Maritime legislation in ChinaMaritime legislation 2 1 and 14 regular container shipping routes that reach almost all the major areas of the world.5 In addition, 31 of China's major

China and maritime la W Wu Huanning

The following are papers on the maritime law of the People's Republic of China presented by Professor W u Huanning of the China University of Politics and Law, Beijing, on his recent visit to Australia.

Maritime legislation in China China is now drafting a new maritime code. This paper considers the

historical development of that code.

I. GENERAL SURVEY

Situated in the east of Asia, China is surrounded by the Bohai, the Yellow Sea, the East China Sea and South China Sea. It has a coastline stretching over 18,400 kilometres which, added to those of outlying islands, amounts to a length of 32,000 kilometres in total. China has more than 700 ports and harbours (not including those of Taiwan) of which there are 70 sea-ports handling over 100,000 tons of cargo a year.' Almost all of these ports are good natural harbours open to traffic all year round.

Historically, China has always been a great seafaring nation. As far back as 2,000 years ago, the Chinese had ships and sailing techniques far in advance of the rest of the world.2 When the West finally caught up with the

Zhang Zhounye Rudimentary Knowledge ofMaritime Traffic Safety Law ofthe PRC (1983, Falu Press, Beijing) 2. It should be noted, however, that in earlier times, China's rankamong the seafaring nations was higher. In the 15th century, for instance, between 1405 and 1435 AD the Chinese navigator Zheng He led seven missions to more than thirty countries in the West, reaching as far as the east coast of Africa, the Red Sea and Mecca. He had a flotilla of 200 ships of various sizes, operated by 27,000 crewmen. They carried gold, silver, silk, porcelain, copper and ironware which were to be traded for local specialities; coconut, pepper, lilac and ivory. Zheng He also purchased coral, precious stones and rare animal hides for the Emperor. Shu Yao COSCO-Symbol of China's Developing Shipping Industry (unpublished pamphlet, Beijing).

Irwin M. Heine reports -in his book China'sMarin'mePolicies andStructure, cited in D. J. Broaderrnann, "China and Admiralty" Journal of Man'time Law and Commerce (forthcoming) -that some of Zheng He's ships may have been as large as 469 feet by 197 feet, which is about seven times larger than the estimates that Admiral Samuel Morison calculated for Columbus' ships the Nina and Pinta. Furthermore, Heine states that "the

20 (1988) 5 MLAANZ Journal

Chinese, it was only by adopting their inventions in one way or another. As Robert Temple says, in his book The Genius of China:3 "For most of history, Europeans used ships which were drastically inferior to Chinese ships in every respect imaginable".

As early as the Tang dynasty (618-907 AD) China was renowned for her flourishing seaborne trade and from the Ming dynasty (1368-1644 AD) China held the lead in shipbuilding. All of which laid a solid basis for a flourishing shipping industry and for developing foreign trade in general.

However, when the Guomingtang fled China in 1949, the PRC was left with hardly any ocean shipping industry at all. Even in 1961, when the first ocean shipping company (named the China Shipping Company and abbreviated as COSCO) was established, there were no more than 20 ocean-going vessels serving in China's merchant shipping fleet. As a nation with revolutionary new foundations, China had to rely heavily on chartering foreign vessels for the carriage of its import and export cargoes. Chinese vessels carried less than 18% of China's foreign trade freight. For years this situation hindered China from developing its import and export transport- a t i ~ n . ~

However, with the development of the national economy and as a result of 35 years of concerted effort the tide has turned. Great progress has been made in respect of ocean transportation, especially since 1979 when the country began to carry out its new policy ofopening up to the outside world. The volume of China's seaborne trade has increased in spite of the adverse conditions affecting the shipping industry worldwide. At present, Chinese ocean-going vessels annually call at some 600 ports in more than 150 countries throughout the world. COSCO alone operates 94 liner services

Chinese had an excellent reputation as highly skilled seamen and maritime administrators. For example, Emperor Kimmeiof Japan (540-571 AD) appointed a Chinese, Wang Sini, as Controller of Shipping. Apparently Wang's brother, Wang Niu, was also highly respected as Controller of Ports in China and was responsible for their [expansion] to accommodate larger vessels."

China's awareness of its long maritime history, which dates back to a period long before Columbus, is the reason for the considerable self-assurance which it currently demon- strates towards "traditional" seafaring nations.

3 Robert Temple The Genius of China: 3000 years of science, discovery, and invention, (Simon and Schuster, New York, 1986), 186. Maritime China, 1986, Vol4, p 81. In recent years COSCO has concentrated its efforts on developing container traflic in all forms based on new trends in containerisation. Container service centres have been set up in China's major cities. Presently the company has a fleet of some 50 new generation cellular container vessels with a carrying capacity of 33,000 TEUs and has a total inventory level of 110,000 TEUs both owned and leased. COSCO inaugurated its first container service between China and the USA in the early 1980s and since then has expanded the scope of its operations from China to Japan, Australia, Hong Kong, Singapore, Malaysia, Thailand, European ports and the Arabian Gulf. Altogether there are 46 sailings per month from China's principal ports.

Maritime legislation 2 1

and 14 regular container shipping routes that reach almost all the major areas of the world.5 In addition, 31 of China's major seaports are open to foreign ships. The number of foreign vessels calling at Chinese ports can fluctuate between 2,000 and 8,000 each year. Indeed, in 1982, 16,000 foreign vessels called at Chinese seaport^.^ Chinese vessels now carry the major portion of the country's total freight and some of them have even entered into the international freight market. The number of vessels (of all types) operated by COSCO rose to 613 in 1985,7 amounting to approx- imately 13 million deadweight tons. COSCO has now become the major force in China's ocean shipping industry. COSCO's present fleet is at least 40 times bigger than its initial one in 1961 in terms of number of vessels and its shipping capacity has increased over 50 times from what it was in 1961.8

According to Lloyd's Register, China now ranks ninth in the world in terms of vessel tonnage and sixth in terms of vessel numbersn9

China has a number of international cooperation agreements in the shipping field. The most significant is the Chinese-Polish Joint-Stock Shipping CO (Chipolbrok). In addition, China has entered into 13 joint venture companies with overseas partners: inter alia the Netherlands, Belgium, West Germany, Norway, Kenya, Australia, the USA, Japan, Thailand and Hong Kong.1°

I t can now be said that the Chinese ocean-shipping industry answers China's needs in terms of foreign trade transportation and has realised the wish of the late Premier Zhou Enlai, which was that China should "gradually replace chartered foreign vessels with domestic vessels in the carriage of China's foreign trade cargoes."

The Collection of Statutes ofPRC (1984), edited by Bureau of Laws and Regulations, The State Council of the PRC (1986, Falu Press, Beijing) 218. Above n1,3. Chen Zhongbiao "Taking up the New Challenge"Maritime China (1986) v01 4, no 4, p 81. COSCO's technically advanced and well managed ocean-going fleet includes full container ships, ro/ro vessels, bulk carriers, oil tankers, passenger ships, LASH vessels and anumber of special purpose ships. "COSCO celebrates its 25th Anniversary" Maririme China (1986) v01 4, no 1, p 66. "Challenge of China's Ocean-Shipping Industry" Shanghai YiBao (Shanghai Translation Journal) (1986) (in Chinese).

l0 "Joint Ventures Yield Profits" Maritime China (1986) v01 4, no 1, p 61. So far, 14 joint venture companies have been established with overseas partners in the Netherlands, Belgium, West Germany, Norway, Kenya, Australia, the United States, Japan, Thailand and Hong Kong involving carriage of goods by sea, cargo/passenger ferry service, shipping and chartering, cargo canvassing, shipping agency and ship's supply. In addition, Hangyan Technical Service Centre in Hamburg, a company totally owned by COSCO, has been set up to offer marine technical services.

(1988) 5 MLAANZ Journal

11. LEGISLATIVE BACKGROUND AND RECENT DEVELOPMENTS

As early as the 1950s, the Chinese government realized that the formulation of a maritime law, as a part of China's legislation concerning its foreign economic relations, was an important and urgent task for safe- guarding China's rights and interests in ocean shipping and foreign trade. Accordingly a maritime law drafting committee was set up.

