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Monday, 09 March 15
CHINA'S SUPREME COURT ISSUES NEW JUDICIAL INTERPRETATION ON SHIP ARREST AND JUDICIAL SALE OF SHIPS - GARD
 KNOWLEDGE TO ELEVATE
China is not traditionally a popular jurisdiction for ship arrest. However, Members and clients with ships calling at ports in China should be aware of this development. This guidance is aimed at clarifying ship arrest and sale procedure in the Chinese maritime courts which could lead to more frequent vessel arrests in China.
This Insight is a brief commentary on a new judicial interpretation1 issued by China’s Supreme Court. It covers a number of issues relating to ship arrest and the judicial sale of ships (the Interpretation) that came into force on 1 March 2015.
Provision of counter-security for arrest
It is normal practice for a claimant to provide counter-security when arresting in China. Article 76 of the Special Maritime Procedure Law 1999 (SMPL 1999)2 provides that the amount of counter-security should be equivalent to the probable loss the arrest would cause to the party whose vessel is arrested. Over the years, the practice of the Chinese maritime courts has varied depending on the facts of the case and different approaches by individual judges. In some cases, the counter-security amount was equivalent to 30 days’ hire of the vessel, whilst in others an amount equal to the claim in respect of which the vessel was arrested.
The Interpretation sets out in Article 5 a mechanism to calculate the security amount based on the aggregate of:
- the maintenance expenses of the vessel during the period of arrest
- the loss of use resulting from the arrest
- the cost to the party whose vessel had been arrested (the respondent) to provide security to release the vessel.
This is the same formula used for assessing the losses resulting from wrongful arrest, as set out in Article 24 of the Supreme Court’s judicial interpretation of 2003 relating to application of the SMPL 1999.3
A number of factors remain unclear, however, such as:
- the level of maintenance to be carried out during the arrest period
- the applicable rate of hire while under arrest
- the scope of security costs – in practice, the maritime courts have generally only included the commission payable by the respondent to provide a bank guarantee.
Furthermore, at the time the arrest application is made – and counter-security is assessed – the respondent will not have an opportunity to substantiate or challenge the evidence submitted relating to maintenance, hire and security costs. That said, once counter security has been provided following the vessel’s arrest, the owners may apply for the amount of security to be increased in the event it can be shown that the original amount is insufficient to cover the owners’ likely losses if the arrest proves wrongful.
Although Article 5 still leaves some open questions, at least it sets out a formula to be followed.
A further clarification relating to counter-security is set out in Article 4. This provides that the maritime courts have a discretion not to request counter-security if the arrest relates to a claim for personal injury at sea or a claim arising under a crew service contract.
Multiple arrests of the same vessel
Article 2 of the Interpretation allows multiple claimants to arrest the same vessel as security for their respective claims. Further, if a claimant has made an arrest application but not applied for a judicial sale, then any subsequent claimant making an arrest application may apply for judicial sale of the vessel according to Article 28 of SMPL 1999.
The Interpretation does not, however, tackle the issue of whether each claimant having arrested the vessel must provide counter-security to the full extent of their respective claims.
Judicial sale and procedure
There are several provisions relating to the judicial sale of vessels:
- Article 11 provides that the judicial sale of a vessel is to be organized by a ship auction committee (comprising judges, auctioneers and surveyors, normally three or five persons, as per Article 34 SMPL 1999)
- Article 13 states that in the event of two failed judicial auctions, the sale price of a ship can be reduced – but not to less than 50 per cent of its assessed value
- Article 14 provides that if a ship has still not been sold after a price reduction, the court may lower the price below 50 per cent of its assessed value provided consent is given by creditors representing two thirds or more of the registered creditors’ claims. In the event a sale is still unsuccessful, the court may release the vessel from arrest
- Article 16 requires creditors to register their claims within 60 days after the court’s announcement for the first judicial auction.
Release of counter-security
The practice of the Chinese maritime courts relating to release or return of counter-security has been a concern for claimants in the past. Counter-security could be held up to two years after the claim had been settled on the basis that it represented security for a possible, subsequent wrongful arrest claim brought by the respondent.
Article 6 of the Interpretation will no doubt be welcomed by claimants. It provides that counter-security should be returned to the claimant forthwith:
- if the respondent agrees, or
- if the claimant requests its return, supported by a valid judicial instrument affirming that the respondent is liable for the claim and the awarded amount is approximately equivalent to the amount of security.
In addition, when a claim has been finally concluded, the claimant can apply to the maritime court for return of the security. The court will notify the respondent and allow them to bring any wrongful arrest claim within 30 days, failing which the security will be returned to the claimant.
Arrest and judicial sale of bareboat chartered vessels
Article 23 of SMPL 1999 allows a claimant to apply to arrest a vessel where its bareboat charterer may be liable for a maritime claim and the ship is under bareboat charter at the time of arrest. However, it has not been clear whether the claimant could apply for judicial sale of the vessel following the arrest.
