. The reason was that given by Xu Qingyue on the previous page.

The claims that are subject to limitation are listed in Article 207 of the Maritime Code:

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only shipowners are entitled to limit liability for oil pollution claims. This means there is no law in China which provides any right of limitation where pollution claims are brought against a party other than a shipowner. As discussed above, the shipowner includes only the charterer and operator in the Maritime Code (Article 204). Thus, salvors and other parties may not limit their liabilities for oil pollution claims. There appears a discrepancy between Article 3(b) of the 1976 Convention and the CLC 1969. This drawback, however, could have been solved by extending the application to other parties, in addition to the shipowners, in domestic legislation. 3 The loss of the right to limit

The Maritime Code provides in Article 209 that: ‘A person liable shall not be entitled to limit his liability in accordance with the provisions of this Chapter, if it is proved that the loss resulting from his act or omission done with the intent to cause such loss or recklessly and with knowledge that such loss would probably result.’ This is an adoption of Article 4 of the 1976

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services’, the limitation of liability shall be calculated according to a gross tonnage of 1,500 tons. 6 Claims for loss of life or personal injury to passengers 7 Contradictions between Chapters 5 and 11

Article 211 of the Maritime Code relates claims for loss of life or personal injury to passengers carried by sea. It provides that limitation of liability of the shipowner shall be 46,666 SDR for each passenger, up to the number of passengers the ship is authorised to carry, with a maximum amount of 25,000,000 SDR.

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disaster in 1993 which claimed 1,800 lives. In such situations, the number of people dead or injured is much greater than the number of passengers the ship is authorised to carry. In this case, of course, the carrier would probably be guilty of conduct barring limitation and would lose the protection of both limits. The point is that if the carrier is allowed to limit his liability in such a situation, should the limit be calculated on the number of passengers actually carried, or on the number the ship is authorised to carry? Article 19 of the Athens Convention provides: ‘This Convention shall not modify the rights or duties of the carrier, the performing carrier, and their servants or agents provided for in international conventions relating to the limitation of liability of owners of sea-going ships.’ As China has ratified the Athens Convention, the above provision, which does not appear in the Maritime Code, will be applied together with the Maritime Code. It becomes clear that if the total amount payable to all claimants after application of the limitation provisions under Chapter 5 exceeds the global limitation fund, calculated in accordance with Article 213 of Chapter 11, the latter will be applied. The same rule would apply if China were to ratify the 1990 Protocol to the Athens Convention and raise the limit per passenger to a maximum of 175,000 SDR per carriage. Another contradiction relates to the concepts of ‘each contract of carriage’ and ‘any given occasion’ in Chapters 5 and 11. Article 117(1) in Chapter 5 refers to the limitation of liability being governed by ‘each contract of carriage’, the whole period during which the passenger is being transported. However, the limitation of liability in Article 212 in Chapter 11 refers to the aggregate of all claims that may arise on ‘any given occasion’. If a passenger

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8 Bar to other actions and counter-claim CABOTAGE RESERVATION

Article 214 of the Maritime Code provides that where a limitation fund has been constituted by a person liable, the claimant may not exercise any right against the assets of the person liable. Where any ship or other property belonging to the person constituting the fund has been arrested or attached, or, where a security has been provided by such person, the court without ‘Cabotage’ is a nautical term derived from Spanish, literally denoting navigation from cape to cape along the coast without going into the open sea. Cabotage, used as a legal term, here refers to the right to transport goods or passengers between ports of a country. It is understandable that developing countries adopt the practice of

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STRICT CONDITIONS FOR SHIP REGISTRATION

The PRC is a signatory of the UN Convention on the Law of the Sea and approved the Convention on 15 May 1996. The Convention is generally accepted as being an accurate statement of current international law concerning this issue. Article 91(1) of the Convention provides that every State shall fix the conditions for the granting of its nationality to ships. For the

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MARITIME COURTS AND JURISDICTION

To cope with the increasing number of maritime disputes, China established the special Maritime Courts system to deal exclusively with maritime cases aiming to increase efficiency and quality of handling of maritime cases which require special knowledge and expertise. The China Maritime Court system was established in 1984 by a decision of the Standing Committee of the

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(5) the collision occurred on the high sea between Chinese ships or involving a Chinese ship; (6) the collision was between foreign ships outside the Chinese territorial sea, but the first port of arrival is a Chinese port;

Each Maritime Court has its ‘jurisdictional territory’. This division is achieved by the fact of the location of the accident, or the property, or the port, or the place where the defendant is domiciled, which links the case to the