By 1963 nine drafts had been prepared but the drafting work came to a complete stop during the Cultural Revolution. I t was not until 1981 that the drafting committee was reconstituted and the drafting work resumed. On the basis of the work done, the Committee summarized the practical experiences of sea-borne trade over the past 30 years in the light of the latest developments in international shipping legislation, including maritime- related bilateral agreements negotiated and signed by the PRC with other countries. The Committee completed another six drafts (10th to 15th), and a new revised (16th) draft, which is the final draft, is now being prepared. The final draft, once finished, will be submitted to the National People's Congress and its Standing Committee for approval and promulgation.

This is not to say, however, that China currently possesses no law governing shipping or maritime affairs. Since the founding of the People's Republic there have been enacted a number of rules and regulations affecting this field. Particular mention may be made of the Provisional Rules of Procedure of the Maritime Arbitration Commission ofthe China Council for the Promotion of International Trade (CCPIT), the Regulations for the Carriage of Goods by Water (1972), the Regulations Governing Super- vision and Control of Foreign Vessels (1979), the CCPIT Provisional Rules for General Average Adjustment (Peking Adjustment Rules 1975), the Economic Contract Law (1981), the Marine Environment Protection Law (1982), Part V of the Civil Procedure Law (for Trial Implementation 1982) entitled "Special Stipulations Governing Civil Procedures Involving Foreign Elements", the Maritime Traffic safety Law (1983), the Foreign- Related Economic Contract Law (1985) and the Civil Law General Principles (1986). Together, these statutes govern a multitude of maritime issues. They are, however, inadequate to meet the ever-rising demand of China's fast expanding economic and trade relations with foreign countries and developments in the shipping industry itself. A sound system of maritime law, such as the draft code would provide, is therefore not only appropriate but necessary.

During the process of making legislation a series of questions have arisen for discussion in legal and shipping circles. In order to reach a consensus before starting to draft a piece of maritime legislation, a symposium on maritime law was convened and various ideas and opinions were presented on each subject. These ideas and opinions are of great importance. The discussion covers the principles, scope and style of the maritime legislation,

Maritime legislation 23

the relationship between international conventions and domestic laws within the scope of maritime law and other major subjects.ll

nr. MAIN LEGAL ISSUES RAISED A. The Purpose and Principles of Maritime Legislation

With regard to this subject, the legal and shipping circles have been completely in agreement. It was believed by all that the existing rules and regulations still fall far short of what China, as a coastal and port state, should have achieved in legislative terms, taking into consideration the relative economic significance of the shipping industry in China's foreign trade and the needs generated by her drive for modernization and cooperation with the outside world. It was therefore unanimously agreed that to lay down a legislative framework for regulating maritime activities was of the utmost importance and should be of the highest priority.

It was further agreed that two main principles should be followed in the drafting of the maritime legislation. First, the law should be beneficial to the development of the maritime transport industry of China and the increase and expansion of economic and trade relations with foreign countries. Second, the law should be drafted on the principle of independence, equality and mutual benefit and should take into account existing international shipping practice.

B. The Title of the Legislation Most experts agreed that the title of a law must be closely related to the

objects over which the law exercises its regulatory function. However, there were different opinions on the scope of matters defined or regulated by this law. Some scholars believed that the maritime legislation should define and regulate the entire maritime relationship (including, for example, ship registration): It should be entitled "maritime law'' or "maritime code". Others argued that the function of the law is mainly to define and regulate the relations between carriers and shippers arising from the carriage of goods by sea. Therefore, the title of the law should be the maritime transportation law. Still others thought that the operation of merchant vessels is the core of all maritime activities so that the title "merchant shipping law" or the "code of merchant ships" would be the right name to use.

1' Xu Hegao The Symposium a Maritime Law (1982, Zhagguo Baike Nianjian (China's Encyclopedic Yearbook) 499, and News Bulletin (Xinhua News Agency) no 11804, Sunday, May 10, 1981. The symposium was held in Beijing, 9 May 1981. The discussion was attended by 80 delegates including officials, lawyers and academics representing the legal profession, trading organizations and universities involved in the design and drafting of the maritime code.


I believe that the law should govern not only the carriage of goods by sea but also the activities and relationship arising from and in connection with seaborne trade, such as the control of vessels, competence and duties of master and crew, liability for collision of vessels, marine insurance, pollution, settlement of maritime disputes, etc. The names "maritime transportation law" and "merchant shipping law" would both indicate a narrower scope of regulation. Further, the use of the term "maritime law" has had a long history and people are familiar with what it signifies.

C. Characteristics of the Draft Maritime Law

There are two main characteristics ofthe draft maritime code to be noted: its international nature and its comprehensiveness.

(1) International nature

Although the maritime code is purely domestic, it is bound nevertheless to have a significant impact at an international level. This is due to the fact that shipping by its very nature involves international relations and that China has become a major maritime nation. The ocean-going vessels flying the flag of the PRC operate in all waters throughout the world and sail from country to country. Therefore, foreign maritime laws and international legislation and practice must be taken into consideration and carefully examined so that China can both profit from foreign experience and avoid conflicts of law with other jurisdictions, bearing in mind common international usage and practice. Hence, drafting the maritime code requires a clear awareness of prevailing international law and practice. An example of such awareness can be seen in the adoption by the drafters ofthe Hague Rules (which exempt carriers from liability for loss or damage arising from fault or neglect in the navigation or in management of a ship), the "no cure, no pay" principle in Anglo-Saxon salvage law and the principle of the 1910 Collision Convention (under which in "both-to-blame" collision cases the liability of each ship is in proportion to its degree of fault).

(2) Comprehensiveness

The second characteristic of the draft is its breadth. The code is by no means a single legal provision. I t seeks to regulate personal and property relationships as well as contractual and tortious relationships. Many of the provisions thus fall within the scope of the civil law. There are also quite a number of administrative law provisions, such as those providing for the kind of vessels that can sail under the flag of the PRC, the kind of qualifications required for crew members and the kind of vessels that can carry out salvage operations in Chinese coastal waters. All of these provisions have to be implemented by certain existing administrative organs. As to the content of the draft maritime code, in addition to the general provisions and appendix, there are sections dealing with vessels, manning, administration of international maritime transport, carriage of goods by sea, carriage of passengers by sea, charter parties, salvage and

Maritime legislation 25

assistance, collision of vessels, marine insurance, general average, limitation of shipowner's liability, settlement of maritime disputes and maritime liens. The comprehensiveness of the law can thus be seen in its civil, administrative and even its few criminal provisions, as well as in its substantive, conflicts and procedural provisions. In short, the law will embody both public and private law, with the latter forming a major part.

D. Other Important Provisions of the Draft Maritime Law

(1) The nationality of ships

The nationality of a ship refers to the state which has authority and responsibility over the ship as symbolised in the flying of a national flag. China accords nationality to a ship only if the ship is owned by a Chinese juristic person; that is, the ship belongs to a state organization, a state-run institution, a state-owned enterprise, a collectively-owned enterprise or a joint venture run by Chinese and foreign partners. As yet no ocean-going vessel in China is owned by an individual citizen, however China is preparing to add a clause authorising this into the maritime law because both of economic necessity and of the re-incorporation of Hong Kong and Macao into China.

The nationality of a ship will depend on its ownership. Only those vessels that belong to a Chinese juristic person or citizen may acquire the nationality of the PRC. In order to acquire the Chinese nationality, the shipowner will have to register the vessel at one of the Harbour Superin- tendency Administrations located at the major Chinese seaports, and a certificate of nationality will then be issued. Vessels that have acquired the nationality ofthe PRC are entitled to the right of navigation under the flag of PRC in internal waters, the territorial seas, exclusive economic zones of the PRC and on the high seas. Besides, such vessels may also engage in coastal shipping business, towage activities, salvage operations of shipwrecks or sunken objects within the coastal waters of China. Foreign vessels may not engage in the above-mentioned operations within those areas. China does not favour the system of "open registry" and the Chinese flag will not be a "flag of convenience".

