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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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Friday, 30 January 15
CAN BULKER CONVERSIONS SPOIL THE TANKER MARKET'S PARTY? - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Oversupply of tonnage has always been in the back of the head of ship owners when it comes to taking advantage of favorable market conditions. As s ...
Thursday, 29 January 15
CHINA ENERGY DEMAND MUST BE REVIEWED DUE TO FUNDAMENTAL ECONOMIC CHANGES - WOOD MACKENZIE
New patterns emerging as energy demand growth decoupled significantly from GDP growth for the first time in 2014
Wood Mackenzie says 2014 was ...
Thursday, 29 January 15
CAPE MARKET IS STILL STRUGGLING WITH LOW DEMAND AND LOW COMMODITY PRICES
Handy
Supramax rates are heading south with slipping rates all across the block. USG activity is slow with mid-week levels in the mid 8.000s, Fea ...
Wednesday, 28 January 15
MARKET INSIGHT - STELIOS KOLLINTZAS
With most traders having returned to action from year end festivities, we have already seen signs of activity in the specialized product markets. L ...
Wednesday, 28 January 15
CAPES CONTINUED THEIR UPWARD MOVEMENT LAST WEEK - INTERMODAL
COALspot.com: The Dry Bulk market displayed a mirror performance of that of the week prior, with the Capesize market correcting further upwards and ...
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- Economic Council, Georgia
- Vedanta Resources Plc - India
- Indogreen Group - Indonesia
- Commonwealth Bank - Australia
- Oldendorff Carriers - Singapore
- ASAPP Information Group - India
- Iligan Light & Power Inc, Philippines
- Energy Development Corp, Philippines
- Bulk Trading Sa - Switzerland
- Kobexindo Tractors - Indoneisa
- The Treasury - Australian Government
- White Energy Company Limited
- Agrawal Coal Company - India
- MS Steel International - UAE
- GVK Power & Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- London Commodity Brokers - England
- Independent Power Producers Association of India
- Bukit Makmur.PT - Indonesia
- Thiess Contractors Indonesia
- Siam City Cement PLC, Thailand
- Wilmar Investment Holdings
- Cigading International Bulk Terminal - Indonesia
- Latin American Coal - Colombia
- Sindya Power Generating Company Private Ltd
- Aditya Birla Group - India
- Central Java Power - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Parry Sugars Refinery, India
- European Bulk Services B.V. - Netherlands
- Goldman Sachs - Singapore
- Xindia Steels Limited - India
- Toyota Tsusho Corporation, Japan
- TNB Fuel Sdn Bhd - Malaysia
- Meralco Power Generation, Philippines
- Orica Australia Pty. Ltd.
- Rio Tinto Coal - Australia
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- Neyveli Lignite Corporation Ltd, - India
- Karbindo Abesyapradhi - Indoneisa
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- Chettinad Cement Corporation Ltd - India
- Aboitiz Power Corporation - Philippines
- Romanian Commodities Exchange
- Ambuja Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- Therma Luzon, Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Simpson Spence & Young - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Ind-Barath Power Infra Limited - India
- Gujarat Sidhee Cement - India
- Lanco Infratech Ltd - India
- International Coal Ventures Pvt Ltd - India
- Petron Corporation, Philippines
- Mercator Lines Limited - India
- Banpu Public Company Limited - Thailand
- Formosa Plastics Group - Taiwan
- Posco Energy - South Korea
- Mintek Dendrill Indonesia
- Bukit Baiduri Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- San Jose City I Power Corp, Philippines
- Planning Commission, India
- Electricity Generating Authority of Thailand
- Bayan Resources Tbk. - Indonesia
- Kaltim Prima Coal - Indonesia
- Coalindo Energy - Indonesia
- Larsen & Toubro Limited - India
- Bharathi Cement Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- Kartika Selabumi Mining - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Petrochimia International Co. Ltd.- Taiwan
- Meenaskhi Energy Private Limited - India
- The State Trading Corporation of India Ltd
- Bhushan Steel Limited - India
- The University of Queensland