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court that has jurisdiction over it. However, there have been some grey areas about which the court should have jurisdiction over certain types of cases. The MPL now details the courts which have jurisdiction in each situation that in the past led to confusion and conflicts of jurisdiction among different courts. These can be categorised as follows: (1) maritime tort actions: the court of the port of registration (Article 6(1) of the MPL), as well as the court of the place where the tort was committed or of the place where the defendant is domiciled (Articles 29–31 of the Civil Procedure Law); (2) maritime contract actions: the court of the port of transshipment (Article 6(2) of the MPL), as well as the court of the place of departure, destination or of the place where the defendant is registered (Article 28 of the Civil Procedure Law); (3) actions based on charter-parties: the court of the ports of delivery, redelivery, registration, or the court of the place where the defendant is domiciled (Article 6(3) of the MPL); (4) actions based on marine insurance contracts: the court of the location of the property insured, or of the location of the accident, or of the place where the defendant is domiciled (Article 6(4) of the MPL); (5) actions based on contracts of crew employment: the court of the place of residence of the claimant, or of the place where the contract has been concluded, or of the ports where the crew embarked or disembarked, or of the place where the defendant is domiciled (Article 6(5) of the MPL); (6) actions based on maritime security (including mortgages): the court of the location of the property, or of the place where the defendant is domiciled (Article 6(6) of the MPL); (7) actions based on mortgages: the court of the port of registration domiciled (Article 6(6) of the MPL); (8) actions based on maritime liens, ownership, possession, and usage of ships: the court of the location of the ship, or of the port of registration, or of the place where the defendant is domiciled (Article 6(7) of the MPL); (9) a lawsuit instituted for expenses of maritime salvage shall be under the jurisdiction of the court where the salvage took place or where the salvage ship first docked after the disaster (Article 32 of the Civil Procedure Law); (10) the court of the port has exclusive jurisdiction over conflicts arising from port operations (Article 7(1) of the MPL); (11) for actions relating to marine pollution from ships, the court at the place where the pollution or the damage occurred, or where prevention measures should be taken has exclusive jurisdiction over such a case (Article 7(2) of the MPL);

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(12) as to actions relating to marine exploitation and activities within Chinese territorial sea and other administrative sea areas, the court of the place where the contract is performed has exclusive jurisdiction over the case (Article 7(3) of the MPL). SECURITY BEFORE JUDGMENT

There is no action in rem procedure available in Chinese law. Rather, pre- judgment security can be obtained by action ‘in personam’ combined with ‘custody of property’ where the execution of a judgment would become impossible or difficult because of the acts of either party or for other reasons (Articles 92–99 of the Civil Procedure Law). According to Chinese legal

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maritime accidents and pollutions at sea. However, the MPL applies to enforcement of judgments and arbitration awards (Articles 22 and 42 of the MPL). As to the scope of the MPL, it does not spell out its coverage in terms of the type and size of ships. Chinese law does not differentiate between a ship and a vessel. Ships referred to in the MPL should be deemed the same as those defined in the Maritime Code (Article 3), which refers to ‘sea-going ships and other mobile units’, but does not include ships or craft to be used for military or public service purposes. However, military and public service ships can be subjected to arrest where they are engaged in commercial activities. Cases relating to inland ships sailing in areas that are not covered by the jurisdiction of Maritime Courts are still subject to the jurisdiction of local People’s Courts. Apparently, however, the MPL applies to inland ships where it is appropriate. MARITIME CLAIMS

Whether arrest of ships should be permissible in respect of any type of claim or whether it should be limited to specific types of claims is always at the core of an arrest law. Shipowners would understandably prefer to see a definitive and closed list of claims that can lead to the arrest of ships, whilst claimants would like to have an open list of claims for arrest. China’s

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SISTER-SHIP ARREST AND OTHER PERMISSIBLE ARRESTS

Sister-ship arrest was another topic for debate at the drafting stage of the MPL. Many argued that the proliferation of single-ship companies often means that in practice, there is no possibility of arresting a sister-ship. Therefore, a proposal was made to introduce the concept of an ‘associated

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Tychy case, the English Court of Appeal held that a slot charterer was within the expression ‘the charterer’ in s 21(4) of the Supreme Court Act 1981, whose other ships could be arrested as sister-ships. However, Article 23(2) of the MPL and Article 3(2) of the Arrest Convention 1999 do not specifically mention ‘slot charterer’, which has left a grey area to the courts for further clarification. The MPL does not spell out in detail the meaning of ‘owned by’, which apparently only refers to 100% ownership. The courts are unlikely to permit arrest of a ship that is joint-owned (Articles 10 and 16 of the Maritime Code) by a third party who is not at fault regarding the claim concerned. There are different views on arrest of a ship co-owned by a third party without fault, which have been left to the courts for further clarification. However, no clarification is needed in the case of cargo arrest. Shipowners will only be allowed to arrest of cargo that is owned by the charterer who has not paid for the hire or freight. This principle should be applied in the case of a sister-

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WRONGFUL ARREST AND COUNTER-SECURITY

It was appreciated by China’s legislators that the obtaining of security in support of a claim by the arrest of the ship is a powerful weapon which can put shipowners under oppressive commercial pressure. Therefore, the new law puts a strict obligation on the applicant for arrest to prevent the facility from being abused and to protect shipowners’ interests. Under the MPL

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RE-ARREST AND MULTIPLE ARREST FOR THE SAME CLAIM

Chinese legislators have been convinced that a ship should not be re-arrested and subjected to multiple arrest. First, as public policy, re-arrest for the same