(2) The carriage of goods by sea

The provisions on carriage of goods by sea will form the core of the maritime code. At present, the international conventions which govern the carriage of goods at sea are: (a) The International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, 1924 (the Hague Rules); (b) The Protocol Amending the Hague Rules, 1968 (the Hague-Visby Rules); and (c) The United Nations Convention on the Carriage of Goods by Sea, 1978 (the Hamburg Rules).

Of the three legal instruments cited, the first two bear closer resemblance to one another than to the third in respect of the rights, liabilities and responsibilities of the carrier and shipper, though the limitation of liability


of the carrier in respect of the loss of or damage to cargo is different as between the two. Both of them could be regarded as belonging to the "Hague Rules" system. The "Hamburg Rules" are fundamentally different from the "Hague Rules" system in that they thoroughly amend and change provisions of the Hague Rules, thereby establishing a new system of rules governing the carriage of goods by sea.

China is not a signatory to any of the above conventions. This raises a problem. Which system should China follow in the drafting of its maritime code? Since 1924, the Hague Rules have been widely followed in the international maritime community and have had tremendous influence in seaborne trade. For years the bill of lading clauses of COSCO and CNFTTC (China National Foreign Trade Transportation Corporation) have been guided by the Hague Rules in respect of the rights and liabilities, responsibilities and immunities of the carriers. Therefore, it is my opinion that, as existing Chinese maritime practice adheres to the spirit and major provisions of the 1924 Hague Rules, it is those rules which should be the guiding force behind China's new maritime code.

Maritime arbitration in China I. INTRODUCTION

Since the establishment of the People's Republic of China, maritime disputes between Chinese and foreign parties as well as disputes between foreign parties have been settled by the following four methods:

(1) amicable negotiations between parties; (2) conciliation with the assistance of a third person; (3) arbitration; (4) litigation.

All these four ways are available to disputing parties. Maritime cases were very seldom heard in a Chinese court of law before November 1984 when special maritime courts were set up; most of them were settled by arbitration.

n. CHINESE ORGANIZATIONS FOR ARBITRATION The Maritime Arbitration Commission (MAC) of the China Council for

the Promotion of International Trade (CCPIT) is the only permanent organization for maritime arbitration in China. The CCPIT was established in May 1952. This is a national non-governmental, economic and trade organization composed of representatives from China's economic and trade circles.

The major tasks of CCPIT are:

(1) Hosting foreign economic and trade delegations and professionals, and organizing and sending Chinese economic, trade and technology delegations abroad;

(2) Organizing Chinese exhibitions abroad and participating in international fairs;

(3) Arranging and hosting foreign exhibitions in China; sponsoring multi-national exhibitions and international fairs in China, and admin- istering the China International Exhibition Centre;

(4) Organizing and participating in international economic and trade conferences, including those CO-sponsored by CCPIT and similar foreign organizations;

(5) Dealing with legal affairs pertaining to foreign commerce and trade, as well as maritime matters; handling average adjustment on ship and cargo damages;

(6) Issuing and legalizing documents, including certificates of origin, certificates of force majeure, documents on foreign trade, and certificates of shipping;


(7) To act as agent for patent applictions and trade mark registrations; provide consultancy services for industrial properties;

(8) To compile and publish periodicals and other publications reporting on China's economic developments, policies, practices and China's foreign economic and trade relations as well as China's import needs or new export commodities;

(9) To handle other matters promoting economic and trade activities.

These activities help to enhance mutual understanding and friendship between the people of China and other countries. Since 1952 the CCPIT has achieved great success in its work.

Within the CCPIT there are two arbitration commissions, the Foreign Economic and Trade Arbitration Commission (FETAC) and the Maritime Arbitration Commission (MAC). Since China adopted the open-door policy, arbitration in China has become ever more vigorous as a major mechanism of dispute resolution.

When people speak about China's arbitration system, they refer mainly to international arbitration, arbitration dealing with disputes arising from international economic relations and maritime transactions between parties one or both of which are foreign firms or individualsand disputes involving the interests of foreigners. But there is another type of arbitration which should be mentioned. That is domestic arbitration. It deals with disputes arising from contracts between Chinese enterprises or organizations. Such arbitration is conducted by Administrations for Industry and Commerce only.

111. THE MARITIME ARBITRATION COMMISSION (MAC)

A. General

The MAC was established in 1958 on the basis of the Decision concerning the Establishment of a Maritime Arbitration Commission within the CCPIT promulgated by the former Administration Council of the PRC.

At the present time the MAC consists of 63 members (arbitrators), including the Chairman, 6 Vice-Chairmen, and Secretary-General. The commission members are selected and invited by CCPIT from among specialists having expertise in international economics and trade, navigation techniques and merchant shipping protection of the marine environment. Other areas include harbour superintendency, pilotage, shipbuilding, shipsurvey, rescue and assistance, marine insurance, average adjustment, shipping economic administration. There are also specialists on various fields of law, such as the law of the sea, international law, private international law, civil law, international trade law and maritime law. The members come from all parts of China. Most of them serve for arbitration

Maritime arbitration 29

on an ad hoc basis. Furthermore, during the arbitration proceedings the tribunal may consult experts on specific questions or practices.

The MAC maintains contact with maritime arbitration agencies and maritime arbitration associations of many countries, such as the Maritime Arbitration Commission of the Japan Shipping Exchange Ltd, the Arbit- ration Court at the Polish Chamber of Foreign Trade, the London Court of International Arbitration, and also with the Australian Centre for Inter- national Commercial Arbitration. (Some Chinese arbitrators have been invited to join the panel of Australian arbitrators). Besides, the MAC has established friendly relationships with several intergovernmental and non- governmental organizations, such as the International Council for Com- mercial Arbitration OICCA), the UN International Trade Centre under UNCTAD/GATT, the International Chamber of Commerce (ICC), the UN International Maritime Organization (IMO) and the International Maritime Committee (CMI).

B. Jurisdiction of MAC

In accordance with the Provisional Rules of Procedure of the Maritime Arbitration Commission passed at the 7th Session of CCPIT on 8 January 1959, MAC has been dealing with the following three kinds of disputes:

(l) Disputes regarding remuneration for salvage services rendered by sea-going vessels to each other or by a sea-going vessel to a river craft or vice versa;

(2) Disputes arising from collisions between sea-going vessels or between sea-going vessels and river craft or from damages caused by sea-going vessels to harbour structures or installations;

(3) Disputes arising from chartering sea-going vessels, agency services rendered to sea-going vessels, carriage by sea by virtue of contracts of affreightment, bills of lading or other shipping documents, maritime insurance and other disputes relating to maritime transportation.

To meet the needs of development which have increased since the "open- door" policy was adopted in 1979, the scope of cases handled by MAC has been enlarged in accordance with a decision of the State Council of the PRC in 1980. In addition to the above-mentioned disputes, it includes disputes involving damage caused by marine pollution and all other disputes concerning maritime matters which the parties agree to submit for arbitration.

The MAC operates in accordance with the following three principles: Independence and initiative; Equality and mutual benefits; and Reference to international practice.

That is to say, in arbitration, the MAC not only abides by Chinese laws, but also pays due regard to the terms and conditions of contracts between


disputing parties and to reasonable customary international practices in world trade and shipping. In the past thirty years, MAC has handled and settled a number of cases according to the above-mentioned principles. By doing so it is able to solve disputes in a fair, reasonable and truth-seeking way. Today more and more Chinese and foreign parties are agreeing to submit their disputes to arbitration at MAC. Quite a number of contracts have been signed by Chinese corporations with firms and companies from the Unired States, Japan, West Germany, Britain, France, Greece, Scandinavian nations, New Zealand and Australia. These contracts clearly stipulate that disputes arising between parties shall be settled first by the parties themselves through friendly negotiation. Failing that, the disputes shall be submitted to the MAC for arbitration.

