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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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Sunday, 18 January 15
INDONESIA TO INDIA SUPRAMAX FREIGHT RATES ARE EXPECTED TO REMAIN WEAK NEXT WEEK
COALspot.com: The BDI was up 4.51 pct week on week on Friday 16, January 2015. The BDI closed at 741 points on this Friday after gaining arou ...
Friday, 16 January 15
U.S. WEEKLY COAL PRODUCTION UP 7.3% W-O-W
COALspot.com – United States the world's one of the largest coal producers, produced approximately 18.9 million short tons (mmst) of coal ...
Thursday, 15 January 15
PANAMAX : MARKET CONTINUE ON LOW PACE - FEARNLEYS
Handy
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LOW CASH COSTS, GOOD LIQUIDITY HELP ASIAN OIL COMPANIES IN PRICE ROUT - FITCH
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Wednesday, 14 January 15
DRY BULK MARKET NOTED ANOTHER WEEKLY DECLINE - INTERMODAL
COALspot.com: The Dry bulk market noted another weekly decline on Friday, with the performance of the Capesize market still weighing down on the re ...
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- Oldendorff Carriers - Singapore
- GVK Power & Infra Limited - India
- Petron Corporation, Philippines
- SMC Global Power, Philippines
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- Lanco Infratech Ltd - India
- Manunggal Multi Energi - Indonesia
- Thai Mozambique Logistica
- Indonesian Coal Mining Association
- Kartika Selabumi Mining - Indonesia
- Agrawal Coal Company - India
- GAC Shipping (India) Pvt Ltd
- Posco Energy - South Korea
- Independent Power Producers Association of India
- Ministry of Finance - Indonesia
- Global Green Power PLC Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Asmin Koalindo Tuhup - Indonesia
- Sindya Power Generating Company Private Ltd
- Bulk Trading Sa - Switzerland
- Indian Energy Exchange, India
- Wilmar Investment Holdings
- PNOC Exploration Corporation - Philippines
- Riau Bara Harum - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Sakthi Sugars Limited - India
- GMR Energy Limited - India
- Eastern Energy - Thailand
- Kideco Jaya Agung - Indonesia
- Siam City Cement PLC, Thailand
- Samtan Co., Ltd - South Korea
- Ind-Barath Power Infra Limited - India
- Parry Sugars Refinery, India
- Semirara Mining Corp, Philippines
- IEA Clean Coal Centre - UK
- Sarangani Energy Corporation, Philippines
- Central Java Power - Indonesia
- Indika Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Carbofer General Trading SA - India
- Altura Mining Limited, Indonesia
- Bhatia International Limited - India
- Ministry of Mines - Canada
- Kumho Petrochemical, South Korea
- Anglo American - United Kingdom
- CNBM International Corporation - China
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement - Thailand
- Tamil Nadu electricity Board
- Renaissance Capital - South Africa
- San Jose City I Power Corp, Philippines
- Orica Mining Services - Indonesia
- Interocean Group of Companies - India
- Cigading International Bulk Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Power Finance Corporation Ltd., India
- Dalmia Cement Bharat India
- Standard Chartered Bank - UAE
- Singapore Mercantile Exchange
- Wood Mackenzie - Singapore
- Cement Manufacturers Association - India
- Globalindo Alam Lestari - Indonesia
- Sojitz Corporation - Japan
- Tata Chemicals Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- CIMB Investment Bank - Malaysia
- OPG Power Generation Pvt Ltd - India
- Central Electricity Authority - India
- Attock Cement Pakistan Limited
- AsiaOL BioFuels Corp., Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Australian Coal Association
- MS Steel International - UAE
- Bayan Resources Tbk. - Indonesia
- McConnell Dowell - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Georgia Ports Authority, United States
- Salva Resources Pvt Ltd - India
- Eastern Coal Council - USA
- Videocon Industries ltd - India
- Barasentosa Lestari - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kaltim Prima Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bahari Cakrawala Sebuku - Indonesia
- The Treasury - Australian Government
- Bhushan Steel Limited - India
- Economic Council, Georgia
- PTC India Limited - India
- Romanian Commodities Exchange
