Guiding Case No. 236
Huan[REDACTED] Ship Leasing Co., Ltd. v. Tian[REDACTED] Fortune Co., Ltd.
(Allision Liability Dispute - Panamanian/Liberian Vessels)

(Deliberated and adopted by the Judicial Committee of the Supreme People's Court, Issued on November 25, 2024)

Keywords: civil; allision liability; foreign-related; post-event choice of law; governing law

Key Points of Judgment

Post-allision agreements selecting governing law shall be given effect per Art 44 of the Law of the People's Republic of China on Choice of Law for Foreign-related Civil Relationships, where the parties to a case of dispute over liability for collision involving foreign-related ships choose the applicable laws by agreement after a ship collision accident takes place, the applicable laws as determined in the agreement shall prevail.

Basic Facts

On 27 September 2022, when the MT [REDACTED]feng (Panamanian flag) owned by Tian[REDACTED] Fortune Co., Ltd. overtook the MV [REDACTED]ya (Liberian flag) owned by Huan[REDACTED] Shipping Chartering Co., Ltd. (hereinafter referred to as "Huan[REDACTED] Shipping Company") in the Strait of Malacca, the two ships collided due to wheel steering gear malfunction and navigational fault of the ship "[REDACTED]feng." In December 2022, Huan[REDACTED] Shipping Company applied to the Ningbo Maritime Court for the arrest of theMT [REDACTED]feng (Panamanian flag) which was being maintained at the Zhoushan Port in Ningbo City. It filed a lawsuit in January 2023, requesting the court to order Tian[REDACTED] Fortune Co., Ltd. to compensate for the damage to the hull and the loss for detention, in a total amount of 58,108,824.77 yuan, and the interest thereof. Tian[REDACTED] Fortune Co., Ltd. filed a counterclaim and requesting the court to order Huan[REDACTED] Shipping Company to compensate for its various losses in an amount of 38,115,057.62 yuan and the interest thereof. The Ningbo Maritime Court held a joint trial of the original lawsuit and the counterclaim. In the court trial, both the plaintiff and the defendant elected Chinese law as governing law.

Judgment

The Ningbo Maritime Court tried the case by applying the Chinese law and on February 7, 2024, it entered a civil judgment (No. 314 [2023], First, Civil Division, 72, Zhejiang) that (1) Tian[REDACTED] Fortune Co., Ltd. shall pay compensate for loss to Huan[REDACTED] Ship Company RMB 37,182,079.93 yuan; (2) Huan[REDACTED] Ship Company should compensate for loss to Huan[REDACTED] Fortune Co., Ltd. in an amount of 3,094,472.96 yuan; (3) After the aforesaid two amounts of compensation are offset, Tian[REDACTED] Fortune Co., Ltd. shall, within ten days after this judgment takes effect, compensate for loss to Huan[REDACTED] Ship Company in an amount of 34,087,606.97 yuan and the interest thereof; (4) Tian[REDACTED] Fortune Co., Ltd. shall, within ten days after this judgment takes effect, pay the application fee for pre-litigation preservation in an amount of 4,500 yuan to Huan[REDACTED] Ship Company; (5) Other claims of Huan[REDACTED] Ship Company shall be dismissed; and (6) Other counterclaims of Tian[REDACTED] Fortune Co., Ltd. shall be dismissed. After the judgment of first instance was pronounced, neither party appealed. The judgment has taken effect and Tian[REDACTED] Fortune Company has voluntarily performed the obligations in the judgment.

Reasons for Judgment

This case involves a dispute over liability for damage caused by collision of foreign-related ships. Upon application of Huan[REDACTED] Ship Company, the Ningbo Maritime Court arrested theMT [REDACTED]feng (Panamanian flag) in accordance with the relevant provisions of the Special Maritime Procedure Law of the People's Republic of China. Article 19 of the aforesaid Law provides that "where the relevant maritime dispute does not enter into litigation or arbitration procedure after enforcement of the maritime claim for preservation of property, the party may bring an action relating to the maritime claim to the maritime court which has taken preservation of property or any other maritime court having jurisdiction over it, with the exception of signing of a contentious jurisdiction agreement or an arbitration agreement between the parties." In accordance with the aforesaid provisions, Huan[REDACTED] Ship Company filed a lawsuit with the Ningbo Maritime Court and the Ningbo Maritime Court had jurisdiction over this case.

Paragraph 1 of Article 273 of the Maritime Law of the People's Republic of China provides that "the law at the place of tort shall apply to claims for damages arising from collision of ships." Article 44 of the Law of the People's Republic of China on Choice of Law for Foreign-related Civil Relationships provides that "the laws at the place of tort shall apply to liabilities for tort, but if the parties have a mutual habitual residence, the laws at the mutual habitual residence shall apply. If the parties choose the applicable laws by agreement after any tort takes place, the agreement shall prevail." Though Art 273 of China's Maritime Law is lex specialis, Art 44 of the Law on Choice of Law for Foreign-related Civil Relationships (lex generalis) governs post-event choice of law - such selection being valid under both regimes. Although the, as a special law, does not explicitly provide that the parties may choose the applicable law for a dispute over ship collision, the Law on Choice of Law for Foreign-related Civil Relationships explicitly provides that the parties may choose the applicable law for tort liability. Therefore, the choice of an applicable law by the parties to a dispute over ship collision did not fall under the circumstances of invalid choice. In this case, both parties are companies registered in the Republic of the Marshall Islands and the countries of registry of the two ships involved are Panama and Liberia. During the court trial, both the plaintiff and the defendant proposed to apply the Chinese law to the tort liability dispute in this case. Since the Law on the Application of the Law on Foreign-Related Civil Relations has made clear provisions on the laws applicable to the tort liability chosen by the parties by agreement, the choice by plaintiff and defendant to apply Chinese law in this case shall be deemed valid.

Legal Provisions

Articles 3 and 44 of the Law of the People's Republic of China on Choice of Law for Foreign-Related Civil Relationships

Article 273 of the Maritime Law of the People's Republic of China

Article 19 of the Special Maritime Procedure Law of the People's Republic of China