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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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Tuesday, 03 March 15
Q4' FOB INDONESIA COAL SWAP CLOSED 2% LOWER COMPARED TO Q2 CLOSING PRICE OF $ 47.47
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 rose month on month and declined week over week.
The Q2 swap increased US$ 2.24 ...
Tuesday, 03 March 15
FOB RICHARDS BAY COAL SWAPS: Q2 UP 9.60%; Q3 UP 9.75% W-O-W
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 surge month over month and week on week.
The Q2 swap has soared US$ 5 ...
Monday, 02 March 15
CFR SOUTH CHINA COAL SWAP FOR Q2 DELIVERY REACHED $ 57.50 PMT W/E 27 FEB 2015
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery rose US$ 1.37 (+2.44%) per MT month over month and declined US$ 0.42 ...
Monday, 02 March 15
BORYEONG POWER PLANT OF KOMIPO TO IMPORT 140K OF SUB-BITUMINOUS COAL FOR Q2
COALspot.com - Korea Midland Power Co. Ltd. (KOMIPO) is inviting bids from coal producers, marketing companies, or traders to supply of 140,000 (70 ...
Monday, 02 March 15
FOB NEWCASTLE COAL SWAP ROSE 6.89% MONTH OVER MONTH
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery rose US$ 3.35 per MT (+6.89%) month over month and US$ 0.40 (0.78%) week on ...
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- Mercuria Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- CIMB Investment Bank - Malaysia
- McConnell Dowell - Australia
- Goldman Sachs - Singapore
- GAC Shipping (India) Pvt Ltd
- Indian Energy Exchange, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ambuja Cements Ltd - India
- Sakthi Sugars Limited - India
- Formosa Plastics Group - Taiwan
- Minerals Council of Australia
- Kideco Jaya Agung - Indonesia
- Global Coal Blending Company Limited - Australia
- AsiaOL BioFuels Corp., Philippines
- Aditya Birla Group - India
- SN Aboitiz Power Inc, Philippines
- Posco Energy - South Korea
- Kaltim Prima Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Samtan Co., Ltd - South Korea
- Karaikal Port Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Meralco Power Generation, Philippines
- LBH Netherlands Bv - Netherlands
- Indika Energy - Indonesia
- Ministry of Finance - Indonesia
- Makarim & Taira - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Indian Oil Corporation Limited
- Star Paper Mills Limited - India
- Orica Mining Services - Indonesia
- Eastern Coal Council - USA
- SMG Consultants - Indonesia
- Commonwealth Bank - Australia
- Coalindo Energy - Indonesia
- Central Electricity Authority - India
- Economic Council, Georgia
- Pendopo Energi Batubara - Indonesia
- Bhoruka Overseas - Indonesia
- Therma Luzon, Inc, Philippines
- Chamber of Mines of South Africa
- Savvy Resources Ltd - HongKong
- Agrawal Coal Company - India
- Holcim Trading Pte Ltd - Singapore
- Vedanta Resources Plc - India
- Barasentosa Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Uttam Galva Steels Limited - India
- Lanco Infratech Ltd - India
- Energy Development Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Coal and Oil Company - UAE
- Jaiprakash Power Ventures ltd
- European Bulk Services B.V. - Netherlands
- Dalmia Cement Bharat India
- Grasim Industreis Ltd - India
- TeaM Sual Corporation - Philippines
- CNBM International Corporation - China
- Heidelberg Cement - Germany
- Kalimantan Lumbung Energi - Indonesia
- The State Trading Corporation of India Ltd
- Gujarat Mineral Development Corp Ltd - India
- Renaissance Capital - South Africa
- Maheswari Brothers Coal Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Rio Tinto Coal - Australia
- Tamil Nadu electricity Board
- GVK Power & Infra Limited - India
- Indo Tambangraya Megah - Indonesia
- Binh Thuan Hamico - Vietnam
- Ceylon Electricity Board - Sri Lanka
- Cigading International Bulk Terminal - Indonesia
- Australian Commodity Traders Exchange
- Mjunction Services Limited - India
- Rashtriya Ispat Nigam Limited - India
- Attock Cement Pakistan Limited
- South Luzon Thermal Energy Corporation
- Larsen & Toubro Limited - India
- Bharathi Cement Corporation - India
- Timah Investasi Mineral - Indoneisa
- Trasteel International SA, Italy
- Madhucon Powers Ltd - India
- Parliament of New Zealand
- Vizag Seaport Private Limited - India
- Altura Mining Limited, Indonesia
- Semirara Mining and Power Corporation, Philippines
- Xindia Steels Limited - India
