Reviewing Recent Developments in Chinese Maritime Law

Journal of Maritime Law and Commerce July 1, 2010 | Luo, Huijie; Li, Miao In recent years China has invested a lot of effort to put in order a number of problems in the PRC Maritime Code, and to improve the judicial practices for trial of maritime cases. This article studies several current legal documents concerning maritime issues, which reflect recent developments in Chinese maritime law including delivery of goods without an original bill of lading, collision of ships, limitation of liability for maritime claims, oil pollution from ships and maritime arbitration.

I THE LEGAL STATUS OF CHEVESE MARITIME LAW The Maritime Code of the People’s Republic of China (PRC) is basically a merchant shipping law, which mainly covers contractual relationships rather than maritime administrative issues.1 It has served the shipping industry for 18 years since coming into force in July 1993. There have been no amendments or new enactment of this code up to present day, though various issues have emerged during this period that require answers. Most academics with knowledge of English Common Law may try to find the answers and developments from recent Chinese Maritime cases. However there is no precedent concept for case law in China. In theory, each case stands as its own decision and will not bind another court.2 Therefore, these works may not be very useful when researching updates in Chinese Maritime Law, in which the judgements of court do not have broad force of law and are not recognized as a part of Chinese Law.

Although in China state legislative power shall only be exercised by the National People’s Congress (NPC) and its Standing Committee,3 the State Council may be authorized by the NPC and its Standing Committee to enact administrative regulations concerning the relevant matters as needed.4 In addition, the Supreme People’s Court (SPC) may be empowered to promulgate judicial interpretations on legal issues which are binding on trials and constitute part of Chinese law. Therefore, the developments in Chinese merchant shipping law still lie in statutory law rather than case law, including the Judicial Interpretations promulgated by the Supreme People’s Court, the Administrative Regulations enacted by the State Council, and new International Conventions adopted by China. The following discussion will focus on the recent SPC Judicial Interpretations delivered pursuant to the provisions of the Maritime Code of PRC, and some other Administrative Regulations and Judicial Interpretations concerning maritime issues.

II SPC INTERPRETATIONS PURSUANT TO THE PROVISIONS OF THE PRC MARITIME CODE A. Delivery of Goods without an Original Bill of Lading Although China has not acceded to three important international conventions, namely the Hague Rules 1924, the Hague Visby Rules 1968 or the Hamburg Rules 1978, provisions from these conventions were incorporated into the Maritime Code. However, none of the three conventions make provisions on the issues concerning the delivery of goods without an original bill of lading. Likewise, no provisions in the Maritime Code clarify the presentation rules, though Chapter IV deals with Transport Documents in Section 4 and Delivery of Goods in Section 5.

On 16 Feb 2009 at the 1463rd meeting of the Judicial Committee of the Supreme People’s Court, the Supreme Court promulgated a new Judicial Interpretation for the Maritime Code, namely the ‘Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law during the Trial of Cases about Delivery of Goods without an Original Bill of Lading’ (PDG).5 The PDG came into force on 5 March 2009, and addresses some important features of the presentation rule under Chinese Law. billofladingnow.net bill of lading

1 . Straight Bills of Lading and Presentation Paragraph 1 of Article 71 of the Maritime Code Provides that:

A bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same.

When acting under a bill of lading, one of the most important responsibilities of the carrier is to deliver the goods to the cargo interests. A question then arises as to whether a ‘straight bill of lading’ is such a bill of lading as defined in Art 7 1 , and how the carrier accomplishes his undertaking to deliver the goods.

Article 71 provides further in paragraph 2 that:

A provision in the document stating that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking.

However, the Chinese version of this provision, which must prevail over the English translation, uses the term ‘to the named person’ rather than ‘to the order of a named person.’ It is clear that the difference between the Chinese version and the English translation is significant. According to the English translation, there is no clear specification of a straight bill of lading. This means that Article 71 does not apply to a straight bill of lading. However, in accordance with the Chinese wording, it could be understood that the delivery of goods to the named person stated in the document, such as in a Straight bill of lading, constitutes such an undertaking. Accordingly, under the Chinese wording, a straight bill of lading is the same as a bill of lading, and the carrier is responsible to deliver the goods to the named consignee stated in a straight bill of lading.

