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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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Thursday, 05 March 15
BUKIT ASAM BOOKED US$ 1 BILLION REVENUE IN 2014
COALspot.com: Indonesian publicly listed and state owned coal miner PT. Bukit Asam, has announced that, the revenue of the company for the period J ...
Wednesday, 04 March 15
AN AGENDA FOR CHANGE - FITCH INDONESIA CONFERENCE
Fitch Indonesia Conference - 5 March 2015
Fitch Ratings will host its annual Indonesia conference on 5 March 2015.
The theme of this year ...
Wednesday, 04 March 15
KEEP CALM AND INVEST IN DRY - THEODORE NTALAKOS
Keep Calm and Carry On was originally a motivational poster, intended to raise the morale of the British public, produced by the British government ...
Tuesday, 03 March 15
INDONESIAN COAL EXPORT VOLUME TO DECLINE 50% BY 2019
COALspot.com: The Indonesian government is planning to reduce coal export volume by 50% within the next five years while keeping its coal productio ...
Tuesday, 03 March 15
INDIAN THERMAL COAL IMPORTS: STEAMING FORWARD - CLARKSONS
Coal-fired power stations comprise around 60% of India’s power output, and with domestic supply issues and favourable international coal pric ...
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- GMR Energy Limited - India
- Georgia Ports Authority, United States
- Mjunction Services Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
- Wood Mackenzie - Singapore
- Baramulti Group, Indonesia
- Eastern Coal Council - USA
- Meralco Power Generation, Philippines
- Star Paper Mills Limited - India
- Australian Commodity Traders Exchange
- Gujarat Sidhee Cement - India
- Intertek Mineral Services - Indonesia
- Tamil Nadu electricity Board
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining Corp, Philippines
- Eastern Energy - Thailand
- Aditya Birla Group - India
- Ministry of Mines - Canada
- Alfred C Toepfer International GmbH - Germany
- Bayan Resources Tbk. - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Sarangani Energy Corporation, Philippines
- Bangladesh Power Developement Board
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- Barasentosa Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- Aboitiz Power Corporation - Philippines
- Petron Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Petrochimia International Co. Ltd.- Taiwan
- Planning Commission, India
- Banpu Public Company Limited - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate Of Revenue Intelligence - India
- Krishnapatnam Port Company Ltd. - India
- Coal and Oil Company - UAE
- Central Electricity Authority - India
- Indian Oil Corporation Limited
- Vedanta Resources Plc - India
- Thiess Contractors Indonesia
- Price Waterhouse Coopers - Russia
- Siam City Cement - Thailand
- Thai Mozambique Logistica
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Larsen & Toubro Limited - India
- Bukit Baiduri Energy - Indonesia
- Mintek Dendrill Indonesia
- Binh Thuan Hamico - Vietnam
- Bahari Cakrawala Sebuku - Indonesia
- Madhucon Powers Ltd - India
- Timah Investasi Mineral - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Grasim Industreis Ltd - India
- Chettinad Cement Corporation Ltd - India
- Edison Trading Spa - Italy
- Rashtriya Ispat Nigam Limited - India
- White Energy Company Limited
- GVK Power & Infra Limited - India
- Leighton Contractors Pty Ltd - Australia
- Semirara Mining and Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Standard Chartered Bank - UAE
- CIMB Investment Bank - Malaysia
- SMC Global Power, Philippines
- Parliament of New Zealand
- Posco Energy - South Korea
- Energy Development Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- International Coal Ventures Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Sakthi Sugars Limited - India
- Commonwealth Bank - Australia
- South Luzon Thermal Energy Corporation
- Sree Jayajothi Cements Limited - India
- Malabar Cements Ltd - India
- Renaissance Capital - South Africa
- ICICI Bank Limited - India
- Heidelberg Cement - Germany
- Uttam Galva Steels Limited - India
- MS Steel International - UAE
- Cement Manufacturers Association - India
- Kobexindo Tractors - Indoneisa
- Dalmia Cement Bharat India
- Formosa Plastics Group - Taiwan
- Medco Energi Mining Internasional
- Bulk Trading Sa - Switzerland