This is now resolved by Article 3 of the Interpretation, which provides that the claimant is entitled to apply (under Article 29 SMPL 1999) for a judicial sale of the vessel to recover a maritime claim for which the bareboat charterer is liable.
This provision is likely to expose head owners to the possibility of their vessel being subjected to a judicial sale through no fault of their own. This might be of significant interest to a shipowner who finances a bareboat charterer to purchase a vessel.
Miscellaneous
Article 7 provides that the shipowner or bareboat charterer is to remain in charge of management of the vessel while under arrest. Should they fail to do so, the maritime court may appoint the claimant or a third party to manage the ship. In which case, the management costs are to be borne by the shipowner or bareboat charterer, or to be paid out of the proceeds of a judicial sale of the vessel.
Under Article 9, the maritime court must terminate the arrest order in the event that it is impossible to enforce the arrest for “objective reasons”. It has not been defined what amounts to “objective reasons”. One possibility could be that the vessel is no longer within the jurisdiction of the Chinese maritime courts, another that the vessel has become a total loss.
The Interpretation should result in a more common approach to arrest and judicial sale by the Chinese maritime courts. However, some issues arising under the SMPL 1999 remain to be resolved, such as whether insolvency of an owner of an arrested ship should take priority over a maritime lien. Nevertheless it is expected that this Interpretation will be generally welcomed by the maritime courts and parties involved in maritime claims.
Acknowledgement: Thanks to Wang Jing & Co for use of their in-house English translation of the Interpretation, in which further details of the changes can found.
Questions or comments concerning this Gard Insight article can be e-mailed to the Gard Editorial Team.
Source: Gard | Hellenic Shipping
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Thursday, 05 March 15
BUKIT ASAM BOOKED US$ 1 BILLION REVENUE IN 2014
COALspot.com: Indonesian publicly listed and state owned coal miner PT. Bukit Asam, has announced that, the revenue of the company for the period J ...
Wednesday, 04 March 15
AN AGENDA FOR CHANGE - FITCH INDONESIA CONFERENCE
Fitch Indonesia Conference - 5 March 2015
Fitch Ratings will host its annual Indonesia conference on 5 March 2015.
The theme of this year ...
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KEEP CALM AND INVEST IN DRY - THEODORE NTALAKOS
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Tuesday, 03 March 15
INDONESIAN COAL EXPORT VOLUME TO DECLINE 50% BY 2019
COALspot.com: The Indonesian government is planning to reduce coal export volume by 50% within the next five years while keeping its coal productio ...
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INDIAN THERMAL COAL IMPORTS: STEAMING FORWARD - CLARKSONS
Coal-fired power stations comprise around 60% of India’s power output, and with domestic supply issues and favourable international coal pric ...
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- Global Green Power PLC Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Xindia Steels Limited - India
- Sinarmas Energy and Mining - Indonesia
- Medco Energi Mining Internasional
- Bukit Baiduri Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Samtan Co., Ltd - South Korea
- PTC India Limited - India
- Goldman Sachs - Singapore
- Chettinad Cement Corporation Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Barasentosa Lestari - Indonesia
- MS Steel International - UAE
- Electricity Authority, New Zealand
- IEA Clean Coal Centre - UK
- Petrochimia International Co. Ltd.- Taiwan
- Sojitz Corporation - Japan
- Coastal Gujarat Power Limited - India
- Edison Trading Spa - Italy
- Kumho Petrochemical, South Korea
- Eastern Coal Council - USA
- Karbindo Abesyapradhi - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Mercator Lines Limited - India
- Australian Commodity Traders Exchange
- Energy Link Ltd, New Zealand
- Jindal Steel & Power Ltd - India
- International Coal Ventures Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Sarangani Energy Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Global Business Power Corporation, Philippines
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- Power Finance Corporation Ltd., India
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- Formosa Plastics Group - Taiwan
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- Metalloyd Limited - United Kingdom
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- Orica Australia Pty. Ltd.