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claim should not be encouraged in order to prevent a ship from being repeatedly arrested in one port after another. Further, it has long been established in other jurisdictions that the security represents the ship; the ship being thereby released, and which cannot be re-arrested for the same cause of action. Lastly, re-arrest and multiple arrest of ships are not permissible under the 1952 Convention. The MPL (Article 24) therefore adopted the principle that a ship cannot be re-arrested in respect of the same maritime claim where the ship has been arrested and released. In line with the stand of the Arrest Convention 1999, the MPL allows exceptions to this general principle. First, where the nature or amount of the security provided is inadequate (Article 24(1)). Secondly, where the person who has provided the security is unlikely to be able to fulfil some or all of his obligations (Article 24(2)). Lastly, where the ship arrested or the security previously provided was released either with the consent of the claimant acting on reasonable grounds; or because the claimant could not, by taking reasonable steps, prevent the release (Article 24(3)). It is understood that the initial amount should be considered ‘inadequate’ only where it was calculated erroneously or based on wrong information. Normal deviation cannot be regarded as ‘inadequate’ for re-arrest. These provisions are principally in line with Article 5(1) of the Arrest Convention 1999, which has its roots in English law. However, in The Hero, an English

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RELEASE FROM ARREST

Under the MPL (Article 18), the arrested ship should be released immediately after the shipowner provides security, or after the arresting party acting on reasonable grounds withdraws his application for arrest. The arrested ship should also be released or the security provided should be returned if the arresting party has not commenced legal proceedings or arbitration

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JUDICIAL SALE

The Chinese courts have a conservatory jurisdiction of 30 days following an arrest (Article 28 of the MPL), during which period substantial proceedings must be commenced, in absence of which the arrested ships will have to be released. If the owner of the ship has not provided security as required within the period, the arrester, following the commencement of formal

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The court should notify the judicial sale through newspapers or the press, or where a foreign ship is involved, through overseas edition newspapers, less than 30 days before the auction. Judicial sale confers on a purchaser a ‘clean’ title free from all charges and encumbrances, including maritime liens (Article 29(2) of the Maritime Code). Therefore, any person having a maritime lien must exercise his right or register his claim in the court within 30 days of public notice on the transfer of the ownership made by the court. The security for judgment obtained by a claimant through arrest is finally reflected in the funds from the sale. The value of the security will be affected by other claims and the priority order of such claims. The legal costs and expenses of enforcing maritime liens and judicial sale, of preserving and selling the ship, and of distribution of the proceeds of sale and other expenses incurred for the common interests of the claimants, shall be deducted and paid firstly from the proceeds of the judicial sale (Article 24 of the Maritime Code). Under Chinese law, maritime liens have priority over possessory liens, which in turn have priority over ship mortgages (Article 25 of the Maritime Code). Claims for crew wages, loss of life or personal injury, taxes and port dues, salvage payments and damage to property resulting from tortious acts are protected by maritime liens (Article 22 of the Maritime Code). If the fund is insufficient for all claims in the same rank, the claimants will then be paid in proportion. A claimant having a low ranking claim should be careful when deciding to arrest a ship. Where the ship’s value (market value) is lower than the quantum of higher ranking claims, he may not recover anything from the proceeds of the sale of the ship, but may only pick up legal costs if the owner decides not to provide security for the claim. MARITIME INJUNCTION

Although Chinese courts have the power to order a party to perform or not to perform certain legal actions, the Maritime Injunction introduced by the MPL is a new concept in Chinese law. The Maritime Injunction is defined by Article 51 of the MPL as ‘a coercive measure granted by a Maritime Court, upon the request of a claimant, by means of an order requiring a respondent

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The MPL sets out three conditions upon which a Maritime Injunction can be granted: (a) the applicant of a Maritime Injunction should have a specific maritime claim; (b) the respondent violates laws or contracts; (c) without a Maritime Injunction as a matter of urgency, damage will occur or be exacerbated. The purpose of a Maritime Injunction is to prevent the interests of the applicant from being infringed by the action or non-action of another party. Courts may require security from the applicant for a Maritime Injunction (Article 55 of the MPL). The defendant is entitled to an indemnity from the applicant for any loss or damage occurring as a result of a wrongful injunction (Article 60 of the MPL). It appears that the Maritime Injunction under the new law is similar to the Mareva Injunction under English law. However, there are some differences worth noting. First, the basic criteria governing the grant of a Mareva Injunction under English law appear stricter, under which the claimant must show: (a) a cause of action against the defendant in the jurisdiction at the time of application; (b) a strong prima facie case; (c) that the defendant has assets

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CONCLUSION

Two main decisive factors motivated China in introducing its present reform of its maritime policy and legal system. First, since China adopted its ‘open door’ policy as a long term strategy to accelerate its ambitious modernisation, foreign trade with more and more countries and regions has grown dramatically. Over 90% of China’s international trade is transported by ships.

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Table2Chinaratifiedmaritimeconventions

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THE MARITIME CODE OF THE PRC 1993

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THE ARBITRATION LAW OF THE PRC 1994

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INSURANCE LAW OF THE PRC 1995

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