- OPG Power Generation Pvt Ltd - India
- Orica Mining Services - Indonesia
- Deloitte Consulting - India
- Economic Council, Georgia
- Carbofer General Trading SA - India
- Jaiprakash Power Ventures ltd
- Chamber of Mines of South Africa
- Sinarmas Energy and Mining - Indonesia
- Coalindo Energy - Indonesia
- Ambuja Cements Ltd - India
- Ind-Barath Power Infra Limited - India
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- Sical Logistics Limited - India
- Indo Tambangraya Megah - Indonesia
- Oldendorff Carriers - Singapore
- Manunggal Multi Energi - Indonesia
- Bhatia International Limited - India
- Parry Sugars Refinery, India
- Kideco Jaya Agung - Indonesia
- San Jose City I Power Corp, Philippines
- Metalloyd Limited - United Kingdom
- Indogreen Group - Indonesia
- Toyota Tsusho Corporation, Japan
- Sindya Power Generating Company Private Ltd
- Kalimantan Lumbung Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- The Treasury - Australian Government
- Ministry of Transport, Egypt
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Asam (Persero) Tbk - Indonesia
- ASAPP Information Group - India
- McConnell Dowell - Australia
- Asmin Koalindo Tuhup - Indonesia
- LBH Netherlands Bv - Netherlands
- Kaltim Prima Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Cigading International Bulk Terminal - Indonesia
- Central Java Power - Indonesia
- Orica Australia Pty. Ltd.
- TNB Fuel Sdn Bhd - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Global Green Power PLC Corporation, Philippines
- Antam Resourcindo - Indonesia
- Indonesian Coal Mining Association
- Mercator Lines Limited - India
- Trasteel International SA, Italy
- Xindia Steels Limited - India
- IEA Clean Coal Centre - UK
- SMG Consultants - Indonesia
- Agrawal Coal Company - India
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Port Waratah Coal Services - Australia
- Bhushan Steel Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Interocean Group of Companies - India
- PowerSource Philippines DevCo
- Coastal Gujarat Power Limited - India
- Indian Energy Exchange, India
- Jindal Steel & Power Ltd - India
- Miang Besar Coal Terminal - Indonesia
- London Commodity Brokers - England
- Global Business Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Iligan Light & Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Global Coal Blending Company Limited - Australia
- PNOC Exploration Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- Minerals Council of Australia
- Makarim & Taira - Indonesia
- Riau Bara Harum - Indonesia
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Vijayanagar Sugar Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Ministry of Finance - Indonesia
- European Bulk Services B.V. - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Singapore Mercantile Exchange
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- AsiaOL BioFuels Corp., Philippines
- Simpson Spence & Young - Indonesia
- Essar Steel Hazira Ltd - India
- Anglo American - United Kingdom
- Borneo Indobara - Indonesia
- Maheswari Brothers Coal Limited - India
- The University of Queensland
- Maharashtra Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Bhoruka Overseas - Indonesia
- Vizag Seaport Private Limited - India
- Videocon Industries ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Globalindo Alam Lestari - Indonesia
- Wilmar Investment Holdings
- Sojitz Corporation - Japan
- Billiton Holdings Pty Ltd - Australia
- Australian Coal Association
- Siam City Cement PLC, Thailand
- GAC Shipping (India) Pvt Ltd
- Independent Power Producers Association of India
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- CNBM International Corporation - China
- New Zealand Coal & Carbon
- Kumho Petrochemical, South Korea
- Bharathi Cement Corporation - India
- Indika Energy - Indonesia
- The State Trading Corporation of India Ltd
- PTC India Limited - India
- Merrill Lynch Commodities Europe
- Neyveli Lignite Corporation Ltd, - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Therma Luzon, Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Energy Link Ltd, New Zealand
- Attock Cement Pakistan Limited
- Africa Commodities Group - South Africa
- Mercuria Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Altura Mining Limited, Indonesia
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