However without consistent interpretation of Article 71 the delivery duty of a carrier under a straight bill of lading has been repeatedly debated by Chinese academics and practitioners,6 especially after the decision of the House of Lords in The Refaela S. According to this judgement the HagueVisby Rules shall apply to a straight bill of lading, which will therefore be treated as a bill of lading. The dicta also indicate that a straight bill of lading needs to be presented for delivery of goods.7 The PDG provides in Article 1 that an original bill of lading cited in this legal instrument includes a straight bill of lading. Therefore the carrier must deliver the goods to the holder of an original straight bill of lading, who presents the original straight bill of lading for delivery of the goods. Otherwise the holder has a right of action in damage against the carrier for wrongful delivery.8 2. Carrier’s Liability The presentation rule set out in the PDG can operate harshly against the carrier, who will be at peril if he makes delivery of goods without an original bill of lading.9 Also the carrier is deprived of the protection of limitation of liability contained in the Maritime Code.10 One of the grounds for unlimited liability is that the delivery of goods happens after the discharge of goods from the ship, and is therefore outside the period of sea transport. In addition, neither the P&I club nor the insurance companies provide insurance cover for the losses which arise as a result of the carrier making delivery of goods without an original bill of lading,11 reasoning that they are not caused by any marine perils.

According to Article 130 of the General Principles of the Civil Law of the People’s Republic of China,12 “if two or more persons jointly infringe upon another person’s rights and cause him damages, they shall bear joint liability.”13 Therefore the carrier and the cargo receiver, who takes the delivery of the goods without presenting an original bill of lading, shall be liable for the damages of the holder of an original bill of lading jointly and severally.14 Meanwhile the holder of an original bill of lading can also claim his damages from the carrier on the basis of breach of contract.

As the lawful holder of an original bill of lading and the cargo receiver are both cargo interests, they may have carried out some negotiation and reached an agreement for the payment of goods after the wrongful delivery. However Article 13 of the PDG provides that if the lawful holder of an original bill of lading cannot receive the payment under the above agreement, he still has the right of action against the carrier. The liability of the carrier can only be discharged if the lawful holder of an original bill of lading obtains the goods or gives up the bill of lading during the negotiations.

3. The Exceptions Given the severe liabilities of the carrier, an issue may arise as to whether the law recognizes any exceptions to the requirement of presentation. Considering the laws in Mexico and some South American countries, which require the carrier to deliver the cargo to the customs or port authorities at the place of discharge, it is impossible to compel the carrier to make delivery to the cargo interests against presentation of an original bill of lading. Therefore Article 7 of the PDG provides that if the carrier delivers the cargo to the customs or port authorities according to the compulsory law of the port of discharge, then he shall be discharged from further liability for any wrongful delivery.15 Thereafter the cargo interests can only ask for delivery of goods from the local authorities by presenting an original bill of lading.

Article 87 of the Maritime Code provides that:

If the freight, contribution in general average, demurrage to be paid to the carrier and other necessary charges paid by the carrier on behalf of the owner of the goods as well as other charges to be paid to the carrier have not been paid in full, nor has appropriate security been given, the carrier may have a lien, to a reasonable extent, on the goods.

Accordingly, when the carrier has a lien on the goods, to a reasonable extent he may apply to the court for an order to sell the goods by auction. After the lawful auction the carrier shall be exempted from the obligation for the delivery of goods. Even if the cargo interests still retain the original bill of lading, they no longer have a right of action against the carrier.16 Furthermore, a straight bill of lading is not negotiable according to the Maritime Code.17 Where one party is simply named as consignee under a straight bill of lading, he only has the right to delivery against the carrier while he remains as consignee on that document. Prior to the carrier’s delivery of goods to the consignee, the shipper of a straight bill of lading is entitled to request the carrier to suspend the carriage, return the cargo, change the destination or deliver the cargo to another consignee.18 In such a case, if the carrier obeys the seller’s alternative instructions, the carrier can refuse the delivery to the consignee who presents an original straight bill of lading, and shall not be liable for wrongful delivery.

