Research on the Scope of Arresting Ships in Maritime Claims
Author of article: Lawyers of Shandong Win & Win Co. Law Firm
Summary: Maritime request to arrest a ship is a very important procedure in the maritime law. Its basic meaning is that the maritime court implements the legal procedures for the arrest of the ship based on the application of the maritime claimant and the relevant provisions of the maritime law. Based on the analysis of international treaties, English law and Chinese law, this article proposes to expand the scope of the arrest of the ship to fully protect the legal rights and interests of creditors, to combat malicious evasion of legal acts, and to evade contracts Shipping company under obligation.
Keywords: arrested ship, single ship company, actual controller
1. Basic case:
In 2010, Ship V refueled in South Korea. The seller was South Korean Company S and the buyer was Mainland China B Company. The owner “OWNER” of this ship V is Hong Kong C Shipping Company. After filling the fuel, the fuel has not been paid. Later, due to the downturn in the shipping industry, the V ship called at a Chinese port. After that, South Korean company S applied to the Chinese Maritime Court for maritime preservation, requesting the arrest of the V ship. In accordance with the relevant provisions of my country’s current maritime litigation law on maritime claims preservation, the maritime court found after review that it could not arrest the V ship.
Later, South Korean S company considered that if the case entered the litigation process, the judgment debtor should be B company of the Chinese mainland of the oil buyer. After investigation, this B company has no property. In fact, in order to circumvent the law, mainland B company established single-ship company C in Hong Kong. Therefore, even if South Korean Company S wins the case, it will not be able to hold Hong Kong Company C accountable because of the principle of independent legal personality. According to relevant Chinese laws and regulations, the court cannot seal up and auction the V ship. In addition, the debt of the V ship itself was huge, and even if the court auction was completed, it could not pay off its ordinary claims. South Korean S company waived further judicial proceedings in China.
According to the provisions of China’s Maritime Procedure Law, the above-mentioned circumstances do not comply with the maritime request to arrest the ship, so the ship cannot be arrested. However, is this fair to the applicant? Through the above cases, let us analyze the scope of arrested ships for maritime claims preservation through international treaties, English law and Chinese law, so as to find out the unreasonable parts of my country’s maritime litigation law and suggest amendments.
2. International treaties on the scope of the arrest of ships:
(1) The 1952 International Convention on the Arrest of Ships
The first paragraph of Article 3 of the Convention stipulates that “except as otherwise provided in paragraphs 4 and 10 of this article, the requestor may arrest the ship that caused the maritime claim, or any other shipowner belonging to the owner at the time of the maritime claim. Ships, even if the arrested ship is ready to sail, except for the ship that caused the request, no other ship may be affected by the items listed in (o), (p), (q) of the first paragraph of Article 1. Seizure for maritime claims.” The fourth paragraph of the article stipulates, “If it is a bareboat charter, the charterer, not the registered owner, shall be responsible for the maritime claim related to the ship, and the requestor may seize the ship in accordance with the provisions of this Convention. Ship, or any other ship owned by the bareboat charterer, but other ships of the registered shipowner shall not be arrested for this sea-time request.”
The convention is the product of mutual compromise between the two legal systems of arresting ships. This is particularly reflected in the arrest of the ship involved or non-participants agreed in the Convention. It retains some of the basic characteristics of British rem litigation, and at the same time incorporates the relevant provisions of the civil law system on property preservation. The convention reflects the particularity of the shipping system and the international nature of ship arrest.
The provisions of this convention on the scope of arrestable ships will be extremely thorough in the theory of rem litigation. “The requestor may arrest the ship that caused the maritime claim.” When applying for arrest, the arrest applicant does not need to consider who the ship’s owner or charterer is, and the legal relationship between the person responsible for the maritime claim and the ship. As long as it is determined that the ship in question caused the maritime claim, it can be arrested. After the convention was enacted, many countries including China and the United Kingdom referred to the convention and formulated or revised laws in their own countries to conform to the principles and spirit of the convention.