C. Conciliation

That combination of arbitration with conciliation is an important feature of the work of the MAC. In China, conciliation as a method of solving civil disputes has a long history and tradition. MAC therefore tries to bring the disputing parties to conciliation whenever possible. But conciliation must be conducted ona voluntary basis with the consent of both disputing parties and on the premise of differentiating between right and wrong and of ascertaining liabilities. A conciliation statement is made to close the case in accordance with the conciliation agreement between the disputing parties if such an agreement has been reached.

Experience proves that in practice the disputing parties are usually satisfied and can voluntarily execute the conciliatory statement. No instances of withdrawal and refusal to execute the conciliation statement have occurred in the past twenty-plus years.

However, conciliation is not always a necessary step in the arbitration proceedings. If either or both parties are not willing to proceed with conciliation, it should not be proceeded with. If no compromise agreement can obviously be reached between disputing parties after a reasonable period of time, conciliation then should be stopped immediately.

Conciliation can be conducted at any stage of arbitration either before or after the arbitration tribunal is formed.

The United Nations Commission on International Trade Law (UNCITRAL) attached importance to China's practice and experiences when drawing upon its conciliation rules recommended for worldwide use.

Now, conciliation is gaining more and more attention in the international commercial community.

In recent years a new method of conciliation has been created, namely, joint conciliation. When a dispute has been submitted to MAC, the foreign party may apply to a corresponding arbitral institution in his own country. Under this process, MAC and the foreign arbitral institution appoint one or

Maritime arbitration 3 1

more conciliators on an equal basis to jointly resolve the case. If conciliation is successful, the dispute is then solved. If conciliation fails, the dispute is then referred to arbitration. This new method has successfully enabled the settlement of two cases involving rather large amounts which arose from China-US trade contracts. More recently, provisions for joint conciliation have appeared in the Protocol for Settlement of Disputes, signed between CCPIT and the Bureau of Industrial Property of France. Similar provisions have also appeared in the Arbitration Cooperation Agreement concluded between the MAC and the FETAC on the one side and the Italian Association for Arbitration on the other.

Another maritime arbitration practice of China, joint handling, was taken up as an experiment in the 1978 Protocol for using arbitration to settle Sino-Japanese maritime disputes. When no unanimity can be reached as to selection of an arbitral body, the maritime dispute is then handled jointly by Chinese and Japanese arbitral bodies.

D. Arbitration Agreement

The MAC takes cases for arbitration, based only on an arbitration agreement reached by both disputing parties.

The arbitration agreement between parties concerned is concluded either prior or subsequent to the arising of the dispute. The former refers to an arbitration clause stipulated in the original contract from which the dispute has arisen. The latter refers to any other form of agreement (such as a special agreement, correspondence exchanged or other relevant documents in which the specific stipulation in respect of submission to arbitration is contained). The arbitration agreement must be written.

Chinese courts of law do not handle the disputes where an arbitration agreement has been reached between parties. In other words, an arbitration agreement provides a legal basis for MAC to take cognizance of cases on the one hand, and it excludes the jurisdiction of law courts on the other.

China attaches great importance to the arbitration agreement because conclusion of an arbitration agreement reflects the common intention of the parties to submit their disputes to arbitration. And such a common intention illustrates the voluntary basis that distinguishes arbitration from litigation.

Failing such written agreement, either of the disputing parties may file a lawsuit with the court having proper jurisdiction over the case.

E. The Arbitration Tribunal

A case is heard either by an arbitration tribunal composed of three arbitrators or by a sole arbitrator. Two of the three arbitrators are chosen from the membership list of the Maritime Arbitration Commission1

1 See the Appendix to this paper.


by each of the parties or appointed by the Chairman of the Maritime Arbitration Commission upon the request of one of the parties. The two arbitrators, whether chosen by the parties or appointed by the Chairman, select a presiding arbitrator from among the members of MAC.

Failing agreement regarding such a selection within the time limit, the chairman of the MAC shall be a presiding arbitrator for them. In the case of a single arbitrator, the disputing parties may jointly choose the individual or authorize the Chairman of the MAC to appoint an arbitrator from among the members of the MAC for them.

F. The Arbitration Procedure

The arbitration procedures of MAC are more or less the same as those adopted by other countries throughout the world. There are in essence the following steps:

(1) Submitting an application for arbitration. The arbitration procedure at the MAC starts when an application for arbitration is submitted to the MAC. The application for arbitration must be accompanied with an arbitration agreement and other original relevant documents and the application for arbitration itself should be clearly stated with the following items: (a) the names and addresses of the applicant (plaintiff) and those of the

respondent (defendant) as well as those of the representative if any; (b) the claim of the applicant and the facts and evidence upon which the

claim is based; (c) the name of an arbitrator chosen by the applicant from among the

members of the MAC or a statement entrusting the Chairman of the MAC to appoint the arbitrator on behalf of the applicant.

Upon receipt of such an application the MAC takes cognizance ofthe case and notifies the defendant to that effect and forwards to him a duplicate of the application for arbitration and all the appended documents. The defendant may file a counter-claim against the plaintiff in any case of which the MAC has taken cognizance.

(2) Forming the arbitration tribunal.

(3) Hearing the case. Hearings are generally held in open session but may also be held in closed session upon the request of both or either of the parties.

If the MAC of China is the right arbitration institution chosen by parties, hearings are generally held in Beijing where the MAC is located. When necessary, however, hearings may be held at other places within the territory of China with the approval of the Chairman of the MAC.

Hearings are conducted by the arbitration tribunal sitting en banc. A sole arbitrator forms his own tribunal and conducts the proceedings alone.


Hearings need not be held orally if both parties agree to have their dispute handled by the arbitration tribunal in written form. The arbitration tribunal may consult experts for the clarification of any facts or questions involved. If one of the disputing parties fails to appear during the hearing of the case, the tribunal may proceed to hear the case upon the request of the party present.

(4) Rendering an award. The award of the arbitration tribunal sitting is decided by majority vote and the minority opinion should be recorded in the file. In the case of a sole arbitrator, the award is rendered by the arbitrator.

The conclusion of the award shall be read to the parties at the closing session of the hearings. The award and the reasons for the decision shall be made in writing within 15 days from the date of the reading of the conclusion and should be signed by all arbitrators or a sole arbitrator as the case may be.

The award is final and neither party may bring an appeal to a law court or other organization.

G. Enforcement of Award

A MAC award should be enforced by the parties themselves within the time stated in the award.

In case the award is not enforced by one of the parties, the other may petition a Chinese court of law to enforce it. It is worth mentioning that in practice, however, no Chinese party has failed to execute an arbitral award rendered by MAC.

As to the execution of an arbitral award rendered by a foreign arbitration institution, the foreign parties who win their cases may rest assured that there is no difficulty in enforcement in China. I t should be noted that, since China acceded to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) and it became effective in China on 22 April 1987, the parties may directly petition the court of any contracting state of the New York Convention to enforce the arbitral award made in any of the contracting countries.

H. Arbitration Fees

On submitting an application for arbitration the applicant shall pay a sum equivalent to 1% of the amount of the claim as a deposit for the arbitration fee. The amount of an arbitration fee shall be determined by the tribunal in the award and it shall in no case exceed 2% of the amount of the claim.

The tribunal may, considering the circumstances of the case, determine whether such a fee should be borne entirely by the losing party or proportionally by both parties. The tribunal may also determine in its award the amount to be paid by the losing party to the successful party in compensation for costs incurred in the action. Such amount shall inno case exceed 5% of the sum awarded to the successful party.


I. Representation of Parties

The parties to disputes may be represented before the MAC in person or through representatives. To make things easy for foreign parties, the foreign parties may retain an attorney to protect their interests. Such attorney may be a Chinese national or a foreign citizen.

J. Language

Chinese is the official language of the MAC and FETAC. When necessary, the arbitration tribunal may appoint an interpreter or ask the parties to provide interpreters during hearings. Since most of the arbitrators read English, if most documents submitted to the tribunal are in English, they do not need to be translated, and a great amount of time and expense may be saved.

