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Wednesday, 02 April 14
CHINA: ARBITRATION CLAUSES IN BILLS OF LADING UNDER CHINESE LEGAL PRACTICE - SKULD
 KNOWLEDGE TO ELEVATE
Successful incorporation of a charterparty arbitration clause into the bills of lading is not a straight forward matter under China jurisprudence and recently a Chinese maritime court dismissed the owners' motion to refer the case to arbitration, because it was held that the C/P arbitration clause incorporated into the B/L was not effective. Details of the matter are as follows. Key points following the legal decision are:
- Although the said B/L recorded on the front page that it was: "to be used with charterparty", there was no express statement in the bill terms for incorporating the arbitration clause from the C/P.
- The standard incorporation clause in the back page of the B/L could not constitute a valid incorporation of the arbitration clause under Chinese law and practice.
- If any C/P terms are to be recognised as incorporated then they would be those of the voyage charter to which the cargo receiver was a party - not the head time C/P. This is because the time C/P is in the nature of being primarily a leasing contract .
Facts of this case
The vessel owners concluded a time C/P as with a charterer. One of the rider clauses provided that English law shall be applicable, and a further clause provided that any dispute arising from the C/P shall be submitted to arbitration at the LMAA.
As part of her charter employment, the vessel carried a cargo of iron ore fines from South America to China. According to the B/L, the shipper South American and the receiver was a Chinese Steel Mill.
While on route the vessel was involved in collision with another vessel. The owners appointed salvors to conduct salvage, and concluded a LOF contract. General average was declared. The salvage was successful, and the Chinese Steel Mill (through its insurers) had to provide general average security to the vessel.
The general average apportionment of salvage costs to cargo was significant, and the Chinese Steel Mill commenced proceedings in China for an indemnity against the ship-owner. The owners raised objection to jurisdiction on the basis that the provisions of the time C/P, including the arbitration clause had been incorporated into the B/L, and thus was binding upon the Steel Mill. The expert opinion of English lawyers was put forward to confirm that the terms of the C/P were successfully incorporated in to the bills of lading, including the arbitration clause.
First instance trial before the Chinese Maritime Court
The Maritime Court dismissed the objection to jurisdiction for the following reasons:
- The case was about compensation of ship collision / general average salvage rewards. Hence, the case fell into the scope of the contract of the carriage of goods by sea.
- Although the said B/L recorded on the front page that: "to be used with charterparty", there was no express statement in the bill terms for incorporating the arbitration clause in the C/P. The standard incorporation clause in the back page of the B/L cannot constitute valid incorporation.
- Meanwhile, the C/P which the owner claimed was to be incorporated into the B/L was a time C/P between the owner and the charterer only. The C/P arbitration clause was only there for resolving the disputes arising from the leasing of the vessel. It was not an arbitration clause for purpose of carriage of goods by sea under the voyage C/P.
- The local Maritime Court, as the nearest court at the port of the destination of the said carriage contract, should have jurisdiction over this case.
Appeal judgment High People's Court
The owners then appealed to the High People's Court and the appeal court dismissed the objection to jurisdiction for reason that:
- Although it is stated on the face of the involved B/L that the said B/L should be used with the C/P, the said C/P to be used with B/L shall be the voyage C/P and not the time C/P to which the owner was a party.
- However, the C/P provided by the owners was a time C/P and there was also no record on the face of the B/L regarding the specific C/P concerned and no express acceptance to have the C/P arbitration clause incorporated.
Observation on this case and comment
Chinese courts hold a stringent view concerning the issue of incorporating the C/P arbitration clause into the B/L. In this case, a key issued appeared to be that the C/P terms sought to be incorporated came from the time C/P, instead of a voyage C/P.
It should also be noted that in 2004 the Qingdao Maritime Court also held that a time C/P is primarily a vessel leasing contract, and although it also has some clauses regarding transportation of cargo it is still primary a leasing contract which is very different from voyage C/P.
The Qingdao Maritime Court continued to say that the B/L relationship is different to the time C/P legal relationship, and because of the rooted difference in this respect, the time C/P arbitration clause cannot be incorporated into the B/L.
Although China is not a case law country, the reasoning of Chinese courts in this regard should be paid attention to for handling of other similar cases.
