The Chinese Rules On The Law Applicable To Cargo Claims Under The Bill Of Lading Contract Of Carriage
In claims for mould and/or heat damage to soya bean cargoes, the Chinese buyers frequently force the foreign shipowners to stand trial in Chinese maritime courts.
The Articles 15 and 21 of the Special Maritime Procedure Law of the People`s Republic of China provides that a maritime claimant can ask a local maritime court to order the arrest of the ship that carried the cargo to which the claim relates until the shipowners will provide a security in the amount required. However, there is no requirement in the Chinese law that the security provided by the shipowners to the claimants should mention the Chinese law as the law applicable for the settlement of claims.
The Article 75 of the Special Maritime Procedure Law of the People`s Republic of China provides that:
"The type and amount of the security provided by a person against whom the claim is made shall be determined through consultation by the maritime claimant and the person against whom the claim is made; if consultation fails, the matter shall be determined by the maritime court."
Provided that the Bill of Lading has specific provisions on the law applicable to contractual disputes, the shipowners may file an objection to the claimants` requirement that the security should mention that the claim be subject to the Chinese law. The Article 17 of the Special Maritime Procedure Law of the People`s Republic of China provides that the shipowners may apply for review of the Court`s order for the preservation of the maritime claim, if they are dissatisfied with such an order.
As regards the Bill of Lading provisions in respect of the law applicable to the contractual disputes, these should be specific.
The Article 269 of the Maritime Code of the People`s Republic of China provides that the parties to a contract involving foreign elements may choose the law applicable to the settlement of their contractual disputes. The Chinese maritime courts held that the parties to a contract of carriage should choose in an explicit manner the law applicable to their contractual disputes1.
Even though the Bills of Lading issued for soya bean cargoes transported to the Chinese ports incorporate the voyage charter party terms, the Chinese maritime courts held that the acceptance of the Bills of Lading by the Chinese buyers (claimants) shall not be deemed an implied consent to choose the applicable law specified in the charter party to govern the disputes arising from the Bill of Lading contract of carriage2. However, the acceptance by the Chinese buyers (claimants) of the Bills of Lading that stipulate expressly the law applicable to contractual disputes would be deemed an implied consent to choose the applicable law. Therefore, the Masters of the ships loading soya bean cargoes in Brazil for transport to ports in China should give instructions in the Letter of Authorization to the charterer`s agents at loading ports to mention on the front page of the Bill of Lading or amongst the conditions of carriage stated on the following page(s) that the law applicable to contractual disputes shall be the English law.
In the absence of such clause in the Bills of Lading, the Chinese maritime courts consider that the parties to the Bill of Lading contract of carriage have not made a choice of the law applicable to their disputes3. In such case the applicable law shall be the law of the country having the closest connection with the contract of carriage. Since the discharging ports of the soya bean cargoes are in China, China is considered as the country having the closest connection with the contracts of carriage of the soya bean cargoes and the law of the People`s Republic of China shall apply.
by Vlad Cioarec, International Trade Consultant
This article has been published in Commoditylaw`s Grain Trade Review Edition No. 7.
Endnotes:
1. See the Article 3 of the Rules of the Supreme People`s Court on the Relevant Issues concerning the Application of Law in the Trial of Civil or Commercial Cases.
2. See The Case of Dispute over Contract of Carriage of Cargo by Sea Filed by Henan Cereals Oils and Foodstuffs Import and Export (Group) Co. Ltd. against Saint Vincent Shipping Inc. and Noble Europe Limited, (2004) GHFCZ No. 312.
3. See The Case of Dispute over Contract of Carriage of Cargo by Sea Filed by Henan Cereals Oils and Foodstuffs Import and Export (Group) Co. Ltd. against Saint Vincent Shipping Inc. and Noble Europe Limited, (2004) GHFCZ No. 312.