Maritime arbitration

Appendix CHINA COUNCIL FOR THE PROMOTION OF

INTERNATIONAL TRADE MARITIME ARBITRATION COMMISSION

Chairman REN JIANXIN

Senior Advisers ' JIA S H I WANG WENLIN

Vice Chairmen Advisers L I U SHAOSHAN L1 HAOPEI SHEN ZHICHENG F E N G FAZU WANG SHOUMAO SHAO XUNYI F E N G LIQI ZHOU TAIZUO ZHU ZENG JIE GAO ZHUNLAI

Secretary-General LIU SHUJIAN

Semmriat: 1, Fruingmenmi Smt, Bcijing, China Cable: COMTRADE BEIJING F=: 8011369 Telex 222288 TPLAD M Phone: 8013344 - 1811

List of members of the Maritime Arbitration Commission of the China Council for the Promotion of International Trade - 1988 (in order of number of strokes in Chinese names).

NAMES DING QIZHONG YU YONGQUAN GAN YANBIN Y IN DONGNIAN WANG YONGMING WANG SHOUMAO

WANG ENSHAO

WANG HUILIN S1 YUZHUO BA1 WENSHUANG YE WEIYING REN JIANXIN

HUA ZHONGYU SUN RUILONG ZHU ZENGJIE

EXPERTISE Shipbuilding, Marine-survey Environmental Protection Harbour Superintendency, Pilotage Maritime Law, Marine Transport Marine Insurance Maritime Law, International Economic and Trade Law Marine Insurance, Average Adjustment, Maritime Law Marine-survey Maritime Law Marine Transport, Chartering Business Average Adjustment, Maritime Law Civil Law, Maritime Law, Civil Procedural Law, International Trade Law Marine Insurance, Marine Transport Carriage of Goods by Sea Shipping Economic Administration, Maritime Law


FENG LIQI FENG FAZU LIU SHUJIAN

LIU SHAOSHAN LIU GUOYUAN

GUAN BINGHENG JIANG CHENGFA LU BAOYOU SONG ZHIWEN LA0 HUI

SHEN ZHICHENG

SHEN MANTANG SHEN ZHAOQI DU ZHIBIAO

SHAO XUNYI

L1 YONGMAO L1 JIAHUA WU HENG WU JUN

WU HUANNING (F) LIN SHIQIE LIN JUNXIN LIN BINGZHONG MENG YUQUN ZHOU TAIZUO ZHANG WEIMIN ZHANG ZHENGYIN ZHANG JIYI ZHANG JIANCHEN ZHANG YAO JUN YU DAXIN ZHONG BOYUAN ZHAO HONGXUN

ZHAO LINHUA ZHAO ENBO

HU MINGY U (F) XU SHIZHANG XU HEGAO SUO KAN XIA GUOZHONG

Maritime Law, Civil Procedural Law Navigation, Maritime Law Maritime Law, Marine Environmental Protection Law International Economic and Trade Law Shipping Economic Administration, Maritime Law Maritime Law, Civil Procedural Law Navigation, Harbour Superintendency Commodity Inspection Administration of Fishery and Fishing Harbour Harbour Superintendency, Marine Environmental Protection Maritime Law, Law of the Sea, Harbour Superintendency Maritime Law, Civil Procedural Law Maritime Law Shipping Economic Administration, Maritime Law International Trade Ldaw, Mdaritime Law, Finance Salvage, Raising, Towage Marine Insurance, Maritime Law Navigation, Marine Engineering Ocean Management, Marine Environmental Protection Civil Law, Private International Law Harbour Superintendency, Pilotage Maritime Law, Civil Procedural Law Navigation, Marine Accidents Maritime Law, Chartering Business Marine Insurance, Maritime Law Marine Accidents, Salvage, Collision Marine Transport, Navigation Maritime Law, Private International Law Ship Machinery Engineering, Ship-repairing Maritime Law, Civil Procedural Law International Law, International Economic Law Pilotage, Navigation, Harbour Adminstration Marine Transport, International Economic and Trade Law, Maritime Law Commodity Inspection Ocean Management, Marine Environmental Protection Marine Transport, Shipping Agency Average Adjustment, Maritime Law Private International Law, Maritime Law Harbour Superintendency Navigation

GAO ZONGZE GAO ZHUNLAI

GAO JIANMING QIN TANGCHUN CUI YUSHAN CHENG WANZHU

FU LIUCAI TAN YONGXIAN


Maritime Law Maritime Law, International Economic and Trade Law Maritime Law, Civil Procedural Law Maritime Law, Average Adjustment Maritime Law Marine Insurance, International Fianancing and Banking Marine Transport, Shipping Agency Marine-survey

Maritime liens I. INTRODUCTION

The expression "maritime lien" has been used in English law since the mid-nineteenth century1 and is expressly or implicitly recognised by legislation in most maritime nations. It is also recognised by international treaties: the International Convention Relating to the Arrest of Seagoing Ships, 1952, Brussels; the International Convention for the Unification of Certain Rules of Law Relating to Maritime Mortgages and Liens, Brussels, April 10, 1927, and the International Convention for the Unification of Certain Rules Relating to Maritime Liens and Mortgages, Brussels, May 27, 1967.2

China is not a signatory of any of the above conventions and had no legislation and practice relevant to maritime liens until 1984.3 Therefore, the term maritime lien was not a concept of widespread familiarity in China.

Since China is now drafting its maritime code, in order to accord with international legislation and practice, the Maritime Law Drafting Com- mittee has included a special chapter in the draft which provides for maritime liens.

In this paper, attention is directed to the definition, nature and characteristics of a maritime lien.

11. DEFINITION

Although the maritime lien has become widely recognised and utilised, there is no single definition of the concept either in domestic or in international law. Why so? It was stated by Sheen J that a maritime lien is "more easily recognised than definedY'.4 This "intriguing and elusive" area of the law has attracted the growing attention of scholars, lawyers and judges throughout the world.

There have been several attempts to define maritime liens concisely and accurately and to describe their legal characteristics, creation, classification and extinction theoretically. However, because the commentators view the maritime lien from different perspectives, these definitions differ accordingly.

l The Bold Buccleugh (1851) 7 Moo PC 267,283-5; 13 ER, 884. Singh, International Maritime Law Convenrions (Stevens, London, 1983) Vol4, pp 3101, 3053,3059. 'Gebuschmarker Limited Partnership Company v. Shanghai Municipal Foreign Trade Company" Bulletin of the Supreme People's Court of the PRC, 1988, N3, p41. The Father Thames (1979) 2 Lloyd's Rep 364,368.

Maritime liens 39

One early attempt at a comprehensive and authoritative definition was made by Sir John Jervis in 1851. This learned British jurist stated5 -

a maritime lien is well defined . . . to mean a claim or privilege upon a thing to be carried into effect by legal process . . . that process to be a proceeding in rem.

Eleven years later, Mellish L J explained6 - A maritime lien must be something which adhered to the ship from the time that the fact happens which gave the maritime lien, and then continues binding the ship until it is discharged, either by being satisfied from the assets of the owner, or in any other way by which, by law, it may be discharged. It commences and there it continues binding on the ship until it comes to an end.

Atkin LJ defined a maritime lien as consisting' - . . . of the right by legal proceedings in an appropriate form to have the ship seized by the officers of the Court and made available by sale if not released on bail.

Later, in 1939, Benedict on Admiralty said8 - The maritime lien is an appropriation of the ship as a security for a debt or claim; such appropriation being made by the law which creates a remedy for the claim against the ship herself and vests in the creditor a special property in her, which subsists from the moment the debt arises and follows the ship into the hands of an innocent purchaser.

A maritime lien has been defined in an American case as9 - A right of property in a ship adhering to it wherever it may go, vesting a right in the person, whose claim is thereby secured, to cause a sale of the ship in a proceeding directly against it in order to obtain satisfaction of the debt.

