Maritime dispute resolution in China

GENERALLY speaking, the laws of China can be divided into those which deal with procedural matters, and those which deal with substance.

Procedural laws

Litigation procedures in China mainly follow the Civil Procedures Law of the People's Republic of China, which was promulgated on April 9, 1991. There are additional provisions dealing with specific maritime issues. Examples are "The Provisions Concerning Arrest of Ships before Commencement of Action by Maritime Courts", and "The Provisions Concerning Forced Sale of the Ship Arrested to Satisfy Debts by Maritime Courts" amended in July 1994. In the pipeline is a draft "Maritime Litigation Special Procedures" which is hoped to provide a more comprehensive set of rules dealing with maritime litigation.

Substantive laws

The Civil Law of the People's Republic of China governs the property relationships between individuals and/or legal entities. The term "property relationship" is widely defined to include maritime and commercial relationships. The general principles contained in the civil law form the basis of all civil litigation in China.

The Maritime Code of the People's Republic of China, which came into existence in 1993, is the substantive law which is applicable in maritime matters. The detailed 15-chapter, 278-article maritime code is to a large extent modelled on international conventions and international practice. Some of the highlights are:-

• The carriage of goods by sea section is broadly based on the Hague-Visby Rules. There are provisions specifically dealing with multimodal transport.
• The section dealing with charter parties is, to a large extent, a codification of English law.
• Tonnage limitation and salvage are both based on the international conventions, the 1976 London Convention and the 1989 Salvage Convention.
• There is a specific chapter (Chapter 12) dealing with contracts of marine insurance. This again represents a codification of English law, and English lawyers had a significant influence in the drafting of this part of the code.

The maritime law as it is written is quite difficult to fault. What about the legal system?

The court system

The courts in China are divided into four levels:

The Supreme People's Court - this is based in Beijing, the highest court in China.

The Higher People's Court - this presides in cities or administrative areas which are under the direct administration of the central government.

The Intermediate People's Court - this presides in cities or administrative areas which are under the administration of the provincial government.

The District People's Court - this is the lowest level of court in China.

Maritime courts

The maritime courts are a division of the Intermediate People's Court, and were established in 1984 in recognition of the need to have specialist judges to deal with international trade and shipping matters. As a consequence, the quality of the judges in the maritime courts tends to be higher than in the non-specialised courts.

Appeals from maritime courts will be heard by the Higher People's Court of the province where the maritime courts of first instance are located.

To date, ten maritime courts have been established in China, a number of which have established branches - for example, the Wuhan Maritime Court has branches in Chong Qing, Nanjing and Nantong, and the Guangzhou Court has branches in Shekou and Zhuhai.

The jurisdiction of the maritime courts

On May 13, 1989, the Supreme People's Court published a document entitled "Provisions on the Scope of Cognisance of the Maritime Court" which classified maritime matters which would fall within the jurisdiction of the maritime courts into the following five categories :-

• Maritime torts such as collision, pollution, personal injury or death, damages caused by wreck or other obstacles and unlawful detention of vessel or cargo, etc;
• Disputes involving maritime contracts such as contracts of carriage of goods or passengers by sea, charter party, freight/demurrage claims, agency/ commission claims, contracts of towage, salvage and wreck removal; contracts of marine insurance etc;
• Other maritime cases involving general average, disputes arising from harbour operations, cases arising from maritime fraud and disputes arising from marine exploitation and utilisation;
• Matters involving enforcement of maritime claims including enforcement of foreign arbitration awards or foreign judgments;
• Cases requiring preservation measures such as arrest of vessels, cargo, bunkers and other injunctive relief for the purpose of obtaining security. The jurisdiction of the maritime court is primarily based on the geographic locality where a party is domiciled, or where the contract is signed or performed or where a tort is committed.

Procedures in maritime litigation

Maritime matters are tried by a bench of three judges, one being the chief judge. Maritime proceedings are initiated by a claimant filing a statement of complaint in which it states its preliminary case. The court will first consider whether the complaint is one over which it has jurisdiction, and whether it is proper for it to hear the matter. Once it is satisfied that it is proper to accept the case, a notice of acceptance will be issued and sent to the plaintiff by the court.

The court will also issue and serve on the defendant a notice of response, enclosing a copy of the statement of complaint, within five days of the acceptance of the litigation. A defendant not domiciled in the geographic area of the court will have thirty days upon receipt of the notice to prepare and file its defence. The court then serves the defence on the plaintiff within five days upon receipt. A notice of hearing will be issued and served on the parties three days in advance of the hearing date. All hearings are in open court unless the matter involves state secrets or personal privacy.

After standard administrative matters are dealt with at the beginning of the hearing, the plaintiff, followed by the defendant, will give respective short statements of claim or defence.

The next stage is called the investigation stage, which focuses on exploring the relevant facts. At this stage, documentary evidence (original documents are usually required) and other evidence will be produced, and oral evidence may be given and cross-examined.

The next step is the debate stage, at which issues of fact and law will be argued by the parties. Lastly, the parties will give their final statements.

In cases where foreign parties or issues are involved, there is no time limit before which a court must render its judgment.

Appeal

Following the decision of the first instance court, an application for appeal may be lodged at the Higher People's Court. The time limit is thirty days if the appellant is not PRC-domiciled, or fifteen days if domiciled in China. Appeals can be made on matters of both fact and law, and the proceedings of an appeal are similar to those of the first instance. The judgment rendered following the appeal is to be final and enforceable.

Again, there is no time limit as to when the final judgment should be rendered in cases involving foreign parties or issues.

The system in practice

The main complaints made about the Chinese courts are lack of transparency, and bias. This can be evidenced in a number of ways.

It is common for judges to have private meetings with the parties separately. This can be done quite formally, or informally - over dinner, or on site visits. There is no principle of hearing both parties together. A local party may be better placed to arrange this than a foreign party would be.

There is a perceived lack of independence in the judiciary. Judges may be influenced by political requirements, and there is a perception that judges see it as part of their function to try to balance the interests of the state against the enforcement of private rights.

Even Chinese shipowners sometimes complain that they get a rough deal in courts in a city which is not their base.

There is undoubtedly corruption in some parts of the system. In 1994, over a thousand court personnel were punished for corruption related offences. Thirty-four judges received criminal punishment.

There are issues about the quality of the judiciary, although it is fair to say that this is a complaint more often directed at the People's Courts than the maritime courts.

Mediation is sometimes seen as a strength or a weakness of the system, partly depending which side you are on. Although mediation has only relatively recently been promoted by the Commercial Court in London, it has long been an intrinsic part of the Chinese system. It means that judges will have informal discussions with the parties (or with one party at a time) in the early stages of a case, and propose settlement along certain lines.

What can be said is that the system is relatively quick, and the cost of litigation is relatively low - certainly compared to most common law systems. It is also improving. There is little recent history of the administration of justice in China, and it will take some time for the system to develop. The Chinese maritime courts are at present rarely a forum of choice, but may become so provided the quality of the judges continues to improve.