4. The Actual Shipper The definition of shipper in the Maritime Code is the same as that defined in the Hamburg Rules. According to Article 42 of the Maritime Code, there are two types of shipper. One is the contractual shipper, who is “… the person by whom or in whose name or on whose behalf a contract of carriage of goods by sea has been concluded with a carrier,” and hence is named as ‘Shipper’ in a bill of lading. The other is the actual shipper, who is “the person by whom or in whose name or on whose behalf the goods have been delivered to the carrier involved in the contract of carriage of goods by sea.” Accordingly the actual shipper is not a party of the contract of carriage, but only delivers the goods to the carrier at the port of loading. The actual shipper may be the f.o.b. seller, who either makes the carriage arrangement as an agent of the buyer, or may never be involved in the initial carriage arrangement at all. Therefore the buyer is the initial party to the carriage contract, and the actual shipper may not be named in a bill of lading as ‘Shipper.’ Although the actual shipper may not have the right to negotiate or endorse a bill of lading if he is not named as ‘Shipper’ on the bill, he is still entitled to sue the carrier and has the same contractual rights as the contractual shipper according to the Maritime Code. Therefore the actual shipper can demand the carrier to issue a bill of lading to him after he delivers the goods to the carrier.19 Also as the actual shipper may retain the original bill of lading, in a case where the carrier delivers the goods to the f.o.b. buyer without an original bill of lading then the carrier shall be liable to the actual shipper for the wrongful delivery.20 B. Collision of Ships In general the Maritime Code closely follows international conventions and international maritime practice. The chapter on collision of ships was drafted on the basis of the International Convention on the Unification of Certain Rules concerning Ship Collisions 1910 (Collision Convention 1910). However the internationalization has unavoidably brought some conflicts into the Chinese Civil Law system. The Supreme People’s Court has therefore introduced some clarifications regarding collision of ships by issuing the Provisions of the Supreme People’s Court on Some Issues about the Trial of the Cases of Ship Collision Disputes (PSC).2′ This legal document comprises 11 Articles and addresses a number of significant issues.

1. Applicable Law The PRC Maritime Code is specially enacted to regulate the relations arising from maritime transport and those pertaining to ships. The special provisions of the Maritime Code shall prevail over other general provisions in Civil Law, and be applied first in the trials of ship collision disputes.22 Article 2 of the PSC has further confirmed this solution for inconsistent provisions in laws, definitively stating that Chapter VEI of the Maritime Code shall be the applicable law for liability issues in the trial of cases concerning ship collision disputes. The General Principles of the Civil Law shall be applied only when there is no provision in the Maritime Code for a certain legal issue.

The issue of the collision between a ship and a non-ship is not addressed in the Collision Convention 1910. Likewise few provisions in the Maritime Code cover collisions between ships and other properties in a harbour, or a pier. A notable question arises as to whether the General Principles of the Civil Law shall be applied in such a case. The answer is to be found in Article 3 of the PSC, which provides that in the event of a collision between a ship and another fixed or floating object as a result of collision of ships, Chapter VIII of the Maritime Code shall apply. On the other hand, where the collision between a ship and another fixed or floating object was not caused by collision of ships, the General Principles of the Civil Law shall apply to the liability issue, whilst the Maritime Code shall apply to other issues such as limitation of liability, maritime lien, etc.

2. Ship-owner’s Liability According to Article 169 of the Maritime Code, “if the colliding ships are all in fault, each ship shall be liable in proportion to the extent of its fault,” which reflects the same provision of the Collision Convention 1910. The effect of the provision is to impose the liability on the colliding ships for damages caused by their collision. A question then arises as to whether a claimant who suffered loss due to collision of ships could make such a claim against the colliding ships under Chinese law. In practice, as the “action in rem’ is not recognized by Chinese Law, a ship by itself cannot be a party to a civil action and liable for any damages. Considering the requirements for a lawsuit in China, a claimant cannot bring a law suit without a proper defendant,” and therefore he cannot enforce his claim against a ship even it has been successfully arrested. This difficulty has been resolved by Article 4 of the PSC since it makes clear that the ship-owner or the registered bareboat charterer shall be liable for the damages caused by a collision between their ships.