I believe that all the above definitions are correct, but that some of them place too much emphasis on procedure. I t appears that the most instructive formulation is the one given by Judge Gore11 Barnes, who defined a maritime lien as followsl0 -

The Bold Buccleugh (1851) 7 Moo PC 267,268. See also The Halley (1868) LR 2PC 193; The Feronia (1868) LR 2A & E 65; The Charles Amelia (1868) LR 2A & E330; The Beldis (1936), 51; The Tolren (1946), 135. The Two Ellens (1872) LR 4 PC 161,169. Cited with approval of Lord Macnaghten in The Sara (1889) 14 App Cas 209,225.

7 The Tervaere (1922) 259,273. See also Thomas, Maritime Liens (Stevens, London, 1980) 10. V01 1,17; TheJoseph Warner USDC Mass 32F Supp 532 (1939) Vol 1, p17.

9 TheRupert City (1914) 213 F263 (W.D. Wash). Quoted from Price, Law ofMan'time Liens (Sweet and Maxwell, London, 1940) 115.

' O The Ripon City (1897) 226,242. Cited with approval in The Tervaere (1922) 259 (CA); The Tolren (1946) 135 (CA); The Acrux (1965) 391.


A [maritime] lien is a privileged claim upon a vessel in respect of service done to it, or injury caused by it, to be carried into effect by legal process. It is a right acquired by one over a thing belonging to another - a jus in re aliena. I t is, so to speak, a subtraction from the absolute property of the owner in the thing.

This formulation reflects the principal points of the maritime lien, its essence, establishment, subject matter and efficiency.

III. ESSENCE A maritime lien embodies -

(1) a right or interest; (2) a right in rem; (3) a right given for security; and (4) a right which can be executed only by judicial process.

(1) A maritime lien is, in essence, a substantive right or interest. Some scholars thought that a maritime lien was a charge, a burden, an ecum- brance or a means of compelling payment of a debt. But this is only from the "viewpoint" of a ship or shipowner. In fact the maritime lien is created by operation of law in favour of those creditors who furnished a service or services to a ship or who suffered injury or damage caused by the ship. From this point of view, a maritime lien is created to protect the interests of the creditor/lienholder and is thus essentially a right or interest.

(2) A maritime lien is a right or interest in rem - in a thing. The maritime lien, as a right, is held by a creditor and established in a thing, more specifically in a vessel. So it is a kind of "property right" or a jus in re.

A maritime lien as a property right is particular. I t attaches or adheres only to maritime property. It means that the subject matter of such a property right is specified and is limited only to maritime property. In general, "maritime property" refers to a ship, its appurtenances, the cargo on the ship and/or freight. It is particular also due to the right in rem afforded by a maritime lien on property which belongs to another. As the Latin maxim says "A maritime lien is a jus in re aliena"ll. It "creates interests in her (the ship) along with those of her owners"I2.

As a property right, a maritime lien has retroactivity. It is not influenced by transfer of title or possession. No matter how many times the property may change hands, the maritime lien remains in the hands of the lienholder.

As a property right, a maritime lien may generally be assigned, although some early American cases denied such an assignment.

' l The Tervaere (1 922) 259, per Banks L. J. 267, adopting the words of Gorell Barnes J. in The Ripon City (1897) 226 and 242. See also Thomas, Maritime Liens (Stevens, London, 1980) 23.

l 2 See nn 7 and 10.

Maritime liens 41

(3) A maritime lien is a property right given for security.

As Judge Bateson said in the Goulandris "A maritime lien is something more than a mere right in rem. "13 This statement seems to me to refer to the fact that a maritime lien is not only a right in a thing, but also a right of property serving as a security for a maritime claim.

A maritime claim secured by a maritime lien bears a strictly personal character. Consequently the maritime lien is also vested in a particular person and is a personal privilege accruing for the sole benefit of the lienholder on the one hand. It binds only the party entering into the juristic relationship, on the other.

(4) A maritime lien is a right, which can be exercised only by legal process in an Admiralty Court.

A maritime lien differs from a typical property right, such as the right of ownership, which may be exercised without the aid of a court. In contrast, a maritime lien is only carried into effect by legal process when its holder brings an action in an Admiralty Court or some other court having maritime jurisdiction. In order to satisfy his claim, the holder may petition the court for the arrest, and further, the sale of the vessel to which the maritime lien adheres. He can never personally seize, detain or attach the said vessel, much less sell her.

Why must maritime liens be exercised or foreclosed only by legal process in an Admiralty Court? Mr Justice Story explained that - "A maritime lien does not include or require any possession of the thing. I t exists altogether independently of such possession"~4.

Possession of the vessel by a holder of a maritime lien is not and can not be required. A lienholder may enjoy the benefit of a maritime lien but has no right to possess the ship to which the maritime lien attaches. He has no right, as well as no way, to control the ship at all. Thus, the right of an inchoate maritime lien held by the creditor is not self-executing. In order to satisfy his claim, the only thing he can do is to bring a lawsuit before an Admiralty Court. The court is empowered to arrest the ship concerned within its jurisdiction. The court may subsequently sell the arrested ship to enforce the maritime lien when the owner of the said ship refuses to furnish sufficient bail or other dependable security.15

l 3 The Goulandris (l 927) 182, per Bateson J, 195. l4 The Nesror (1831) 18 Fed Cas 9 N10, 126 Cir Ct DMe. l5 "Specific Provisions of the Supreme People's Court for the Arrest of Ships prior to Legal

Proceedings." Bulletin of the Supreme People's Court of PRC (1986) No 1; "Specific Provisions of the supreme People's Court for the Forced Sale of Arrested Ships," Bulletinof the Supreme People's Courr of the PRC (1986) No 3.


Hence, it can be seen that a maritime lien in admiralty differs from liens provided not only in Common Law but also in civil law.

Maybe this is the very reason why Gilmore and Black noted in their book "A lien is a lien is a lien, but a maritime lien is not."l6

Since it is true that a maritime lien is actually not a lien (ie a right of detention) in the sense of either the Common Law or the civil law parallel, what are the fundamental characteristics of the maritime lien?

IV. CHARACTERISTICS 1. First of all, a maritime lien is secret in nature. A maritime lien comes into existence automatically without antecedent formality. I t is created only by statute or by a historically acknowledged situation in the general maritime law. No maritime lien can be conferred on a claim by an agreement between parties concerned, nor by a court, even one having admiralty jurisdiction. No record and no registration of it is required. I t exists only at law. Therefore, a maritime lien may well be unknown to creditors other than the lienholder. Thus, the maritime lien may operate to the prejudice of such creditors including mortgagees and even innocent purchasers without notice of the lien. So, one who wants to buy a second-hand vessel must be very careful to find out whether there is a maritime lien attached to the vessel.

2. A maritime lien is an "accessory" or "secondary" right or interest. A maritime lien is not independent, but secondary and subordinate, in nature. Because it is created in order to provide a security for a principal claim (credit), it belongs to the realm of accessory rights. In other words, a maritime lien is created secondary to the creation of a principal maritime claim and it is extinguished when the maritime claim secured by such a lien is extinguished (say, when the claim is satisfied). 3. A maritime lien is a "preferential" right. The creditor who is entitled to a maritime lien on the vessel of the debtor enjoys a higher priority than other creditors in receiving payment. The priority, however, is relative in nature. It arises only in the case where the proceeds of the sale of an arrested vessel are insufficient to satisfy all maritime claims made on the same debtor, specifically on the shipowner, including those secured by various other competing liens. Only in this situation will the holder of a maritime lien enjoy priority over other claimants, even over the claimant under a secured mortgage. Otherwise, the priority of a maritime lien will not assume crucial importance. 4. A maritime lien is an "indelible" right. By virtue of the fact that a maritime lien travels with the property into whoever's hands the property may pass, the right in the nature of a maritime

'6 Gilmore and Black The Laws of Admiralry (1980) 587.

Maritime liens 43

lien is frequently described as an indelible right." I agree with this description. Here the word "indelible" is used in a relative sense. I mean that a maritime lien cannot be expunged until the original debt is cleared up, or the period stipulated by law has expired, or the arrested vessel has been sold by an Admiralty Court.

To sum up, it can safely be said that the maritime lien regime is a sort of special, extraordinary legal system peculiar to maritime law.