- Indo Tambangraya Megah - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Bangladesh Power Developement Board
- The Treasury - Australian Government
- Bayan Resources Tbk. - Indonesia
- Jaiprakash Power Ventures ltd
- Mintek Dendrill Indonesia
- Vedanta Resources Plc - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PetroVietnam Power Coal Import and Supply Company
- SN Aboitiz Power Inc, Philippines
- Parry Sugars Refinery, India
- Trasteel International SA, Italy
- Simpson Spence & Young - Indonesia
- Posco Energy - South Korea
- Independent Power Producers Association of India
- Holcim Trading Pte Ltd - Singapore
- Semirara Mining Corp, Philippines
- Heidelberg Cement - Germany
- Neyveli Lignite Corporation Ltd, - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sakthi Sugars Limited - India
- Banpu Public Company Limited - Thailand
- Directorate General of MIneral and Coal - Indonesia
- Karaikal Port Pvt Ltd - India
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- Coal and Oil Company - UAE
- Attock Cement Pakistan Limited
- GMR Energy Limited - India
- Savvy Resources Ltd - HongKong
- Gujarat Sidhee Cement - India
- White Energy Company Limited
- European Bulk Services B.V. - Netherlands
- Romanian Commodities Exchange
- Siam City Cement - Thailand
- Minerals Council of Australia
- Standard Chartered Bank - UAE
- GAC Shipping (India) Pvt Ltd
- Makarim & Taira - Indonesia
- The State Trading Corporation of India Ltd
- Ministry of Mines - Canada
- Kartika Selabumi Mining - Indonesia
- ICICI Bank Limited - India
- Sree Jayajothi Cements Limited - India
- AsiaOL BioFuels Corp., Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Commonwealth Bank - Australia
- Interocean Group of Companies - India
- Vizag Seaport Private Limited - India
- Eastern Energy - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- London Commodity Brokers - England
- Central Electricity Authority - India
- Port Waratah Coal Services - Australia
- Therma Luzon, Inc, Philippines
- Intertek Mineral Services - Indonesia
- Aboitiz Power Corporation - Philippines
- Sical Logistics Limited - India
- Parliament of New Zealand
- Pendopo Energi Batubara - Indonesia
- Ministry of Finance - Indonesia
- Baramulti Group, Indonesia
- Ministry of Transport, Egypt
- Deloitte Consulting - India
- Bulk Trading Sa - Switzerland
- Pipit Mutiara Jaya. PT, Indonesia
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indika Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Bhushan Steel Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Central Java Power - Indonesia
- Malabar Cements Ltd - India
- Georgia Ports Authority, United States
- Kapuas Tunggal Persada - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Carbofer General Trading SA - India
- Mercuria Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Merrill Lynch Commodities Europe
- Australian Coal Association
- Gujarat Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- New Zealand Coal & Carbon
- Grasim Industreis Ltd - India
- Latin American Coal - Colombia
- Salva Resources Pvt Ltd - India
- Larsen & Toubro Limited - India
- Rio Tinto Coal - Australia
- Antam Resourcindo - Indonesia
- Siam City Cement PLC, Thailand
- Binh Thuan Hamico - Vietnam
- Singapore Mercantile Exchange
- Indian Energy Exchange, India
- Wilmar Investment Holdings
- Indonesian Coal Mining Association
- Altura Mining Limited, Indonesia
- Globalindo Alam Lestari - Indonesia
- India Bulls Power Limited - India
- Price Waterhouse Coopers - Russia
- Semirara Mining and Power Corporation, Philippines
- Videocon Industries ltd - India
- Orica Mining Services - Indonesia
- VISA Power Limited - India
- GVK Power & Infra Limited - India
- Petron Corporation, Philippines
- Cement Manufacturers Association - India
- Ceylon Electricity Board - Sri Lanka
- PowerSource Philippines DevCo
- Iligan Light & Power Inc, Philippines
- Wood Mackenzie - Singapore
- Tata Chemicals Ltd - India
- IHS Mccloskey Coal Group - USA
- ASAPP Information Group - India
- OPG Power Generation Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Indogreen Group - Indonesia
- Timah Investasi Mineral - Indoneisa
- TeaM Sual Corporation - Philippines
- Ambuja Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Electricity Generating Authority of Thailand
- Tamil Nadu electricity Board
- Lanco Infratech Ltd - India
- CNBM International Corporation - China
- Thiess Contractors Indonesia
- SMC Global Power, Philippines
- Thai Mozambique Logistica
- Star Paper Mills Limited - India
- Kaltim Prima Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Planning Commission, India
- Indian Oil Corporation Limited
- Bharathi Cement Corporation - India
- Toyota Tsusho Corporation, Japan
- Kalimantan Lumbung Energi - Indonesia
- The University of Queensland
- Krishnapatnam Port Company Ltd. - India
- Marubeni Corporation - India
- Kideco Jaya Agung - Indonesia
- Chamber of Mines of South Africa
- Bhatia International Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- Mjunction Services Limited - India
- Manunggal Multi Energi - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Kobexindo Tractors - Indoneisa
- CIMB Investment Bank - Malaysia
- Agrawal Coal Company - India
- Africa Commodities Group - South Africa
- Coalindo Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Riau Bara Harum - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Madhucon Powers Ltd - India
- Sindya Power Generating Company Private Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- McConnell Dowell - Australia
- Meenaskhi Energy Private Limited - India
- Bukit Makmur.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Energy Development Corp, Philippines
- Meralco Power Generation, Philippines
- Dalmia Cement Bharat India
- Renaissance Capital - South Africa
- SMG Consultants - Indonesia
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