As has already been discussed, the liability of joint concurrent tortfeasors is joint and several under the General Principles of the Civil Law, which means that an innocent third party can recover the whole of his loss from either or both tortfeasors. However, the Maritime Code has partly adopted the principle of joint liability, which shall only apply to claims for loss of life or personal injury.24 The rule of division of loss specially provided in the Maritime Code shall apply to cases of liability for property damages caused by collision of ships.25 Clearly the position for recovery of property damages suffered by an innocent party is more difficult, as each colliding ship in fault shall not be liable for compensation in excess of the proportion it shall bear. It can be even worse if the ships are reluctant to settle on the proportion of their respective faults. Therefore, the PSC sets out a precondition to the rule of division of loss by putting the burden of proof on the colliding ships. The ships must prove the proportion of their faults by providing official evidence in such forms as court decisions, court orders, or conciliation or arbitral awards.26 Otherwise the claimant can claim his full property damages from any one of the ships.

3. Wreck Removal Expenses Although China has not adopted the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 1976), Chapter XI of the Maritime Code was partly modeled on the provisions of LLMC 1976. Claims under Article 207 of the Maritime Code are subject to limitation. However, Art. 2 (1) (d) and (e) of LLMC 1976 are not listed as claims subject to limitation in article 207 T7 One can argue whether the claims for costs incurred for wreck removal are subject to limitation of liability, as there is no express reservation provision for this issue in the Maritime Code. However, if the claims become subject to limitation of liability, the Maritime Safety Agency cannot recover its expenses in relation to the raising of wrecks in full. Therefore there may be the risk that the removal work can not be carried out efficiently due to lack of compensation. In that case the safety of navigation and environment will be threatened as the waterway is not clear of objects. In order to avoid these unpleasant consequences, the PSC addressed the issue by clarifying that all claims in respect of wreck raising, removal, etc, are not subject to limitation of liability.28 C. Marine Insurance In terms of chapter XII of the Maritime Code, a major interpretation for the contract of marine insurance, namely the Provisions of the Supreme People’s Court on Several Issues about the Trial of Cases Concerning Marine Insurance Disputes, has been in force from January 2007. The Provisions comprise 16 articles and introduce comprehensive judicial interpretations on a number of important issues concerning the application of law, conclusion, termination and assignment of the contract, insurer’s liability and subrogation.29 D. Limitation of Liability for Maritime Claims The Supreme People’s Court is going to adopt a new instrument for the rulings in maritime trials of cases on limitation of liability for maritime claims. In 2009 the SPC published the latest draft of the document for discussion, which is entitled Provisions of the Supreme People’s Court on Several issues about the Trail of Cases Concerning the Disputes of Limitation of Liabilities for Maritime Claims (Draft PLL).10 The Draft PLL has been developed pursuant to the provisions of the PRC Maritime Code31 and the PRC Special Maritime Procedure Law.32 Therefore, certain issues concerning some confusing provisions in the Maritime Code are clarified by the Draft PLL.

1. Persons Entitled to Limit Liability According to Article 204 of the Maritime Code, ship-owners and salvors are entitled to limit their liability. The definition of ‘ship-owners’ has been extended to include the owner, the charterer and the operator of a ship.33 Although charterers are within the definition of ‘ship-owner’ and are clearly entitled to limit, there is no clarification as to the types of ‘charterers’ who may limit liability. The Draft PLL adopts a narrow interpretation by providing that the word ‘charterer’ does not include all types of charterers, and only demise-charterers as well as time-charterers are entitled to limit their liabilities.34 Therefore in the case of China, voyage charterers and slot charterers are not entitled to limit liability.

Comparing this list to the class of persons whose liability could be limited under the LLMC 1976, it is noteworthy that the word ‘manager’ does not appear in the definition of ‘ship-owners’ in the Maritime Code. The different wording has caused confusion and attracted a long-existing criticism that the manager should be added to the list of those entitled to limit liability. However, even in the Draft PLL the manager has not been introduced as a class of person who is able to limit liability. Instead the Draft PLL sets out a clear definition for Operator. ‘An Operator’ is the person who is registered as an operator, or to whom the actual operation and control of a ship has been entrusted by the ship-owner or demise-charterer.35 Presumably a manager who is actually operating the ship may come within the definition of Operator’ and thereby be allowed to limit. Conversely the non vessel operator or manager, who is not actually involved in the operation of the ship, should not be able to limit liability.