By Philip Peng
Hai Tong & Partners, Beijing
Source: Skuld / Hellenic Shipping
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- Ministry of Mines - Canada
- GVK Power & Infra Limited - India
- Electricity Authority, New Zealand
- Jorong Barutama Greston.PT - Indonesia
- Indika Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Merrill Lynch Commodities Europe
- New Zealand Coal & Carbon
- Chettinad Cement Corporation Ltd - India
- Edison Trading Spa - Italy
- Mercuria Energy - Indonesia
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
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- London Commodity Brokers - England
- Krishnapatnam Port Company Ltd. - India
- Kohat Cement Company Ltd. - Pakistan
- Cigading International Bulk Terminal - Indonesia
- Romanian Commodities Exchange
- Ministry of Finance - Indonesia
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- Central Electricity Authority - India
- Dalmia Cement Bharat India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Formosa Plastics Group - Taiwan
- Salva Resources Pvt Ltd - India
- Bharathi Cement Corporation - India
- Minerals Council of Australia
- Siam City Cement - Thailand
- Banpu Public Company Limited - Thailand
- Leighton Contractors Pty Ltd - Australia
- Vedanta Resources Plc - India
- Mjunction Services Limited - India
- IEA Clean Coal Centre - UK
- Indo Tambangraya Megah - Indonesia
- Global Green Power PLC Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Africa Commodities Group - South Africa
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- Bulk Trading Sa - Switzerland
- White Energy Company Limited
- International Coal Ventures Pvt Ltd - India
- Aditya Birla Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Makarim & Taira - Indonesia
- Samtan Co., Ltd - South Korea
- Meenaskhi Energy Private Limited - India
- Australian Commodity Traders Exchange
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- The State Trading Corporation of India Ltd
- Agrawal Coal Company - India
- Sakthi Sugars Limited - India
- Indian Energy Exchange, India
- Jindal Steel & Power Ltd - India
- Heidelberg Cement - Germany
- Parliament of New Zealand
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- Sinarmas Energy and Mining - Indonesia
- Indian Oil Corporation Limited
- Goldman Sachs - Singapore
- Deloitte Consulting - India
- Parry Sugars Refinery, India
- Videocon Industries ltd - India
- Star Paper Mills Limited - India
- Bangladesh Power Developement Board
- CIMB Investment Bank - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- Siam City Cement PLC, Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMG Consultants - Indonesia
- Thiess Contractors Indonesia
- PTC India Limited - India
- Mintek Dendrill Indonesia
- Kepco SPC Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Independent Power Producers Association of India
- Antam Resourcindo - Indonesia
- Manunggal Multi Energi - Indonesia
- Bhatia International Limited - India
- Gujarat Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Java Power - Indonesia
- Sindya Power Generating Company Private Ltd
- Sical Logistics Limited - India
- Mercator Lines Limited - India
- Power Finance Corporation Ltd., India
- Gujarat Sidhee Cement - India
- Metalloyd Limited - United Kingdom
- Orica Australia Pty. Ltd.
- Semirara Mining and Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Global Business Power Corporation, Philippines
- Indogreen Group - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- European Bulk Services B.V. - Netherlands
- CNBM International Corporation - China
- Grasim Industreis Ltd - India
- Kaltim Prima Coal - Indonesia
- Port Waratah Coal Services - Australia
- Asmin Koalindo Tuhup - Indonesia
- MS Steel International - UAE
- Eastern Energy - Thailand
- Wilmar Investment Holdings
- Sojitz Corporation - Japan
- Pendopo Energi Batubara - Indonesia
- Vizag Seaport Private Limited - India
- Malabar Cements Ltd - India
- Directorate Of Revenue Intelligence - India
- Planning Commission, India
- Global Coal Blending Company Limited - Australia
- LBH Netherlands Bv - Netherlands
- Bayan Resources Tbk. - Indonesia
- Attock Cement Pakistan Limited
- SMC Global Power, Philippines
- Posco Energy - South Korea
- Globalindo Alam Lestari - Indonesia
- Chamber of Mines of South Africa
- ICICI Bank Limited - India
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- Standard Chartered Bank - UAE
- South Luzon Thermal Energy Corporation
- Sree Jayajothi Cements Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Gujarat Mineral Development Corp Ltd - India
- ASAPP Information Group - India
- Coal and Oil Company - UAE
- Coastal Gujarat Power Limited - India
- Ceylon Electricity Board - Sri Lanka
- Trasteel International SA, Italy
- Bhoruka Overseas - Indonesia
- Jaiprakash Power Ventures ltd
- Petron Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Coalindo Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Singapore Mercantile Exchange
- Holcim Trading Pte Ltd - Singapore
- Meralco Power Generation, Philippines
- GMR Energy Limited - India
- Karbindo Abesyapradhi - Indoneisa
- TeaM Sual Corporation - Philippines
- Savvy Resources Ltd - HongKong
- Tata Chemicals Ltd - India
- Anglo American - United Kingdom
- Medco Energi Mining Internasional
- Madhucon Powers Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Billiton Holdings Pty Ltd - Australia
- Baramulti Group, Indonesia
- Simpson Spence & Young - Indonesia
- The University of Queensland
- Ind-Barath Power Infra Limited - India
- Marubeni Corporation - India
- Binh Thuan Hamico - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Carbofer General Trading SA - India
- PowerSource Philippines DevCo
- Energy Link Ltd, New Zealand
- Commonwealth Bank - Australia
- Essar Steel Hazira Ltd - India
- Tamil Nadu electricity Board
- Xindia Steels Limited - India
- India Bulls Power Limited - India
- Therma Luzon, Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- San Jose City I Power Corp, Philippines
- Australian Coal Association
- McConnell Dowell - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Lanco Infratech Ltd - India
- Intertek Mineral Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Eastern Coal Council - USA
- Straits Asia Resources Limited - Singapore
- PNOC Exploration Corporation - Philippines
- The Treasury - Australian Government
- SN Aboitiz Power Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Ambuja Cements Ltd - India
- Economic Council, Georgia
- Semirara Mining Corp, Philippines
- Maheswari Brothers Coal Limited - India
- Thai Mozambique Logistica
- Kapuas Tunggal Persada - Indonesia
- Bhushan Steel Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Energy Development Corp, Philippines
- Borneo Indobara - Indonesia
- Wood Mackenzie - Singapore
- Kobexindo Tractors - Indoneisa
- Riau Bara Harum - Indonesia
- Timah Investasi Mineral - Indoneisa
- Latin American Coal - Colombia
- Orica Mining Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Georgia Ports Authority, United States
- Altura Mining Limited, Indonesia
- Indonesian Coal Mining Association
- Ministry of Transport, Egypt
- Electricity Generating Authority of Thailand
- OPG Power Generation Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Kumho Petrochemical, South Korea
- Toyota Tsusho Corporation, Japan
- Iligan Light & Power Inc, Philippines
- Cement Manufacturers Association - India
- Barasentosa Lestari - Indonesia
- PetroVietnam Power Coal Import and Supply Company
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