Guiding Case No. 231
Dongguan Feng[REDACTED] Shipping Co., Ltd. v. Dongying Xin[REDACTED] Logistics Co., Ltd.
(Salvage Remuneration Dispute)

Keywords: civil; salvage operations; remuneration entitlement; common ownership

Key Points of Judgment

Where salvage operations take place between ships of the same owner, vessels engaged in salvage operations shall be deemed independent salvors. Absent circumstances specified in Article 187 of the Maritime Law of the People's Republic of China, remuneration obtained under Article 191 of the Maritime Law shall neither be invalidated nor diminished due to fault attributable to a distressed vessel under common ownership. 

Basic Facts

On January 1, 2016, Dongying Xin[REDACTED] Logistics Co., Ltd. (hereinafter referred to as "Dongying Xin[REDACTED] Logistics Company") executed a Crude Oil Storage Agreement with Dongying Harbor & Shipping Co., Ltd. of Shandong Wan[REDACTED] Group, according to which Dongying Xin[REDACTED] Logistics Company rented two tanks (V-6105 and B-6106) of Dongying Harbor & Shipping Co., Ltd. of Shandong Wan[REDACTED] Group.

MT [REDACTED]sheng 9 (Motor Tanker) and MT [REDACTED]sheng 16 (Motor Tanker) are owned by Dongguan Feng[REDACTED] Shipping Co., Ltd. (hereinafter referred to as "Dongguan Feng[REDACTED] Shipping Company"). On January 10, 2017, the ship MT [REDACTED]sheng 16 loaded 6,500 tons of gasoline from the tank V-6106 of Dongying Harbor & Shipping Co., Ltd. of Shandong Wan[REDACTED] Group. On January 16, 2017, when the ship MT [REDACTED]sheng 16 berthing at No. 16 berth in the south basin at the Dongying Port was loading gasoline. The casualty ensued from bulkhead fissures in the engine-pump room partition coupled with operational negligence. MT [REDACTED]sheng 16 and negligence in personnel management and operations, gasoline was leaked to the pump room and the engine room, causing great dangers to the safety of personnel, ships, and the port. After identifying the aforesaid dangers in the patrol, the law enforcement officers of the Dongying Marine Department reported to the Dongying Maritime Search and Rescue Center. The local government set up a working group of emergency response to dangerous situations for the ship "MT [REDACTED]sheng 16." According to the arrangements and requirements of the Dongying Maritime Search and Rescue Center and the working group of emergency response to dangerous situations, several entities including Dongguan Feng[REDACTED] Shipping Company participated in the emergency salvage. On January 19, 2017, Dongguan Feng[REDACTED] Shipping Company assigned the ship MT [REDACTED]sheng 9 to participate in the salvage. At 19: 00 on January 22, the gasoline loaded onto the ship MT [REDACTED]sheng 16 was all transferred to the ship "MT [REDACTED]sheng 9." At noon on February 7, after cleaning, purging, and ventilating the pump room and the engine room of the ship "MT [REDACTED]sheng 16," the oxygen and explosion values became normal after the tests and the dangers were lifted.

Dongguan Feng[REDACTED] Shipping Company filed a lawsuit with the Qingdao Maritime Court, requesting the Court to order Dongying Xin[REDACTED] Logistics Company (owner of the loaded gasoline) to pay the salvage remuneration, the corresponding interest, and the litigation cost. During the proceedings, Dongying Xin[REDACTED] Logistics Company claimed that the ship MT [REDACTED]sheng 16 was negligent in the accident involved. Dongguan Feng[REDACTED] Shipping Company was the owner of both ships MT [REDACTED]sheng 16 and "MT [REDACTED]sheng 9." In accordance with the provisions of Article 187 of the Maritime Law, the salvage remuneration payable to Dongguan Feng[REDACTED] Shipping Company shall be canceled or reduced due to its negligence.