2. Constitution of Fund Article 213 of the Maritime Code provides that the fund shall be constituted as the sum of such amounts set out respectively in Articles 210 and 211, together with the interest thereon from the date of the occurrence giving rise to the liability until the date of the constitution of the fund. An interesting point in Article 210 is that there are two separate limitation funds available for each category of claims; personal claims and property claims. However, some arguments were apparent as to whether the person liable shall always set up one large fund for both types of claims under Article 210. The answer is to be found in the Draft PLL which provides that the liable person may constitute a fund for either, or a combination of both, types. If the liable person constitutes a fund for property claims, the amount of the fund shall be calculated in accordance with subparagraph (2) of Article 210, which provides the financial limits in respect of claims other than that for loss of life or personal injury. However, the amount of the fund in respect to claims for loss of life or personal injury shall be the total of the amounts set out in Article 210 relating to loss of life, injury and property claims together with interest.36 3. Distribution of Fund There are no express provisions in the Maritime Code relating to the distribution of the limitation fund. The general view is that the fund so constituted shall be distributed among several claimants in proportion to their established claims which are subject to limitation.37 However, there are some exceptions. According to subparagraphs (3) and (4) of Article 210, larger amount and priority shall be available for the payment of the claims for loss of life and personal injury. Also, claims in respect of damage to harbour works, basins and waterways and aids to navigation shall have priority over other property claims. In addition, as the Maritime Code is silent on the distribution of the limitation fund, arguably the claimants could benefit from maritime liens or other rights even to the extent of leaving other claimants for damage unpaid.38 The Draft PLL introduces some finality to this issue by clarifying that even if one claimant had a maritime lien over the ship, he shall not take priority in compensation against the limitation fund.39 4. Bar to Other Actions Article 214 of the Maritime Code provides that when a limitation fund has been constituted, any person having made a claim against the liable person may not exercise any right against any assets of the liable person. In view of the different wordings of ‘against the person liable’ (as used in the Maritime Code) as opposed to ‘against the fund’ (as used in LLMC 1976), it is not certain whether the claimant is debarred from exercising any rights in respect to any claims against any other assets of a person liable. The difficulty is resolved by the Draft PLL which allows the claimant to apply for property preservation if he makes a claim in respect of which the person liable cannot limit.40 The Draft PLL also emphasizes that when a limitation fund has been set up, the claimant is prevented from enforcing a maritime lien by arresting the vessel of the person on whose behalf the fund has been constituted, in respect of claims which are also subject to limitation.41 III OTHER REGULATIONS AND INTERPRETATIONS ON CERTAIN MARITIME ISSUES NOT COVERED BY THE PRC MARITIME CODE 1. Oil Pollution from Ships According to the Law on Legislation of PRC, the State Council may be authorized to enact administrative regulations concerning the relevant matters as needed. Most Administrative Regulations deal with administrative rather than substantive laws. Likewise, the Regulations of the People’s Republic of China on the Prevention and Control of Pollution from Ships (the Regulations),42 which come into force as of 1 Mar 2010, covers a wide range of maritime administrative issues.43 However, it is worth noting that the Regulations make provision for the compensation of marine pollution damage from ships in Chapter VII. web site bill of lading

China is a state party to the International Convention on Civil Liability for Oil Pollution Damage 1992 (1992 CLC). Also China has recently adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 (2001 Bunker Convention).44 However, the 1992 CLC and the 2001 Bunker Convention shall only apply in China to oil pollution cases that involve foreign factors. None of the provisions concerning civil liability for any oil pollution damage have been incorporated into the Chinese Maritime Code. In 2010 the first legal regime regulating civil liability for oil pollution damage caused by ships is introduced by the Regulations into PRC law which gives effect to the provisions of the 1992 CLC and the 2001 Bunker Convention.

