Mareva v maritime

ON 1 July, 2000, the maritime injunction was introduced into the Special Maritime Procedure Law of the People's Republic of China (SMPL). But it is being mixed up with the mareva injunction, which is well-known and widely-used in a number of leading maritime jurisdictions. The remarkable differences between these two terms should be clarified.

The mareva injunction, now known as a freezing order, prohibits the defendant from removing assets from the jurisdiction and/or dealing with them. The maritime injunction, however, covers the actions of the respondent or defendant, regardless of whether the actions relate to the assets or not.

Once a maritime injunction is made, and the respondent refuses to comply with it, the maritime court may impose a fine, order a detention or, if the act constitutes a crime, execute criminal liability.

The mareva injunction is a court order freezing any or all of the defendant's assets in or out of the jurisdiction, permitting their judicial sale to satisfy an eventual judgement favouring the claim. However, it does not place the frozen assets under the court's authority.

The maritime injunction, however, does not freeze any assets or property. It only orders the respondent to do or not to do certain things. It is a compulsory measure adopted by the maritime court on the application of a maritime claim, compelling the person against whom the claim is made to do or refrain from doing certain things that may prevent the legitimate interest of the claimant from being infringed.

For example, the cargo owner requires the carrier to deliver the cargo, the shipper requires the carrier to issue a bill of lading, or the shipowner requires the charterers to redeliver the ship or pay the agreed hire. Freezing assets or attachments could be done by preservation measures, known in civil law countries as the saisie conservatoire.

The maritime injunction originates from the Chinese legal Theory of Debts, which recognises both property and action as the objects of debt. To secure a claim, the preservation measure could be either against property (the ship, cargo, freight or expected interest) or against the actions of the other party. Preservation measures against property in admiralty practice have been included in maritime liens, attachment of cargo, arrest of ships, etc. Whereas the objects of debt are actions, in order to secure a maritime claim, the SMPL introduced the maritime injunction as a preservation measure.

When a maritime injunction is granted

The basic criteria governing the granting of a maritime injunction in China are:

1. Application in writing, together with reasons supported by relevant evidence
2. The claimant has a specific maritime claim (not necessarily those specified for arrest of ships)
3. A breach of statutory provisions or contractual provisions by the person against whom a claim is made needs to be re-addressed
4. As a matter of urgency, loss will occur or become worse if a maritime injunction is not granted forthwith

A maritime injunction may be applied for and issued before or after the start of the trial. It can only be issued by a maritime court. The process of the maritime injunction is an ex-parte hearing and decision. The maritime court, having accepted an application, will give a Yes or No order within 48 hours. It is a matter of procedure. While the mareva injunction could be part of an action in rem, a mareva injunction may also be sought by the defendant in support of a counterclaim.

If a maritime injunction is applied for before the start of the trial, it should be filed with the maritime court where the dispute arose. A maritime injunction is not prejudiced by the jurisdiction agreement or arbitration agreement between the parties in respect of the maritime claim. The issuing court will automatically get the jurisdiction over the merits of the case, unless the jurisdiction agreement or arbitration agreement between the parties provides otherwise.

Counter-security

Counter-security for granting a maritime injunction is at the discretion of the maritime court. As the maritime injunction is to be made before the maritime claim is ascertained, it cannot be 100 per cent correct, and there may be some possibility that the application is wrong. Any wrongful injunction may cause damage to the respondent or other bona-fide parties, so it seems that counter-security is necessary to cover any possible damages by wrongful injunction.

Article 55 of SMPL provides:

'The maritime court, having entertained an application for a maritime injunction, may enjoin the maritime claimant to provide security. The application shall be rejected if the maritime claimant fails to do so.'

The type and amount of the counter-security, which is subject to change if the provider applies to the maritime court on good reasons and so ratified, shall be determined by the maritime court. The amount of the security provided by a maritime claimant shall be in line with the loss a party against whom a claim is made may suffer as the result of such application.

After providing security, in the case of the mareva injunction, the applicant must give a 'cross-undertaking of damages' to indemnify the defendant for losses resulting from it should the claim be unsuccessful, as well as to compensate third-parties for any expenses which they may reasonably incur in complying with such an order, or losses which the order may cause.

Review or set-aside of the maritime injunction is possible. Although the SMPL provides that the maritime injunction shall be executed immediately once ruled, any interested party dissatisfied with the maritime injunction may apply for review, not more than once within five days after receipt of it. Execution of the order shall not be suspended during the review period. Where an interested party objects to a maritime injunction, the maritime court will examine the objection and cancel the injunction by order if the reasons for it are justified. If the parties are not satisfied with the decision of review, as per the Civil Procedure Law of the PRC, it cannot be appealed. It is also unlikely that the maritime court will vary the maritime injunction. The result of the review would be either a Yes or No confirmation.

The court also varies and discharges mareva injunctions, particularly where they adversely affect the rights of innocent third-parties. In some cases, the injunction is also varied or discharged to the benefit of the defendant, provided that the purpose for which the mareva was originally issued is not compromised. It can also be set aside upon reasonable grounds of the defendant.

A worldwide mareva injunction can be used in order to restrain defendants subject to English jurisdiction from dealing with or dissipating their assets situated outside England and Wales, or requiring that assets outside the jurisdiction be transferred to a jurisdiction where the mareva remedy will be recognised. In a similar way, the maritime injunction could have a worldwide effect too, although the SMPL does not specify this in particular. The injunction itself does not pinpoint the assets, it only covers the actions of the respondent. In case of actions, there are no territorial restrictions.

Once a maritime injunction is made, and the respondent refuses to comply with it, the maritime court may impose a fine, order a detention or, if the act constitutes a crime, execute criminal liability. These three punishments could be executed according to the seriousness of the case.

Bearing all this in mind, the power vested in the maritime injunction can be seen to be quite persuasive.