Ship Mortgage Loan Contract Dispute between DVB BANK SE and SAM LION Limited

[Basic Facts ]

Since April 30 2020, seven foreign parties from Germany, Sweden and other countries and one Hong Kong based company have applied to the Qingdao Maritime Court for detention of the Liberian-registered SAM LION ship. The ship owner failed to provide guarantee within the statutory period and eventually abandoned the ship. DVB Bank SE filed a claim to the Qingdao Maritime Court for auction of the ship. The eight parties set out above and 21 foreign crew members of the SAM LION ship applied to the Qingdao Maritime Court for registration of maritime creditor’s rights and filed suits. The subject matter amount of the cases is over USD 20 million.

[Outcome]

At first instance, the Qingdao Maritime Court ruled in favor of DVB Bank SE and ordered that SAM LION Limited shall repay loans from the bank the principal, the interest of the loan and penalty interest with a total of USD 17,134,455.69. The court confirmed that the DVB Bank SE’s mortgage on SAM LION and is entitled to first payment from the sale proceeds of the auction. After the judgment was made, neither party applied for an appeal. Other cases involving the insurance contract, the supply contract for ship materials and spare parts and the affirmation of the wages of the 21 crew members have been confirmed. The wages of the 21 crew members are considered maritime lien, thus they are entitled to priority of compensation from the auction proceeds of the ship. The ship involved was successfully auctioned at a premium through the judicial auction website.

[Implications]

Although the parties involved in this case are either foreign or based in Hong Kong, and the dispute itself has no connection to Mainland China, all the parties involved applied to the Qingdao Maritime Court for detention of the ship and filed suits.

The continuous spread of the COVID-19 pandemic has severely impacted the global shipping industry and the crew group. The rearrangement of shifts and repatriation has become one of the biggest challenges for the shipping industry. The series of cases on the SAM LION ship has been properly dealt with, and has received high praises from the Embassies of Ukraine and the Philippines, which fully reflects foreign litigants’ recognition of and trust in China’s maritime judiciary. The maritime court proactively offered humanitarian assistance to the 21 foreign crew members, had taken reasonable and feasible measures to safely and efficiently repatriate the crew members while ensuring the prevention and control of the pandemic,and fully protected the lawful rights of the crew members and helped the purchaser of the ship to resume normal production and operation with the least delay possible.

The handling of this case demonstrated China’s responsibility as a major power of ships and seafarer, offered a Chinese solution to properly deal with the difficulties arising from changing shifts or repatriating crew members on a global level, helping shipping companies to resume work and production in an orderly manner.

（本案例英文资料由上海政法学院提供)

(The English Version of this Case provided by Shanghai University of Political Science and law）