The Regulations confirm the strict but limited liability of the ship-owner for pollution damage arising from the carriage of the persistent oil by sea, and the strict but limited liability of the ship-owner for pollution damage caused by spills of bunker oil.45 However, if the oil pollution damage was wholly caused by a third party’s act or omission, the third party shall be liable for compensation.46 The Regulations further set out other available exceptions, including where the damage resulted from an act of war, a natural phenomenon of an inevitable character, or the damage was wholly caused by the negligence or other wrongful act of any government or other authority responsible for the maintenance of lights or other navigational aids in the exercise of that function.47 In addition, compulsory insurance is introduced by the Regulations applying to the registered owner whose ship is 1000 GT or larger, carrying oil cargoes and trading within PRC territorial sea.48 The Regulations require that the ship-owner shah1 maintain oil pollution liability insurance or other appropriate financial security. The amount required for the insurance must accord with the limits of liability available to the ship-owner under the Maritime Code or the 1992 CLC or the 2001 Bunker Convention whichever is applicable.49 According to the Regulations, it is clear that the Chinese government is going to establish its own domestic Ship Oil Pollution Compensation Fund, although China has not acceded to the 1992 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (1992 IOPC Fund).50 The oil importers or their agents, who receive the persistent oil that have been carried by sea in PRC territorial seas, shall contribute to the Ship Oil Pollution Compensation Fund.51 The collection and management of the Ship Oil Pollution Compensation Fund will be worked out by the competent authorities of transport and finance under the State Council. However it is still unclear as to whether China will ratify the 1992 IOPC Fund in the near future.

B. Maritime Arbitration In the maritime context, arbitration is a popular choice of dispute resolution. For example, arbitration agreements are usually contained in a charterparty, bill of lading or salvage contract. In relation to whether Chinese law will recognise and enforce the arbitration clauses in maritime contracts, the Interpretation of the Supreme People’s Court concerning Some Issues on Application of the Arbitration Law of the People’s Republic of China (the Interpretation) can provide some useful guidelines.52 7 . Arbitration Agreement The Chinese Arbitration Law sets out strict requirements for a valid arbitration agreement. It must be in writing, express an intention to refer disputes to arbitration, stipulate the matters referable to arbitration, and designate an arbitration commission to hear the dispute.53 Accordingly, in practice, Chinese courts generally take a rigid and conservative judicial attitude toward the effectiveness of arbitration agreements in maritime contracts in which the arbitration clause is abbreviated in its form.

It is noteworthy that the issue of the law governing the validity of the arbitration agreement is addressed in Article 16 of the Interpretation, which provides that the applicable law agreed by the parties shall apply to determine the validity of a foreign-related arbitration agreement. In addition it makes clear, that where the parties have not reached an agreement on the applicable law, but have agreed on the place of arbitration, the laws of the agreed place of arbitration shall apply.58 Where neither the applicable law nor the place of arbitration has been agreed, or the agreed place of arbitration is unclear, the lex fori shall apply.59 In the maritime context, it is usually the case that there may be an express choice of law clause as well as an arbitration clause in a contract such as a charterparty or bill of lading. Given that the arbitration agreement is separable and independent from the underlying contract,60 the applicable law of the arbitration agreement should not be confused with the substantive choice of law applicable to the main contract. Therefore, the general choice of law clause shall not be applied to determine the validity of an international arbitration agreement.61 Nevertheless these new rules set out by the Interpretation will favour the enforcement of arbitration agreements in maritime disputes. In the absence of agreed applicable law of the arbitration agreement, English law will apply to determine the validity of “arbitration in London” in accordance with the agreed place of arbitration. Accordingly, most maritime arbitration agreements will be recognized and enforced by English law, as arbitration in London is a popular choice of dispute resolution in shipping. However, even in cases where the lex fori shall apply, now the Interpretation requires the Chinese courts to take a flexible approach to the validity of arbitration agreements.