In addition, after the dangers were lifted, other entities participating in the salvage filed lawsuits with the Qingdao Maritime Court against Dongying Xin[REDACTED] Logistics Company and Dongguan Feng[REDACTED] Shipping Company as defendants with respect to the salvage remuneration. On November 19, 2020, Dongying Xin[REDACTED] Logistics Company and other entities participating in the salvage reached an enforcement settlement agreement during the enforcement by the Qingdao Maritime Court, under which Dongying Xin[REDACTED] Logistics Company paid the salvage remuneration and the corresponding interest.

Judgment

On September 26, 2019, the Qingdao Maritime Court entered a civil judgment (No. 137 [2019], First, Civil Division, 72, Shandong) to dismiss the claims of Dongguan Feng[REDACTED] Shipping Company. After the judgment of first instance was pronounced, Dongguan Feng[REDACTED] Shipping Company refused to accept it and appealed. On March 16, 2020, the High People's Court of Shandong Province entered a civil judgment (No. 14 [2020], Final, Civil Division, HPC, Shandong) that (1) the civil judgment (No. 137 [2019], First, Civil Division, 72, Shandong) entered by the Qingdao Maritime Court shall be set aside; (2) Dongying Xin[REDACTED] Logistics Company shall, within ten days after this judgment takes effect, pay Dongguan Feng[REDACTED] Shipping Company the salvage remuneration of RMB 1,290,384 Yuan and the corresponding interest; and (3) other claims of Dongguan Feng[REDACTED] Shipping Company shall be dismissed. After the judgment of second instance was pronounced, Dongying Xin[REDACTED] Logistics Company filed an application for retrial. On November 23, 2020, the Supreme People's Court entered a civil ruling (No. 4813 [2020], Petition, Civil Division, SPC) to deny the application for retrial filed by Dongying Xin[REDACTED] Logistics Company.

Reasons for Judgment

For the purpose of encouraging ships owned by the same person to participate in salvage at sea, avoiding unfair deprivation of the salvage remuneration payable to the crew participating in the salvage, and fairly safeguarding the interests of the insurers of the ships, Article 191 of the Maritime Law mandates that "The provisions of this Chapter shall apply to the salvor's right to the payment for the salvage operations carried out between the ships of the same owner." The aforesaid Article mandates that salvage operations carried out between the ships owned by the same party to a civil legal relation may also give rise to claim for salvage remuneration. Article 187 of the Maritime Law mandates that "Where the salvage operations have become necessary or more difficult due to negligence of the salvor or where the salvor has committed fraud or other dishonest conduct, the salvage remuneration payable to the salvor shall be canceled or reduced." This Article provides for the circumstances where the salvage remuneration may be canceled or reduced in a salvage at sea.

In China's litigation system, no lawsuit may be filed in the name of a ship. However, with respect to determination of salvage remuneration, a ship providing salvage may be treated as an independent entity. Where the accident giving rise to salvage operations is caused by improper navigation or management of goods of the ship in distress, the right of claim for salvage remuneration of the ship providing salvage owned by the same owner of the ship in distress may not be affected. The negligence and liability of the two ships in the salvage may not be mixed up just because they are owned by the same owner. Where the salvage at sea is caused by the negligence of the ship in distress in navigation and management of goods on board, it may not be deemed as the negligence of the ship providing salvage. The legal persona of 'salvor' under Article 187 pertains to the salvage vessel as a juridical entity, distinct from her owner As long as the ship providing salvage does not fall under any of the circumstances as prescribed in Article 187 of the Maritime Law, the salvage remuneration payable to it may not be canceled or reduced.

In this case, although MT [REDACTED]sheng 16 and MT [REDACTED]sheng 9 are owned by the same owner, as the ship providing salvage, MT [REDACTED]sheng 9 was not negligent for the occurrence of the marine accident involved. Dongying Xin[REDACTED] Logistics Company failed to present evidence to prove that MT [REDACTED]sheng 9 committed any fraud or any other dishonest conduct in the salvage operations. Therefore, the salvage remuneration payable to MT [REDACTED]sheng 9 may not be canceled or reduced attributable to the negligence of MT [REDACTED]sheng 16 in the marine accident.

Legal Provisions

Articles 187 and 191 of the Maritime Law of the People's Republic of China