- Australian Coal Association
- Krishnapatnam Port Company Ltd. - India
- Singapore Mercantile Exchange
- Carbofer General Trading SA - India
- PowerSource Philippines DevCo
- Semirara Mining and Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Bhoruka Overseas - Indonesia
- Ministry of Finance - Indonesia
- Marubeni Corporation - India
- Price Waterhouse Coopers - Russia
- Binh Thuan Hamico - Vietnam
- Attock Cement Pakistan Limited
- Barasentosa Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Coal and Oil Company - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Manunggal Multi Energi - Indonesia
- South Luzon Thermal Energy Corporation
- Essar Steel Hazira Ltd - India
- Chamber of Mines of South Africa
- Dalmia Cement Bharat India
- Mercuria Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Indian Oil Corporation Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Kumho Petrochemical, South Korea
- Energy Link Ltd, New Zealand
- Indian Energy Exchange, India
- Ministry of Transport, Egypt
- Renaissance Capital - South Africa
- Parliament of New Zealand
- Jorong Barutama Greston.PT - Indonesia
- Semirara Mining Corp, Philippines
- Riau Bara Harum - Indonesia
- Global Coal Blending Company Limited - Australia
- SMC Global Power, Philippines
- Bangladesh Power Developement Board
- Star Paper Mills Limited - India
- Siam City Cement - Thailand
- Trasteel International SA, Italy
- Samtan Co., Ltd - South Korea
- Kideco Jaya Agung - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Merrill Lynch Commodities Europe
- Miang Besar Coal Terminal - Indonesia
- Heidelberg Cement - Germany
- Tamil Nadu electricity Board
- Global Business Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- OPG Power Generation Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sakthi Sugars Limited - India
- Orica Mining Services - Indonesia
- Indo Tambangraya Megah - Indonesia
- Sojitz Corporation - Japan
- Vizag Seaport Private Limited - India
- PNOC Exploration Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Uttam Galva Steels Limited - India
- Port Waratah Coal Services - Australia
- Africa Commodities Group - South Africa
- Metalloyd Limited - United Kingdom
- Altura Mining Limited, Indonesia
- Salva Resources Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- GMR Energy Limited - India
- Wood Mackenzie - Singapore
- Sinarmas Energy and Mining - Indonesia
- Ministry of Mines - Canada
- Standard Chartered Bank - UAE
- Central Electricity Authority - India
- Madhucon Powers Ltd - India
- Pendopo Energi Batubara - Indonesia
- Deloitte Consulting - India
- Pipit Mutiara Jaya. PT, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Georgia Ports Authority, United States
- LBH Netherlands Bv - Netherlands
- IEA Clean Coal Centre - UK
- Kapuas Tunggal Persada - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Borneo Indobara - Indonesia
- Sical Logistics Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Indika Energy - Indonesia
- Electricity Authority, New Zealand
- IHS Mccloskey Coal Group - USA
- New Zealand Coal & Carbon
- Cement Manufacturers Association - India
- Ceylon Electricity Board - Sri Lanka
- Makarim & Taira - Indonesia
- Edison Trading Spa - Italy
- India Bulls Power Limited - India
- Power Finance Corporation Ltd., India
- GAC Shipping (India) Pvt Ltd
- AsiaOL BioFuels Corp., Philippines
- Malabar Cements Ltd - India
- Mjunction Services Limited - India
- Bhatia International Limited - India
- Rashtriya Ispat Nigam Limited - India
- TeaM Sual Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Minerals Council of Australia
- SMG Consultants - Indonesia
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Tata Chemicals Ltd - India
- Eastern Energy - Thailand
- Eastern Coal Council - USA
- VISA Power Limited - India
- Indonesian Coal Mining Association
- CIMB Investment Bank - Malaysia
- Medco Energi Mining Internasional
- McConnell Dowell - Australia
- ICICI Bank Limited - India
- Anglo American - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- Grasim Industreis Ltd - India
- Australian Commodity Traders Exchange
- PTC India Limited - India
- Videocon Industries ltd - India
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