2. Incorporation of Arbitration Clause into Bills of Lading In the shipping context, the parties may incorporate by reference the terms of another entire contract. For instance, many bills of lading incorporate the clauses of the charterparty under which the bill is issued.62 Disputes commonly arise in relation to whether an arbitration clause in the charterparty has been incorporated into the bill of lading. The Interpretation expressly recognises the possibility of incorporation of an arbitration clause by reference.63 Therefore, it is clear that Chinese law allows an arbitration clause in a charterparty to be incorporated into a bill of lading. Also it is possible to construe some specific directions regarding how an arbitration clause can be effectively incorporated in a bill of lading. According to the Interpretation, where a bill of lading stipulates that a valid arbitration clause in the charterparty shall apply to the resolution of any dispute arising from the bill of lading, the parties shall refer disputes to arbitration in accordance with such an arbitration agreement. Therefore, general reference in a bill of lading to “all terms conditions and exceptions” of the charterparty is not sufficient to incorporate an arbitration clause. It is necessary to refer clearly to the arbitration clause in the bill of lading to assure incorporation. Also, it is preferable to ensure that specific reference expressly appears on the front of a bill of lading.64 Bearing in mind the fairly conservative attitude of Chinese courts toward the validity of arbitration agreements, presumably the wording of Article 11 should be given rather narrow construction regarding the effectiveness of arbitration clauses incorporated in bills of lading. In addition to the requirement of a specific reference to the arbitration clause in the bill of lading, the arbitration clause in the charterparty must be broad enough on its true construction to include disputes under the bill of lading and between the parties to it.65 Accordingly, the charterparty itself must specifically refer to disputes under the bill of lading, such as providing that all disputes arising under the charterparty, and any bill of lading issued under it, shall be referred to arbitration. Conversely, where the charterparty includes a clause requiring disputes between the owners and charterers to be resolved by arbitration, the charterparty arbitration clause could not refer to disputes under the bill of lading.66 Consequently, a clause referring to disputes between owner and charterer can not be effectively incorporated into the bill of lading.

Also, as discussed above an expression of consensual intention to refer disputes to arbitration is one of the essential requirements for a valid arbitration agreement. However, a bill of lading is a commercial instrument which may pass through many hands. The holder of a bill of lading may have no knowledge of the arbitration clause which is contained in a separate charterparty. In the absence of express acceptance of the arbitration clause, the parties’ intention to arbitrate is unclear. Therefore, in order to subject the holder of a bill of lading to the charterparty arbitration clause, it is preferable to ensure that the contracting parties have access to both the charterparty and the bill of lading at the time of contracting.

IV CONCLUSION Against the background of globalization, international shipping conventions and law have been incorporated into Chinese maritime law. While this process of incorporation has been ongoing several instances of conflict between recent international maritime practice and the PRC Maritime Code have come to light. Although China has solved a number of problems within the PRC Maritime Code, and improved the judicial practices for trial of maritime cases, it is hard to deny that a comprehensive review of the PRC Maritime Code is necessary in the near future.

1 There are a few administrative provisions, such as those in General Provisions, Ships and Crew.

2 The cases approved by the Judicial Committee of the Supreme People’s Court act as a guide or direction to later cases.

3 Such as the Maritime Code of the PRC. It was adopted on 7 Nov 1992 at the 28″ session of the standing committee of the Seventh People’s Congress of the PRC.

4 Art 9 of the PRC Legislation Law.

5 The English translation is available at the website www.lawinfochina.com.

6 The dispute is whether delivery of the goods must be to the named consignee in a straight bill of lading or against presentation of a straight bill of lading.

7 The Refaela S [2005] 1 Lloyd’s Rep 347.

8 Article 2 of the PDG.

9 Article 5 of the PDG provides that the carrier who delivers goods against a forged bill of lading should be liable for wrongful delivery even though he is unlikely to be able to detect a forgery.

10 Article 4 of the PDG.

11 Article 11 of the PMI provides that:

The losses resulting from the failure of the carrier to deliver goods without the original bill of lading in the marine goods transport do not fall within the scope of insurance liability of the insurer, unless it is otherwise prescribed by both parties in the insurance contract.

12 It was adopted by the NPC on 12 April 1986 and effective as of 1 Jan 1987.

13 Also see Article 8 of the PRC Tort Law which was adopted by the Standing Committee on 26 December 2009 and shall come into force on 1 July 2010.

14 Article 11 of the PDG.

15 However, a binding custom at the port of discharge imposing a similar requirement, cannot be accepted as one of exceptions.

16 Article 8 of the PDG, which also applies to auction by the customs if no one takes delivery of the goods at the port of discharge.

17 Article 79 of the Maritime Code provides that a straight bill of lading is not negotiable.

18 Article 308 of the PRC Contract Law, it was adopted by the NPC on 15 March 1999 and has come into force since 1999.

19 Paragraph 1 of Article 72 of the Maritime Code provides that:

When the goods have been taken over by the carrier or have been loaded on board, the carrier shall, on demand of the shipper, issue to the shipper a bill of lading.