V. CONCLUSION 1. As yet, despite the fact that the regime of maritime liens has been

recognised and accepted by almost all maritime nations and even adopted by two international conventions, no uniformity in this field has been achieved throughout the maritime community in the world. In fact, the existing conventions (namely the 1926 Brussels Convention and 1967 Brussels Convention) did not avail much against the practice owing to the fact that either there are very few signatories of these conventions, or that the conventions themselves meet with criticism. Moreover, the legislation of each state on maritime claims is quite different, especially concerning the scope of maritime claims which give rise to a maritime lien, the ranking of priorities, the period of existence, and the procedure to be exercised or the foreclosure of maritime liens. These circumstances have underlined the need for a new international convention which will be acceptable to all maritime nations. Such a goal of unification is most desirable.

Recently international efforts to draw up a new convention setting out provisions for the recognition and enforcement of maritime liens and mortgages have made considerable progress during meetings of an intergovernmental group of experts representing more than fifty maritime nations (including the PRC) and a large number of ncn-governmental bodies with a professional interest in ship financing. The series of meetings were held firstly in Geneva in 1986, then in London in May 1987, and from 30 November to l l December 1987 again in Geneva. At the recent Geneva session, it was agreed to convene another session in London from 16 to 20 May 1988.19 Since the divergence of opinion as to the appropriate range of maritime liens remains I am not optimistic about a united outcome. It seems to me that the adoption of a substantive maritime lien convention in the near future is practically impossible.

In the absence of such uniform law on maritime liens, it is my view that more attention should now be given to the rules of private international law.

1' The Tolten (1946) 135, per Scott LJ, 150. 18 See n2. l9 UNCTAD Bulletin (United Nations Conference on Trade and Development Bulletin) No

239, January, 1988.


In other words, it would be more sensible and practical to set out first an international convention for the unification of certain rules with respect to the proper application of law relating to maritime liens and mortgage than to draw up new substantive rules on this subject. Should the general conflict of laws principles be adopted, the question of whether the court recognises and exercises a maritime lien arising outside its jurisdiction would be easier to resolve.

2. Because of its secrecy a maritime lien may prejudice not only creditors other than the holder of a maritime lien but also bona fide third persons, ie innocent purchasers who acquire a vessel to which a maritime lien is attached. Thus it may be argued that the secretiveness of a maritime lien is inequitable. However, the very fact of secretiveness increases the international effectiveness of the maritime lien.

In order to remove or reduce the disadvantages of a maritime lien two methods are submitted for consideration. One of them is to protect an innocent purchaser of a second-hand vessel by suitable warranties in a bill of sale. The other way to protect creditors other than a lienholder is to limit the scope of claims which give rise to a maritime lien on a vessel to a minimum by means of legislation. This was what the 1967 Convention has done. According to the 1967 Convention claims resulting from contracts entered into or acts done by the master, acting within the scope of his authority may not be secured by a maritime lien, although such claims have rise to a maritime lien under the 1926 Convention. The proposed legislation of maritime law in the PRC would seek to limit the number of maritime liens which take priority over mortgages. The establishment of a ranking and priority of claims system, such as the following, has been considered:

(a) State taxes, harbour dues and other port dues; (b) Claims in respect of loss of life or personal injury occurring in direct

connection with the operation of the vessel; claims arising out of the contract of engagement of the master, crew and other persons holding a position on board;

(c) Claims for salvage remuneration and contribution in general average;

(d) Claims for collision or other accidents of navigation, and for damage caused to works and installations forming parts of harbours, docks and navigable ways.

As to the cost awarded by the court and expenses incurred in the common interest of the claimants, they shall be paid out of the proceeds of such sale first. The maritime liens set out above shall rank in the order as listed, and the maritime liens set out above in subparagraphs (a) and (b) shall rank pari passu as between themselves. The maritime lien set out in subparagraph (c) shall rank in the inverse order of the time when the claims secured thereby accrued.

Maritime liens 45

3. Enforcement of a maritime lien by a legal process has become one of the fundamental legal characteristics of a maritime lien. In most Common Law countries, a maritime lien is exercised or foreclosed only by an action in rem.

An action in rern is peculiar to the admiralty jurisdiction in those countries. An action in rern is not a proceeding against a person but is a proceeding against the ship herself. Under this predominant theory the ship is sued as a defendant in an action in rem. Although the separate and individual parts of the ship (such as the hull, holds, engine, equipment) cannot be "guilty" in fact, the ship herself as a whole is held responsible and can be sued as a defendant in a proceeding in rern to enforce a maritime lien.

As to the correlation between a maritime lien and an action in rem, Sir John Jervis observed in The Bold Buccleugh2O -

A maritime lien is the foundation of the proceedings in rem . . . and whilst it must be admitted that where such a lien exists, a proceeding in rem may be had, it will be found to be equally true that in all cases where a proceeding in rern is the proper course, there a maritime lien exists.

In China, however, the position is different. Here, an action in rern never goes before any People's Court, notwithstanding that some points of view of the personification theory have been accepted. A ship has existence to some extent like a natural or juristic person. For example, each ship must have a specific name, a nationality, a domicile (home port) and has an age. Additionally, a ship may be declared missing or legally lost after a certain period of time. In these aspects a ship really does resemble a person. The personification of a ship, however, is only a legal fiction. Accordingly, a ship is not treated in China as a real person whose acts and omissions are personal. So the ship cannot be held legally responsible. Under the Law of Civil Procedure of the People's Republic of China (for trial implement- a t i ~ n ) ~ ~ , only those who are capable of exercising the rights of a litigant may act as litigants in civil, including maritime, proceedings. The litigant's rights, in general, refer to the right to entrust representatives, to challenge for withdrawal, to produce evidence, to take part in the debate, to request mediation, to file an appeal, to ask for execution and so on. A ship is not capable of exercising such litigant's rights, so that she cannot appear before a court as a litigant. Therefore, a ship cannot be sued before a Chinese Court. These are the reasons why a maritime lien is executed by an admiralty court acting in personam in China.

20 See n5. 21 The Law of Civil Procedure of the People's Republic of China (For Trial Implementation),

adopted by the Standing Committee of the Fifth N a t i m l People's Congress at its 22nd Session on 8 March I982 and came into effect on I October 1982.

Summary of Maritime Traffic Safety Law of the People's Republic of

China I. PRELIMINARY NOTE

(1) The Maritime Traffic Safety Law of the People's Republic of China was adopted by the Standing Committee of the 6th National People's Congress on 2 September 1983 and came into force on 1 January 1984.

(2) This statute, consisting of 53 articles (in 12 parts), is formulated in order to exercise control over maritime traffic, to ensure the safety of property and human life and to safeguard the sovereignty and national interests of China (article 1).

(3) This law is applicable to all vessels, installations and persons navigating, berthing or carrying out operations in the coastal waters of the PRC, and to the owners and operators of those vessels and installations (article 2).

(4) The Harbour Superintendency Administrations are the competent authorities responsible for the supervision of the safety of traffic in the coastal waters (article 3).

11. GENERAL

A. Navigation, Berthing or Operation

Non-military vessels of foreign nationality may not enter inland waters or ports of the PRC without the permission of its competent authorities. Only under extraordinary circumstances, such as an emergency case of disease or injury of the crew members or malfunctioning of the engine or the vessel being in distress, may the vessel make an emergency application to the competent authorities for such entry and should act as instructed where it is too time-pressed to make a normal entry. No military vessels of foreign nationality may enter the territorial seas of the PRC without permission of the government (article 11). Foreign seagoing vessels entering or leaving the ports of the PRC shall be subject to inspection by the competent authorities (article 12). A compulsory pilot for vessels of foreign nationality is required (article 13). The towage of installations, such as mobile off-shore drilling units, shall not be conducted unless approval by competent authorities is granted after they have conducted a towage inspection (article 16). A vessel may be denied access into or ordered to depart from a port of the PRC if the presence of the vessel is considered to be a threat to the safety of the port (article 18). A vessel or an installation may be prohibited from leaving the port or suspended from the voyage, or re-routed or seized under the following circumstances:

Maritime Traffic Safety 47

(a) Where it is in violation of the relevant laws or regulations promulgated by PRC; or

(b) Where it is unseaworthy or untowworthy; or

(c) Where it is involved in a maritime traffic accident while not following the necessary procedures; or

(d) Where it is in default of payment of any amount due to the competent authorities or the departments concerned; or unable to produce securities required; or

(e) Where it is involved in any other event deemed by the competent authorities to be detrimental, or likely to be so, to the safety of maritime traffic (article 19).