Moreover, after this convention established the sister ship seizure system, it contributed to the popularity of single-ship companies. In order to avoid the seizure of sister ships, some shipping companies have registered single-ship companies. “All countries of the 1952 Arrest Convention can apply the sister ship arrest system. For non-convention countries, except for countries in the Common Law system that directly target the ship in question, the continental law system also arrests sister ships due to the litigation preservation system. A shipping group with a large fleet is extremely disadvantageous.” For this reason, in order to avoid legal risks, the shipping group changed its business strategy in terms of corporate assets, using a single-ship company as a legal person to limit corporate responsibilities. Since a single-ship company only owns one ship, there is no sister ship, which can prevent the sister ship from being seized.
(2) The 1999 International Arrest Convention
The arrest of the ship chartered by the person responsible for the maritime claim under this Convention, whether it is a bareboat charter, a time charter or a voyage charter, can be arrested, as long as the judgment on the request can be passed according to the law of the place where the arrest is requested Mandatory execution of the judicial sale or auction of the ship. This provision expands the scope of the ship’s arrest and helps protect the interests of maritime claimants.
“The 1999 Convention changed the practice of the 1952 Convention in rem litigation on the ship involved in the seizure. It uses the ship’s ownership as a link and is closer to the property preservation system of civil law countries. The changing trend of person-to-person litigation. The scope of detainable ships is basically kept at the ship owned by the person responsible for the maritime claim, and the arrest of the ship in question can be applied to the ship leased by the respondent bareboat.”
When drafting the section on arrest of ships in the Maritime Procedure Law, our country used the provisions of the Convention for reference. However, some of the provisions of this convention are not necessarily scientific and reasonable, let alone fully adapt to the national conditions and basic legal system of a country.
3. British law
The rem litigation established and developed by the British High Maritime Court is the most complete and influential. The history of the British Maritime Court can be traced back to the 14th century. At that time, the maritime court had jurisdiction over the property. The maritime court obtained jurisdiction by seizing maritime property, that is, ships, cargo on board and freight, so as to force the owner to come to the case and provide Guarantee to ensure that the court can enforce the judgment.
In the United Kingdom, the Admiralty Court Act (Admiralty Court Act) of 1840 and 1861 was the first to historically expand the maritime court’s jurisdiction in rem. The law specifically provides that some maritime claims that do not have maritime liens can also be filed in rem litigation, thereby expanding the maritime court’s jurisdiction in rem. This type of right of maritime claimants was later referred to by the court as Statutory Right of Action In Rem) or become a legal lien.
“The Judicial System of the Supreme Court of 1875 stipulated that in rem litigation, a subpoena must be issued in the maritime court against the withheld property. The rem shall not be regarded as the defendant at the time. If the owner of the property does not appear in court, the maritime claimant The property is compensated from the sale price of the property. The property is the source of liability and the limitation of liability. The owner of the ship can choose to respond to the lawsuit against the property or not. If he chooses not to proceed, the court will directly target the arrested ship. If the shipowner responds, the rem action will become a mixed rem action and a person action.”
4. Chinese law
(1) Provisions on the arrest of ships by the Supreme Court in 1994
Article 3 of the provisions of the Supreme People’s Court on the arrest of ships prior to litigation by maritime courts, “Scope of arrest of ships: (1) The owner, operator or charterer of the arrested ship shall be liable for the maritime claim. The arrest of the ship involved shall, It must be at the time of the application for arrest and when a maritime claim occurs, and the ship in question belongs to the same owner, the same operator or the same charterer, except for the application for arrest of the ship in order to exercise the priority of the ship. (2) The first paragraph of this article is arrested. Other ships owned by the specified ship owner. (3) The arrest of other ships owned, operated or chartered by the ship operator or charterer specified in the first paragraph of this article.”