- SMG Consultants - Indonesia
- Bangladesh Power Developement Board
- Gujarat Sidhee Cement - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indogreen Group - Indonesia
- Bukit Baiduri Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Price Waterhouse Coopers - Russia
- Latin American Coal - Colombia
- Bharathi Cement Corporation - India
- Jaiprakash Power Ventures ltd
- Grasim Industreis Ltd - India
- Energy Development Corp, Philippines
- Australian Commodity Traders Exchange
- Uttam Galva Steels Limited - India
- Energy Link Ltd, New Zealand
- New Zealand Coal & Carbon
- Banpu Public Company Limited - Thailand
- Star Paper Mills Limited - India
- Kepco SPC Power Corporation, Philippines
- Africa Commodities Group - South Africa
- European Bulk Services B.V. - Netherlands
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mercuria Energy - Indonesia
- Malabar Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Formosa Plastics Group - Taiwan
- Larsen & Toubro Limited - India
- VISA Power Limited - India
- Heidelberg Cement - Germany
- Coal and Oil Company - UAE
- Coastal Gujarat Power Limited - India
- Bhoruka Overseas - Indonesia
- Simpson Spence & Young - Indonesia
- Edison Trading Spa - Italy
- PetroVietnam Power Coal Import and Supply Company
- Kobexindo Tractors - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Toyota Tsusho Corporation, Japan
- Meralco Power Generation, Philippines
- IHS Mccloskey Coal Group - USA
- Deloitte Consulting - India
- Kalimantan Lumbung Energi - Indonesia
- Thiess Contractors Indonesia
- SN Aboitiz Power Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- Leighton Contractors Pty Ltd - Australia
- Mercator Lines Limited - India
- Directorate Of Revenue Intelligence - India
- Chettinad Cement Corporation Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mintek Dendrill Indonesia
- Sree Jayajothi Cements Limited - India
- The University of Queensland
- PowerSource Philippines DevCo
- International Coal Ventures Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Straits Asia Resources Limited - Singapore
- London Commodity Brokers - England
- Ambuja Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Aboitiz Power Corporation - Philippines
- Marubeni Corporation - India
- Timah Investasi Mineral - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Maheswari Brothers Coal Limited - India
- Madhucon Powers Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Baramulti Group, Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Merrill Lynch Commodities Europe
- Savvy Resources Ltd - HongKong
- Mjunction Services Limited - India
- Vedanta Resources Plc - India
- Binh Thuan Hamico - Vietnam
- Antam Resourcindo - Indonesia
- Parliament of New Zealand
- Electricity Generating Authority of Thailand
- Iligan Light & Power Inc, Philippines
- Goldman Sachs - Singapore
- Planning Commission, India
- Xindia Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Intertek Mineral Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Electricity Authority, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The State Trading Corporation of India Ltd
- Vizag Seaport Private Limited - India
- Coalindo Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Ministry of Transport, Egypt
- Sical Logistics Limited - India
- Indian Oil Corporation Limited
- Aditya Birla Group - India
- Trasteel International SA, Italy
- Commonwealth Bank - Australia
- Semirara Mining and Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Minerals Council of Australia
- Borneo Indobara - Indonesia
- ICICI Bank Limited - India
- Chamber of Mines of South Africa
- India Bulls Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- ASAPP Information Group - India
- Therma Luzon, Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- GN Power Mariveles Coal Plant, Philippines
- Jindal Steel & Power Ltd - India
- Medco Energi Mining Internasional
- Directorate General of MIneral and Coal - Indonesia
- Rio Tinto Coal - Australia
- Makarim & Taira - Indonesia
- White Energy Company Limited
- Port Waratah Coal Services - Australia
- Gujarat Mineral Development Corp Ltd - India
- Global Business Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Sinarmas Energy and Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
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