20 Article 12 of the PDG.

21 It was promulgated by the SPC on 28 April 2008 and came into force on 23 May 2008.

22 Article 83 of the PRC Legislation Law provides that:

With regard to laws … if they are formulated by one and the same organ and if there is inconsistency between special provisions and general provisions, the special provisions shall prevail.

23 An 108 of the PRC Civil Procedural Law, there must be a specific defendant before a law suit is filed.

24 Paragraph 3 of Article 169 of the Maritime Code.

25 It also applies to an innocent third ship involved in a collision. See paragraph 2 of Article 169.

26 Article 8 of the PSC.

27 Article 2 (1) of the 1976 LLMC provides that:

subject to Articles 3 and 4 the following claims, whatever the basis of liability may be, shall be subject to limitation of liability:

(d) claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship;

(e) claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship;

28 Art 9 of the PSC.

29 See Zhao, Liu, ‘Developments in Chinese Marine Insurance Law” (2008) 14 JIML.

30 There is no official English version of this draft document as it has not been finalized and adopted.

31 Chapter XI is on Limitation of Liability for Maritime Claims.

32 It was promulgated by the Standing Committee of the National People’s Congress on 25 December 1999 and has been in force since 1 July 2000.

33 Paragraph 2 of the art 204 of the Maritime Code.

34 Paragraph 1 of draft art 10 of the PLL.

35 Paragraph 2 of draft art 10 of the PLL.

36 Draft art 14 of the PLL.

37 Art 12 (1) of 1976 LLMC.

38 Article 30 of the Maritime Code provides that:

The provisions of this Section (Maritime Liens) shall not affect the implementation of the limitation of liability for maritime claims provided for in Chapter XI of this Code.

39 Draft art 16 of the PLL.

40 Draft art 4 of the PLL.

41 Draft art 5 of the PLL.

42 It was promulgated by the PRC State Council on 9th September 2009.

43 Such as the discharge and reception of marine pollutants from ships, marine pollution response plan, oil spill clean-up arrangements, etc.

44 It was ratified by China on 9 Dec 2008 and came into force on 9 Mar 2009 in China.

45 The definition of ship-owner includes the registered owner, the bareboat charterer, the manager and the operator of a ship.

46 Art 50 of the Regulations.

47 Art 51 of the Regulations.

48 Direct action against the insurer is not addressed in the Regulations.

49 Article 53 of the Regulations.

50 The 1992 Fund Convention only applies to the Hong Kong Special Administrative Region.

51 Article 56 of the Regulations.

52 It was adopted on December 26, 2005, and came into force on September 8, 2006.

53 Article 16, Arbitration Law of PRC, effective as of 1 Jan 1994.

54 Article 1 of the Interpretation.

55 Article 2 of the Interpretation.

56 Articles 3 and 4 of the Interpretation.

57 Article 6 of the Interpretation.

58 It accords with the provisions of the 1958 New York Convention.

59 Article 16 of the Interpretation.

60 Article 10 of the Interpretation strengthens the autonomy of the arbitration agreements.

61 See Lillian Lian, Stewart Shackleton, ‘China: the Supreme People’s Court’s new interpretation on the application of PRC arbitration law,’ Int. ALJR. 2006, 9(6), 167-171. The authors misunderstood the provision of the Interpretation, “the law agreed by the parties as the governing of the contract shall also apply to determine the validity of an international arbitration agreement.” 62 See e.g. the Congenbill.

63 Article 11 of the Interpretation.

64 See Fei Lanfang, ? Review of Judicial Attitude towards the Incorporation of Arbitration Clauses in Bills of Lading in China’ (2009) 15 JlML, which illustrates that a general reference on the front of a bill of lading together with a specific reference on the back cannot constitute an effective incorporation.

65 The Chinese courts will not recognize the Annefield exception, as no such exception has been addressed in the Interpretation.

66 Without clear guidelines verbal manipulation is not applicable by the Chinese courts.

[Author Affiliation] Huijie Luo* and Miao Li** [Author Affiliation] * Lecturer, Jiangsu Maritime Institute ** Lecturer, Jiangsu Maritime Institute Luo, Huijie; Li, Miao