It can be seen from the provisions of this article that the scope of the 1994 arrest of ships is very extensive. The first point is that there are a wide range of parties, including ship owners, operators, and charterers. The second point is the wide range of ships involved, including “owned, operated, and chartered” ships. Such a wide range of arrests caused great controversy at the time. Some people believed that this would damage the interests of shipowners who were not liable and cause confusion in the relationship of liability. However, due to the wide scope of detention, which is beneficial to protect the legitimate rights and interests of the applicant, we should also see its advantages. In particular, the “operator” should include ship managers, controllers, shareholders and other responsible ship operators. Among them, “operating” includes operating activities such as controlling and managing ships. This can prevent the responsible party from evading legal responsibility to the greatest extent, resulting in the inability to arrest the ship.
(2) Provisions of the Maritime Procedure Law of the People’s Republic of China
Article 23 of the Maritime Procedure Law, “In any of the following circumstances, the maritime court may arrest the ship in question: (1) The owner of the ship is responsible for the maritime claim and is the owner of the ship at the time of the arrest; (2) The bareboat charterer of the ship is responsible for maritime claims, and is the bareboat charterer or owner of the ship at the time of seizure; (5) Maritime claims with maritime liens. Maritime courts may seize maritime claims Request the responsible shipowner, bareboat charterer, time charterer or voyage charterer to all other ships at the time of the arrest, except for requests related to ship ownership or possession.”
This article is a lawsuit against persons, emphasizing the responsibility towards persons, which is significantly different from the lawsuit against persons in common law system.
Article 1 states that when a ship is arrested, the owner of the arrested ship should be the person responsible for maritime claims. The responsible person is the same as the owner of the arrested ship, rather than the ship involved is the same as the ship at the time of arrest. The second article says that for bareboat charterers, when they are responsible for maritime claims and are still the bareboat charterer of the ship or have become the owner of the ship at the time of arrest, they can arrest the ship in question. All other ships at the time of the arrest can be arrested. Furthermore, if the time charterer or voyage charterer is the person responsible for the maritime claim, if the owner of the ship is not responsible for the maritime claim, the time charter or the ship in question cannot be arrested, but the ship can be arrested. All other ships owned by the charterer or the charterer at the time of the arrest. Here is also the emphasis on the requirements for human litigation.
After China’s maritime court was established in 1984, the judicial practice of maritime petition preservation for arrest of ships before litigation appeared. China only recognizes litigation in person, but not in rem. “However, when China formulated maritime claims preservation laws and regulations, it referred to the above-mentioned international practices and international conventions, including the system of in-rem suit, so China’s pre-litigation measures for arrest of ships have traces of in-rem suits.”
5. The theoretical basis and advantages of expanding the scope of ship arrest
(1) Drawing on the theory of in rem litigation
Maritime legal relations are very complicated, with great foreign-related, liquidity and uncertainty. There are also many parties involved in maritime legal relations, such as ship owners, bareboat charterers, time charterers, voyage charterers, ship operators, etc. The legal relations are complicated. In the course of commercial transactions, due to time constraints or because the ship party is a familiar customer, contract parties often do not ascertain the relationship between the ship party signing the agreement and the ship involved, and what responsibilities should be assumed. Because of the high mobility of ships, if the parties to the contract want to find out the legal relationship between the ship and the ship, a very large cost is required. The ship signing the contract often only provides the ship registration certificate, not the ship, based on commercial secrets. Lease contract or other contract that can prove the legal status of the ship. The parties to the contract are often lucky enough to sign relevant agreements with the ship. Once a maritime legal dispute occurs, it is often difficult for a creditor as a party to a contract to determine who is really responsible.