- Edison Trading Spa - Italy
- Riau Bara Harum - Indonesia
- Videocon Industries ltd - India
- Sojitz Corporation - Japan
- Indogreen Group - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhatia International Limited - India
- Banpu Public Company Limited - Thailand
- Coastal Gujarat Power Limited - India
- Central Java Power - Indonesia
- IEA Clean Coal Centre - UK
- PTC India Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Energy Link Ltd, New Zealand
- Kartika Selabumi Mining - Indonesia
- Thai Mozambique Logistica
- Manunggal Multi Energi - Indonesia
- Merrill Lynch Commodities Europe
- VISA Power Limited - India
- Ministry of Transport, Egypt
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- Latin American Coal - Colombia
- Wood Mackenzie - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Petron Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Electricity Authority, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Oldendorff Carriers - Singapore
- Baramulti Group, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Meenaskhi Energy Private Limited - India
- Metalloyd Limited - United Kingdom
- Antam Resourcindo - Indonesia
- India Bulls Power Limited - India
- Global Business Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Sical Logistics Limited - India
- Parry Sugars Refinery, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Generating Authority of Thailand
- Tata Chemicals Ltd - India
- Thiess Contractors Indonesia
- London Commodity Brokers - England
- Deloitte Consulting - India
- Global Green Power PLC Corporation, Philippines
- Marubeni Corporation - India
- Gujarat Sidhee Cement - India
- Sree Jayajothi Cements Limited - India
- Bhushan Steel Limited - India
- Independent Power Producers Association of India
- Siam City Cement PLC, Thailand
- Port Waratah Coal Services - Australia
- Australian Coal Association
- Medco Energi Mining Internasional
- Africa Commodities Group - South Africa
- Kapuas Tunggal Persada - Indonesia
- Orica Australia Pty. Ltd.
- Salva Resources Pvt Ltd - India
- PowerSource Philippines DevCo
- Standard Chartered Bank - UAE
- GMR Energy Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Sarangani Energy Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Price Waterhouse Coopers - Russia
- Miang Besar Coal Terminal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Intertek Mineral Services - Indonesia
- New Zealand Coal & Carbon
- Sinarmas Energy and Mining - Indonesia
- Straits Asia Resources Limited - Singapore
- Kumho Petrochemical, South Korea
- Power Finance Corporation Ltd., India
- SMC Global Power, Philippines
- Bayan Resources Tbk. - Indonesia
- Ministry of Mines - Canada
- Mintek Dendrill Indonesia
- Planning Commission, India
- Essar Steel Hazira Ltd - India
- Indonesian Coal Mining Association
- Siam City Cement - Thailand
- International Coal Ventures Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Anglo American - United Kingdom
- Mercator Lines Limited - India
- Simpson Spence & Young - Indonesia
- Ind-Barath Power Infra Limited - India
- Borneo Indobara - Indonesia
- ICICI Bank Limited - India
- IHS Mccloskey Coal Group - USA
- Gujarat Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Bukit Baiduri Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Kobexindo Tractors - Indoneisa
- Singapore Mercantile Exchange
- Carbofer General Trading SA - India
- The University of Queensland
- Malabar Cements Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- OPG Power Generation Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Toyota Tsusho Corporation, Japan
- Wilmar Investment Holdings
- Maharashtra Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Cement Manufacturers Association - India
- Bangladesh Power Developement Board
- Iligan Light & Power Inc, Philippines
- MS Steel International - UAE
- Sindya Power Generating Company Private Ltd
- Kepco SPC Power Corporation, Philippines
- White Energy Company Limited
- Globalindo Alam Lestari - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Georgia Ports Authority, United States
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Interocean Group of Companies - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Romanian Commodities Exchange
- San Jose City I Power Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Eastern Energy - Thailand
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