B. Assurance of Safety

No installations can be fmed or established nor any activities detrimental to the safety of traffic carried out in port areas, anchorages, channels, dense traffic areas or in routes designated by the competent authorities unless approved by such authorities (article 22). Any one who has damaged aids to navigation or navigational facilities should report promptly to the competent authorities and should satisfy their liability (article 23).

C. Carriage of Dangerous Goods Vessels or installations storing, loading, discharging or carrying danger-

ous goods must apply to the competent authorities for approval (articles 32 and 33).

D. Rescue at Sea

The vessels or aircraft from foreign countries entering into or flying over the territorial waters of the PRC in order to search for and/or rescue any vessels or persons in distress, must obtain approval from the competent authorities (article 39).

E. Salvage and Wreck Removal

The owners or operators of sunken or drifting objects affecting the safety of maritime traffic should salvage and remove such objects within the time set forth by the competent authorities. Failing to timely remove the obstructions, subjects the owners and operators to liability for costs of such removal. This provision shall not prejudice the right of the owners or operators to institute a claim against a third party (article 40). Sunken vessels or objects lying in the coastal waters of this country may not be salved or dismantled without the permission of the competent authorities (article 41).

F. Investigation and Settlement of Maritime Traffic Accidents Any vessel or installation involved in a maritime traffic accident should

submit an accident report and relevant documents to the competent


authorities. Such authorities shall investigate the causes thereof and establish the responsibilities of the parties (articles 42-43).

G. Legal Responsibilities

In case of violation of this law, the following penalties may be imposed: (a) warning; or (b) suspension; or (c) withdrawal of certificate of competency; or (d) fine (article 44). Any party who objects to a penalty, may bring an action in the People's Court within 15 days of the receipt of the notice of penalty (article 45). Civil disputes arising from maritime traffic accidents can be settled through mediation. Cases involving foreign interests can be submitted to arbitration in accordance with the written agreement between the parties (article 46).

Summary of the Marine Environmental Protection Law of the

People's Republic of China I. PRELIMINARY NOTE

(1) The Marine Environmental Protection Law of the People's Repub- lic of China (PRC) was adopted by the Standing Committee of the 5th National People's Congress on August 23, 1982 and came into effect on March 1, 1983.

(2) This statute, consisting of 48 articles (in 8 chapters), is enacted in order to protect the marine environment and natural resources, to prevent pollution damage, to maintain ecological balance, to safeguard human health and to promote the development of marine programmes (article 1).

(3) This law is applicable to all vessels, installations and persons engaged in navigation, exploration, exploitation, production, scientific research and other activities in the ocean areas under the jurisdiction of the PRC. It also applies to pollution damage to those areas (article 2).

(4) The competent authorities and their duties: (1) the Environmental Protection Department under the State Council is in charge of protecting the marine environment throughout the country. The Department of Marine Affairs is responsible for organizing investigations, monitoring and surveillance of the marine environment and for conducting scientific research. The Harbour Superintendency Administration is responsible for overseeing, investigating and dealing with the discharge of pollutants from vessels and it is in charge of environmental protection in the port areas. The environmental protection entities of the armed forces are responsible for supervising the discharge of wastes by or from naval vessels and surveillance of the waters of naval ports. The environmental protection entities of local governments in coastal areas are responsible for organizing, coordinating and overseeing marine environmental protection in their respective administrative areas (article 5).

11. GENERAL

1. Prevention of Pollution Damage caused by Coastal Construction Projects Scientific studies of the marine environment must be conducted by the

responsible entity and an Environmental Impact Statement must be submitted to the Environmental Protection Department before plans for any coastal construction project are finalized. Measures must be taken to protect the aquatic resources when building harbours, oil terminals, tidal power stations, dams and conservation facilities in estuaries (articles 6,7). All ports and oil terminals shall install facilities to receive and treat oil residues, oily water and other wastes, as well as anti-pollution equipment,


monitoring equipment and alarm systems (article 8). The destruction of coastal windbreaks, woods, rocks or coral reefs is forbidden (article 9).

2. Prevention of Pollution Damage caused by Offshore Oil Exploration and Exploitation

An Environmental Impact Statement including effective measures to prevent pollution damage must be submitted to the Environmental Protection Department for examination and approval before work plans are submitted (article 10). In cases where explosives are to be used offshore, effective measures shall be taken to protect aquatic resources (article 1 1). Oil residues, oily water and wastes may not be discharged into the sea (articles 12-15). Offshore oil pipelines and oil storage installations shall always be kept in good condition to prevent leaks (article 16). Effective technical measures shall be taken to prevent blow-out or oil-spill accidents in exploring and exploiting offshore oil resources. Any blowout or oil-spill which occurs shall immediately be reported and effective measures shall be taken by the responsible entity to control and eliminate oil pollution (article 17).

3. Prevention of Pollution Damage by Land-Based Pollutants

The discharge of harmful substances into the sea must be conducted in strict compliance with the standards for discharge and relevant regulations promulgated by local governments (article 18). The discharge of water containing high-level radioactive wastes is prohibited. No medical and industrial waste containing poisonous elements may be discharged into the sea until it is properly treated and disinfected (article 20). Industrial wastes and domestic sewage containing organic and nutrient matter shall be discharged into bays, semi-enclosed seas or other sea areas having low absorption capacity only where permitted by governmental regulations (article 21). The use of chemical pesticides in coastal farmlands shall conform to State regulations (article 23).

4. Prevention of Vessel-Source Pollution Damage

Any oil tanker of 150 tons gross or above or any other vessel of 400 tons gross or above must be fitted with appropriate anti-pollution equipment and facilities and carry on board an Oil Record Book. All discharges must be conducted in compliance with State regulations and must be accurately recorded in the Oil Record Book (articles 27,28,29). Oil tankers of less than 150 tons gross must be fitted with special containers for recovering residual and waste oils (article 27). Any vessel carrying more than 2,000 tons of oil shall have a valid Certificate of Civil Liability Insurance or produce other security as required (article 28). The discharge of materials washed from vessel holds and other residues from vessels carrying noxious or corrosive goods must be conducted in compliance with State regulations and standards and must be accurately recorded in the vessel Log Book (article 30). The discharge of radioactive substances from nuclear-powered vessels

Maritime Environmental Protection 5 1

or from vessels carrying such,substances is generally prohibited (articles 19 and 31). Where pollution damage is caused by the discharge of oil, oily mixtures or other harmful substances from vessels navigating, berthing or operating in the sea areas of the PRC the vessel concerned shall immediately take measures to control and eliminate such pollution damage and shall report the accident to the nearest Harbour Superintendency Administration for investigation (articles 34,35,37).

5. Legal Liability After violating a law, the violator shall: (a) be warned; or (b) pay the

discharge fee and/or cleanup costs; or (c) incur a fine. Any violator who objects to the imposition of any of the above-mentioned penalties, may bring suit in the People's Court within 15 days of receipt of the notice of penalty (article 41). Entities and individuals suffering from pollution damage may institute a claim against the polluter. Disputes between the violator and victim can be settled in court through the processes enacted in the Civil Procedure Law of the PRC (article 42). The polluter shall not be liable for pollution damage arising or resulting from: (a) an act of war; or (b) force majeure; or (c) the negligence or fault of those in charge of aids to navigation or navigation facilities (article 43). Where pollution damage results in serious losses of property, loss of life, or personal injury, those who are directly responsible may also be prosecuted for criminal responsibility (article 44).

Documents

Maritime legislation in ChinaMaritime legislation 2 1 and 14 regular container shipping routes that reach almost all the major areas of the world.5 In addition, 31 of China's major