In this case, mere litigation against persons cannot guarantee the realization of the maritime claimant’s rights. First, the maritime claimant needs to find out who is really responsible and the relationship between the real responsible person and the ship, and then choose a court with jurisdiction to sue. This is extremely difficult for maritime claimants who do not have relevant information and ship lease contracts on hand, and are not familiar with maritime law. Even if the person responsible is found, the court with jurisdiction may be a foreign court. Considering maritime litigation procedures The service of subpoenas and subsequent hearings and evidence procedures in the document will also cause considerable difficulties for the maritime claimant. Moreover, the initiation of ordinary suits against persons may not effectively guarantee the rights of the maritime claimant. At the time of the lawsuit, this person often does not have any assets or has already transferred assets to other companies. Even if the judgment is successful, the application for the court to enforce the judgment against the person may also occur that the company may easily transfer the ownership of the ship in a very short time, leaving the company with no assets to realize the claims of the maritime claimant.
For the above reasons, in many cases, the maritime claimant does not want to resort to complex legal procedures such as court litigation or arbitration, but only hopes to force the other party to provide a guarantee for release of the ship or to prompt the other party to settle the ship through the arrest procedure, using the lowest cost , The fastest speed to solve the problem. Similarly, for many respondents, there is also the problem of unwillingness to respond to or participate in arbitration, and therefore have to accept the maritime claimant’s settlement conditions in exchange for the release of the ship. In rem litigation, the ship in question can be arrested, and the case can be better closed by the parties reconciling themselves and the maritime claimant applies for release of the arrested ship. Under this circumstance, not only the social function of the court to determine disputes is realized, but the ship arrest procedure also has a systematic legal procedure for case acceptance, review, adjudication, arrest, reconciliation, release, and settlement. Conversely speaking, if the maritime claimant’s application for arrest of the ship is rejected, the maritime claimant will generally give up filing a lawsuit or applying for arbitration, considering the difficulty of legal proceedings and the difficulty of enforcement even if an effective judgment is later obtained. Hard work. “For example, as far as the ship arrest procedure is concerned, for those maritime claimants who are forced to give up taking further legal actions for some reason, the rejection of their arrest application is largely similar to the rejection of the lawsuit. , Thereby indirectly denying the corresponding entity claim rights of the maritime claimant.” This is very unfair to the maritime claimant.
(2) Refer to the provisions of the Civil Procedure Law
Article 93 and Article 94 of the “Civil Procedure Law of the People’s Republic of China”, “If an interested party does not immediately apply for property preservation due to an emergency situation, it will cause irreparable damage to his legal rights and interests, he may proceed before the suit Apply to the people’s court for property preservation measures. The applicant shall provide a guarantee. If no guarantee is provided, the application shall be rejected. Property preservation is limited to the scope of the request or the property related to the case.”
First, this article stipulates that pre-litigation preservation must be in emergency, which is an inevitable requirement for pre-litigation property preservation. Because in an emergency, the applicant for preservation often does not have time to find out whether the owner of the property is the respondent. Second, this article stipulates that the applicant should provide a guarantee, rather than having the court review whether it is necessary to provide a guarantee based on the actual situation of the case. This is also to avoid the mistake of preserving property in an emergency, causing losses to the respondent or a third party that cannot be recovered. Third, this article stipulates that the property needs of property preservation are related to the case, but it is not necessary to prove that the property belongs to the respondent. This is because before the case has entered the litigation and the court has not made a judgment, it is often impossible to determine whether the owner of the preserved property belongs to the respondent.
In comparison, according to China’s maritime litigation law: First, it does not stipulate that maritime claims must be required to be preserved before litigation in an emergency. Second, the maritime court accepts the maritime claim preservation application, and may order the maritime claimant to provide security. But it does not order the maritime claimant to provide guarantees under any circumstances. However, in judicial practice, when the maritime petitioner asks to arrest the ship, it is often the same in emergency. If the ship is not arrested immediately, the ship in question will leave the port at any time. Once such a chance of arrest is lost, it will often be difficult to touch again. To.
Therefore, the author suggests that maritime claims preservation should refer to the pre-litigation property preservation provisions of the Civil Procedure Law, and add a new article: “If the maritime claim preservation party is in an emergency, not immediately applying for maritime claims preservation will cause irreparable damage to his lawful rights and interests. Before prosecuting the case, apply to the maritime court for maritime claim preservation of the ship involved in the case. The maritime claim preservation party shall provide a guarantee. If no guarantee is provided, the application shall be rejected.” This can expand the scope of the arrest of the ship and protect the legitimate rights and interests of the applicant. , It can also avoid the occurrence of loss that cannot be recovered due to the wrongful detention of the respondent or the third party due to the application of the maritime claim preservation party.
(3) For single-ship companies, the “actual controller” responsibility should be added
A single-ship company is generally registered as a legal person, and the registered asset is a ship. The ships of a single-ship company may fly the national flag or the flag of convenience. “Because the real shipowners and their property are not in the flag state, the ship is usually operated by the ship operator in one country. The ship does not call at the port of the flag state at all. Once a dispute occurs in the operation, the shipowner That is to say, you can evade responsibility by changing the name of the ship and the name of the shipping company.”
In the above case, the applicant finally found that Hong Kong Company C was a single-ship company established in Hong Kong by the actual controller of Mainland Company B. In accordance with the independent responsibilities of legal persons, legal persons and investors have their own independent property, their own personalities, and their independent responsibilities. The company only assumes external liabilities with independent assets, and the company’s creditors can only collect debts against the company. Even if the company’s existing assets are insufficient to repay the debts, investors will not be liable. In the above-mentioned case, the mainland B company did not manage well and did not have any assets, but it was impossible to sentence the Hong Kong company to bear the responsibility without absolute evidence of “exposing the company veil”.
In order to avoid legal risks and contractual responsibilities and obligations of single-ship companies, their registered shareholders are often not company shareholders, and shareholders are merely named. The single-ship company is operated and operated by the actual controller. “The actual controller often improperly controls the company that endangers its independence, and uses the company as a tool to achieve its illegal purposes. The company loses its operational independence.” In fact, the actual controller of the ship is the true shareholder of the ship. What is the actual controller? According to my country’s company law, “the actual controller refers to a person who is not a shareholder of the company, but can actually control the company’s behavior through investment relations, agreements or other arrangements.” In the maritime field, if someone controls and directs the ship Operation, equity control, administrative management, signing important contracts related to the ship, and deciding whether the ship can be sold, that is, having the right to dispose of the ship and being responsible for the consequences, it can be said that this person is the actual controller.
Regarding the concept of “actual controller”, we can also refer to the definition of “direct and indirect control power” established by the South African Supreme Court in the “HEAVY METAL” round. The ship “HEAVY METAL” was arrested in Cape Town as an associated ship of the ship “SEA SONNET”. “The South African Supreme Court stated that the person who has direct or indirect control over the company has statutory power. If a person with legal power happens to control two related companies, the statutory conditions for the existence of the two companies will be met. Therefore, the South African Supreme Court It is judged that “HEAVY METAL” and “SEA SONNET” are related ships and should be seized.”
In summary, my country’s maritime lawsuits restricts the scope of the arrest of ships too strict, resulting in the inability of right holders to apply for arrest in China, leading to the loss of Chinese jurisdiction. The author suggests that in the second section of my country’s maritime litigation law, the arrest and auction of ships, under Article 23, the maritime court may arrest the ship in question, add an article, “The actual controller of the ship is responsible for the maritime claim and shall He was the actual controller of the ship at the time of the arrest.”
According to the regulations of the Maritime Law of the People’s Republic of China on maritime requests for arrest of ships, effective arrest measures cannot be taken against single-ship companies that are increasingly evading legal actions and those that maliciously evade contractual obligations and fail to fulfill contractual obligations. In order to ensure the procedural protection of legal creditors’ maritime claims, and ultimately ensure the realization of their legitimate rights and interests, and to ensure my country’s international maritime jurisdiction status, my country’s maritime litigation law needs to adapt to changes in the times and make corresponding amendments to the scope of maritime claims to arrest ships .